Once minerals prices deflated, a grim reality, hidden behind smoke screens of oil, coal and natural gas prices, was suddenly painfully visible from our (not yet renovated) state capitol. At that point, though, the prevailing opinion (not shared by all legislators) was that it was more important to save state spending than to bring the size of government in line with what the tax base could sustainably provide for.
Today, let us take a closer look at Wyoming and identify the so called "structural deficit" in our state budget.
- Continued decreases in total funding. This is a good idea in theory, but as I explained yesterday it does not address the cost drivers that are already built into education spending. If the legislature address those cost drivers instead, this measure will be redundant.
- Recalibration of cost formulas for "non-personnel elements". A potentially good idea, as it addresses one of the structural-growth parameters in education spending. However, to have an impact on state spending anywhere near the structural deficit, the legislature as a whole needs to apply this kind of approach on a broad, systemic scale. At an estimated $22 million in savings, this application is right in kind but wrong in quantity: it is barely an accounting error.
- School district consolidation, statewide school-bus purchases and reduction of central-office administration salary costs. Again, right kind of thinking with the wrong kind of application. Instead of having school bureaucrats and themselves - our elected officials - determine what size and kind of administration our schools need, why not let the free market do that job? The savings potential is far bigger than the few millions estimated by the subcommittee.
*) Economic theory is a bit unclear as to exactly how to measure a structural deficit. I prefer the performance-based definition because of its empirical applicability. For further reading, see:
Larson, S: A Dynamic Definition of the Structural Budget Deficit; Discussion Paper for Compact for America; December 2014; or:
Larson, S: Estimating the Structural Deficit in Wyoming; Republic Free Choice; May 2015.