Accounting Maneuvers Obscure Actual Depth of Cuts in Legislative Budget

Legislative leaders have repeatedly claimed that their budget, recently vetoed by Gov. Perdue, spends only slightly less than her initial budget proposal. That claim is simply inaccurate. The actual difference between the Governor’s $19.9 billion budget proposal and the $19.7 billion in appropriations passed by the legislature is greater than $219 million, due in large part to two clever accounting maneuvers.

While the legislature’s total appropriation is $19.7 billion, about $197 million of that amount comes from moving the Highway Patrol’s budget from the Highway Fund to the General Fund. This change takes advantage of the fact that the State budget numbers receiving the most attention and scrutiny reflect General Fund appropriations only. The Highway Patrol has long been accounted for under the Transportation budget, which is funded not by General Fund revenues – personal income tax, corporate income tax, sales tax, etc. – but by the highway use tax and the gas tax. So, while this shift has no net impact on total State revenues or spending, the act of transferring it over to the General Fund is shown as $197 million in increased availability, offset by $197 million in “new” General Fund spending.  This raises the total budget number to $19.7 billion, up from $19.5 billion.

What defenders of the budget overlook is the fact that the Highway Patrol isn’t, in fact, new spending at all. The Highway Patrol’s budgetary presence in the Transportation budget and patrol officers’ physical presence on our roads and highway clearly attest that the Highway Patrol was funded last year, and the year before that – just out of a different account. So, in terms of total State outlay (total money spent by the State), the legislative budget uses the Highway Patrol to ‘smooth over’ approximately $200 million in agency cuts within the Justice & Public Safety budgets.

The legislative budget performs the same trick with the line item for the Wildlife Resources Commission, which has never before been budgeted within the General Fund. The legislative budget “raises” availability by repealing the Commission’s $23 million sales tax set-aside, then moves the Commission and $18 million (after a $5 million cut to the Commission) in appropriations for it to the Natural & Economic Resources section of the budget. In one accounting change, the Commission’s budget is considerably reduced and net budget cuts to NER appear $18 million smaller than they actually are.

The chart below clearly shows that total spending cuts in the legislative budget are hundreds of millions higher than the $1.4 billion ‘top line’ showed in the legislative budget summary table. When the Highway Fund transfer is removed from calculation and shown, as below, as the off-budget to on-budget transfer that it actually is, there is no net impact to the amount raised or spent by the legislative budget – there is only a clearer reflection of just how much of this budget is paid for by cuts rather than one-time money or actual revenues.

While these accounting changes may have some legitimate purpose, thus far they’ve only been used to obscure the depth of spending reductions in the legislative budget.