Look at the County's Increases in Spending Over the Last Ten Years

Scott Yost in the Rhino provides some perspective regarding the proposed Guilford County budget which includes a tax increase.  He points out that budgetary spending  in the county has doubled over a period of 15 years.

One way the 2000-2001 budget seems very distant from today is in the number of dollars shelled out. Just a decade ago, Guilford County was being run on a much smaller budget: The 2000-2001 budget totaled $397.5 million. That compares with a proposed county budget of $582.3 for 2011-2012 – a 46 percent increase in the county's budget in just 10 years...

One of the biggest expenses in the county budget each year is the money the county pays to run the schools. In 2000-2001, that came to just over $106 million. In the current county budget, Guilford County gave the schools $175 million – an increase of 65 percent over what the schools were getting from the county for their operating expenses a decade ago...

In 2000, the county's human services – which includes health, mental health and social services – were allocated $61 million. In 2010-2011, the cost of funding human services totaled just over $160 million; Fox's proposal for 2011-2012 recommends $155 million for that purpose...

The 2000-2001 county budget allocated $38 million for public safety in Guilford County – which includes paying for the Sherriff's Department and the Emergency Services Department. In 2010-2011, the budget allocated $86 million for public safety. Fox's budget proposal for fiscal 2011-2012 would add another $6 million to that number, for a total in the coming fiscal year of $95 million.

The county's population only grew 16 percent over the last decade.  Spending increases in these areas outpaced population growth and inflation combined. 

When county commissioners wring their hands and represent that they cannot conceive of ways to achieve spending cuts sufficient to avoid a tax increase, they are not being honest with us. 

The fact is that we have had solid liberal Democratic leadership of the county for a long time, with all the fiscal profligacy that entails.  Looking at the recent history of budget increases--- as Scott Yost has skillfully detailed-- should lead anyone to believe that cuts should be eminently possible; and a tax increase can easily be averted.  The question is whether our politicians have the will.

Comments

[bubba]

"The question is whether our politicians have the will."

There is no question, really. It's pretty obvious that they don't even possess the intention, let alone the will.

[Joe Guarino]

Bubba, unfortunately I am afraid you are right. That is why it is important to keep the pressure up. Guilford County and its school system have been massive laboratories for implementing the liberal ideal in governance over the last decade or two. Spending has therefore skyrocketed. If we wish to have any hope of restoring anywhere near the level of prosperity we once enjoyed in this county, we need to fix this.

[bubba]

In the current makeup of commissioners, who will step up to make a forceful and unmistakable call for the significant cuts that are needed?

Who will make this a signature issue, and be willing to be the lightening rod for all the babble, dribble, drool, and spew that's sure to follow from the statists/relativists/opportunists who make up our local Usual Suspect cabal?

[Joe Guarino]

We shall see, Bubba, who has the courage to take this banner, and run with it. I don't expect it to be Linda Shaw or Mike Winstead, but perhaps I am wrong. Yow? Bencini?

[Dave Ribar]

Joe:

Since 2001, prices have gone up by 27 percent, and you mention that population has gone up by 16 percent. Thus, for the budget to keep pace with inflation and population, it would have needed to have increased by 47 percent (1.27 x 1.16 = 1.47). Actually, the adjustment should be a little higher because it should reflect next year's inflation and population, not this year's.

It appears that on a per-person, inflation-adjusted basis, county spending has decreased, not increased.

[Joe Guarino]

Dave, that sounds great, but there is one extra piece of information. The county's territory is shrinking because of municipal annexations. We are spending more for less territory covered. Also, the budgetary increases for schools, health and human services and public safety have each far exceeded the 47 percent benchmark that you claim.

(Has the county divested itself of other functions over the last 10 years, and turned them over to the cities and towns? For instance, parks?)

I am surprised that inflation was 27 percent over the last ten years. Which index did you use? (Personally, from the standpoint of methodology, I think I would have added the 27% and 16% increases to yield a theoretical budget increase of 43 percent instead of multiplying them. That would still yield a net increase in county spending over the ten-year period, albeit a small one.)

[Dave Ribar]

Joe:

Annexation doesn't change the population numbers much. Even including annexation, Greensboro grew slightly slower than the county average, while High Point grew slightly faster. In any case, schools and social services (72% of the budget) are county-wide.

The 27 percent inflation figure comes from the CPI-U for all goods (if I restricted the index to the CPI-U for the Southeastern U.S., the increase would have been slightly higher). I compared March 2001 with March 2011 (223.49/176.1 = 1.269 = 26.9% increase).

If you use the CPI-U for services (the more appropriate index here), the increase would be 31%.

The rates should be multiplied, not added. To make the figures easy, suppose that you start by spending $1 for each of 100,000 people, or $100,000. Suppose that to keep pace with inflation, spending goes up to $1.27 per person. Suppose also that the population increases by 16% to 116,000. The new spending would be $1.27 for each of 116,000 people, or $147,320 (a 47.3% increase).

In the end, the premise of the article and post are wrong. The proposed spending is SMALLER than the increase in population and inflation (significantly so if you factor in service inflation). You've selected the fastest growing spending areas but neglected the areas where spending growth has been restrained. Budgets are about choices, and Guilford County has chosen to focus on schools, human services, and public safety--pretty good priorities in most people's eyes. It has done so while more than holding the line on overall costs.

[Dave Ribar]

Joe:

If you really want your eyes to bug out, adjust for inflation using the BEA's price index for state & local government expenditures, which increased 42 percent from 2001.I to 2010.IV.

[Abner]

Dave,

I believe the cost inflation in education is up because there are more adminisrative employees per student, and average income of government employees has gone up much more than the private sector in he last ten years.

The other cause of cost increases seems to be employee healthcare, Joe, which as most have experienced, has doubled since 2000.

Let's not say the increased costs are simply due to higher costs, without looking under the hood.

btw, the second highest increase in costs after healthcare in America since 2000 has been in higher education.

Notice where government subsidies are the greatest, the largest cost increases have occured.

Healthcare and education.

Our community's average income's have certainly not gone up.

Using CPI is ex food and energy. So what we have is a stagflaion, with higher costs and falling income.

Our real estate is worth less than it was worth in 1997.

What we have done is spent more on facilities and salaries, without any increase in performance.

College students will certainly not get more out of school next year than in 2000, for almost double the price.

Is Dave trying to say it is worth the price?

Did the cost of Northern High School make their kids smarter? I think not.

Did paying teachers more across the board make our children smarter? I think not.

Could Charter Schools that may cost less combined with performance based pay give more our kids a better shot?

maybe to the point that it is worth a try.

[Abner]

Where do you see "spending growth has been restrained"?

[Dave Ribar]

Abner:

I purposely avoided the education and government services inflation adjustments because of the arguments that you make. Those figures indicate that costs would have gone up by about 42 percent before any adjustment for population. That said, higher education costs aren't especially relevant for Guilford County because the only higher ed. costs it has are for GTCC.

Per capita personal income has gone up, though probably by less than the amount of inflation. Figures for 2011 aren't available, but per capita personal income in 2009 was 19% higher than in 2000. With the recovery since 2009, incomes have likely trended higher.

With respect to "spending growth restrained," if some categories of spending went up by more than 46 percent and overall spending increased by 46, it must be the case that some other categories went up by less than 46 percent. It looks like one of those categories was likely "general government."

[Joe Guarino]

Abner, excellent points. But of course, the cost of health care can be managed. Go to higher deductibles and higher copays to keep your premiums flat. It is doable-- but government tends not to do it very much.

Dave, another index of inflation is the Producer Price Index, which is thought to be a more reliable measure of inflation in some circles. Using the CPI is inappropriate because, strictly speaking, local government's costs are not reflected by the usual consumer costs as reflected by the prices they encounter in the open market. The local governmental costs are heavily influenced by how much employees are compensated in wages and benefits; and also by how many employees are hired. I am not entirely familiar with the BEA index, but if it is merely a reflection of what is happening among other local governments, it is not helpful as an index of the core, unavoidable inflation the county faces.

Annexation is important because the county has less geographic territory to service for certain functions.

But one other important point is that population increases do not necessitate that county spending increase on a proportionate basis. You can't assume that a 16% population increase justifies a 16% increase in costs. Many organizations reach a critical mass, and then can service more people without increasing staff in a manner commensurate with the increased service population. It is called economies of scale-- a concept with which you are doubtless familiar. Government should be able to operate more efficiently as it gets larger.

I am not completely sold on your arithmetic methodology otherwise.

[Abner]

"With the recovery since 2009, incomes have likely trended higher."

not for most here.

for many in my profession, heathcare specialists and government employees, yes.

everyone else, not so much.

How many employees have been added in the education system per student over x time?

How many admin positions increase per student?

what ave pay, including benefits, per admin increase?

how much has teacher pay gone up?

All the inflation idicies being refered to have been politically altered beyond repair.

they arn't really a good indication of anything anymore.

They exist to keep social security increases etc... lower than they otherwize would have been.

Again, with the schools, we need to not borrow more than $300 billion in new debt that has not been borrowed yet.

And the Admin costs need to be looked at.

Just so all is disclosed, my industry has obviously taken more than its share from the public trough, as has Joe's...

What does Dave do?

[Abner]

$300 million...

[Dave Ribar]

Joe:

The PPI for finished goods went up 34 percent over this period (March 2001-March 2011). The PPI for commodities went up 47 percent. The 26.9% CPI figure is actually favorable to your case (it's also the figure that is used in the TABOR that you promoted).

Annexation would be important if it accounted for a lot of people or if there were a lot of geographically based services; it doesn't and there aren't. The population figures show that county population outside the boundaries of GSO & HP went up at the same rates as inside.

Given the price increases, Guilford County has likely shown economies of scale (costs per person are lower). But, of course, now you've taken to claiming arbitrary cost targets with no basis in facts.

You start by saying that "spending increases in these areas outpaced population growth and inflation combined." When that's shown to be false, you then claim that population and inflation aren't really relevant.

The issue with your arithmetic is that your are ignoring compounding--in this case from two different growth rates.

[bubba]

Notice how Dave sees fit to ignore the pertinent questions Abner asks. In addition, his point on indices makes Ribar's talking points moot.

[Abner]

I saw somewhere that our working population has remained relatively flat since 2000.

that means any increase is not spread over an increasing population that is taxed.

So about the same number of income earners have and will continue to absorb increases in government costs.

[Joe Guarino]

Dave, now hold on a minute. Examine my statement once again: "Spending increases in these areas outpaced population growth and inflation combined." When I mentioned "these areas", I was referring to education; health and human services; and public safety, all of which had just been discussed. And for each of those broad areas, spending had, indeed, outpaced population growth and inflation combined.

Maybe it is the fact that I haven't taken math classes for over 30 years; but I am not sure I see the value of compounding in this particular context. It seems to me the combined effects of population growth and inflation-- for the purpose of argumentation-- should be additive, not multiplicative, unless your objective is the make the final number higher.

[Jon Hardister]

Government spending should not outpace the growth of population or inflation. It would be nice if Guilford County had a law that prevented such a thing from happening.

[Joe Guarino]

I agree, Jon. Great point-- impose external limitations on the politicians' spending habits if they cannot restrain themselves.

[Dave Ribar]

Joe:

The value of compounding is that it correctly describes how the combined effects have evolved. The only purposes for continuing to do this incorrectly would be to understate the growth in costs.

In a short period of time (say a year), compounding doesn't matter much. However, over longer periods of time (say a decade), it adds up and becomes appreciable. In this case, it ends up being the difference of just over 4 percent or about $16 million in costs (relative to a $397.5 million base). You seem to be arguing that $16 million can be ignored.

[bubba]

The use of "compounding" is the functional equivalent of "multpliers" as the hocus-pocus needed to make numbers work to satisfy a particular worldview, and to rationalize needless public spending.

Unfortunately, we all know too well how that type of academic and intellectual gibberish works.

[Joe Guarino]

Dave, I guess I am still not getting it. I am having trouble getting my arms around the concept that the combined effects of population increases and inflation on the county budget should be multiplicative, not additive.