July 10, 2002

Busting the Cap

Tennessee's constitution has had a provision capping the growth of government spending since 1978, when an amendment was approved that limits annual spending increases to the rate of economic growth. However, the cap has a major flaw: The legislature can break the cap by a simple majority vote. It is the loophole that has swallowed the law - and billions of extra taxpayer dollars...

Since the 1984-85 fiscal year, spending exceeded the cap nine times, by a total of just under $2.2 billion. The cap was exceeded twice during the Gov. Lamar Alexander years - by $446.1 million in FY 1984-85, and $100 million in FY 1986-87, and five times under Gov. Ned McWherter - $101 million in FY 1988-89, $74 million in FY 1989-90, a whopping $703.1 million in FY 1991-92, $450 million in FY 1992-93. Gov Sundquist has been just as irresponsible, proposing budgets that ultimately lead the legislature to over-spend the cap by $55 million in FY 1996-97, and $270 million in FY 1999-2000.

But this year sets a new record. Gov. Sundquist's budget request was cut some $500 million, yet he still has the dubious honor of having signed into law the single largest spending in excess of the cap in history. It goes along along with the largest budget in state history and the largest tax increase in state history - neither of which were anywhere near as large as the self-styled fiscal conservative had sought.)

As required by the constitution, the legislature passed a one-page law setting forth the amount by which the cap would be exceeded. That law, passed July 4, says: "The index of appropriations from state tax revenues for the 2002-2003 fiscal year may exceed the index of estimated growth in the state's economy by seven hundred seventy-one million dollars ($771,000,000) or nine and twenty-seven hundredths percent (9.27%).

That's $771 million in just the first year. Because each year's budget increase is built on top of the previous year's budget, exceeding the cap by $771 million this year means next year's budget will also be $771 million higher than it would have been if the constitutional spending cap had been respected. And the next year's budget. And the one after that, etc...

Over the next 10 years, this year's busted spending cap will cost Tennessee taxpayers an astonishing $7.71 BILLION dollars in additional taxes, unless something is done.

Tennesseans will not be protected from "the endless expansion of government" (to quote Don Sunquist) until the current spending cap is replaced with a more effective cap similar to the Taxpayers Bill of Rights in the Colorado state constitution. For more on that, see my recent essay: We Won, Now What?

The one-page law allowing the state to exceed the cap is here in a 1-page PDF file. You'll need Adobe Acrobat Reader software.