I think that something has to be done about the formula. Maybe changing from personal income to personal disposable income would be better. I have noticed that Massachusetts has a declining rate of sales tax collections that is below the inflation rate. They are blaming it on the Internet. When that Internet thing hits here it really is going to be bad since our sales tax rate is nearly double their 5% rate. A high fraction of Massachusetts income is from financial institutions so they can increase their personal wealth while turning the state into a financial wreck with debt. The rise in median income is at least partially due to people moving to other states who just can not afford the average $4k in property taxes every year.

As long as Tennessee has people who think that when the government spends the money, it magically multiplies but, when normal people spend the money, nothing multiplies and all the children get stupid, there is little hope for reform.

As the baby boomers retire, you might see that their income actually decreases. I think this is going to cause more violations of the cap in the future. We are rapidly approaching a future where two generations at the same time will be retired.

It might also be helpful to try and differentiate between consumptive spending and spending as an investment. Spending money on students that do not graduate is consumptive spending. Spending money on highways that effectively connect cities is investment mostly but spending money on highways with low utility (traffic counts) and for questionable economic development purposes (I-69 and others) is consumptive spending.

Spending money on a four lane when a two lane would be adequate is consumptive spending.

Economic Development spending is mostly state sponsored piracy or the movement of economic activity from one place to another. As long as it is moved within the borders of the state, there is no gain for the state. This is largely consumptive spending.

Sports Stadiums and Convention Centers are not legitimate government functions and represent consumptive spending to the extent that they fail to pay for themselves. Worst of all, they tend to consume other tax revenue when forecasts are particuly bad.

The legislature is overly fascinated by the prospect of buying federal grant projects with state matching money. They always justify it as if there was a sale on dollar bills down at the bank: two for a dollar! Even if it produces a marginally useful project, they always remind the detractors of how the money multiplies because Dr. Fox said so. The liberals hate Nixon but they love his ideas on revenue sharing.

Posted by: Daqnny L. Newton at May 1, 2007 10:01 AM

Knoxnews had an article on how Philly plans to spend every last dollar of the projected surplus for eternity.

This will provide him justification for a veto on a reduction in the sales tax on food.

And the Republicans are going to give it to him along with a whole side of pork cooked up fresh to take care of any excess.

Posted by: Rick Forman at May 1, 2007 11:33 AM

So what does it take to violate the spending cap? A simple majority, or do you need some sort of supermajority? If the latter does not exist, maybe having something like that is the answer.

Posted by: Ron at May 1, 2007 5:45 PM

It takes a simple majority - the same minimum number of votes that it takes to pass the budget, which is a loophole that I dubbed "the loophole that swallowed the law."

In my paper I propose a simple two-part reform:

1. Require a super-majority to exceed the cap.

2. Allow the legislature to exceed the cap by a simple majority if their proposed additional spending is approved by voters in a referendum.

The super-majority requirement would make future excess spending less likely, while the simple-majority-plus-referendum provision would make it possible for the legislature to increase spending beyond the cap in situations where the excess spending has majority support, but not super-majority support, in the legislature - and majority support in the public.

As for the super-majority requirement, it is worth remembering that in the spring of 2002, when Gov. Sundquist was pushing for a huge tax increase to pay for a budget that was $771 million over the cap, the legislature first had to vote to break the Copeland Cap before voting to approve his budget.

The House voted 76-12 (with 11 representatives not voting) to break the cap - more than a two-thirds majority - but the Senate only approved breaking the cap by a simple majority, 17-12 (with four senators not voting).

Legislators who voted in the spring of 2002 to exceed the Copeland Cap were, in effect, voting to raise taxes. If the Copeland Cap had required a two-thirds majority in each house, the $771 million in excessive spending would not have been allowed - and the $933 million tax increase would not only have been unnecessary - it would have been pointless as the extra revenue could not have been spent.

Amending the Copeland Cap to require a two-thirds majority to exceed it would, in effect, not just strengthen the constitutional cap on the growth of spending, but also create a new cap on the growth of tax rates. Large tax increases designed to fund overthe- cap spending would, in effect, have to be approved by two thirds of the legislature, not just a bare majority.

Simply changing the Copeland Amendment to require a two-thirds majority vote and adding the simple majority-plus-referendum provision would restore the loophole to its original intent as a provision for true emergencies and allow for higher spending growth when the legislature wants it and the public supports it.

Under suggested reform 1, the $771 million excess spending and the $933 million tax increase would not have passed.

Under suggested reform #2 the legislature did have the votes to put the tax and spending increase to a referendum.

Posted by: Bill Hobbs at May 2, 2007 6:56 AM

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