Beacon Hill Institute Weekly Dispatch: TELs are still foretelling; Estimate of MA GSP

In its appeal to restore funding for its favored programs the Massachusetts Audubon Society this week cited last year’s report from the Beacon Hill Institute that — among many observations  —  noted the state’s lower-than-national-average spending on recreation and parks.

In an email to its supporters, the Audubon Society said, “According to a Beacon Hill Institute Report, we spend less than half the national average on parks and recreation – or $62.90 per person compared to the national average of $138.721.” The quote from our report Massachusetts Fiscal Policy:  The Legend v. the Facts is certainly accurate.

We’re glad that the Audubon Society cared to check out our research and we’re glad that the environmental group is able to use the information to sway legislators now drafting the FY 2012 budget in their corner. The Audubon Society certainly has a point about uneven spending even if they selectively quoted material favorable to their cause.

In rationalizing its budget choices, the Massachusetts legislature ought to bring its spending closer to the national average on a number of budget items  — not just parks and recreation which are arguably real public goods enjoyed by everyone. But that also means cutting the  spending identified by the institute that’s way above the national average. For example, Massachusetts spends far more generously on safety-net services than the rest of the country.  In three safety-net budget categories – Public Welfare, Unemployment Compensation and Veterans Affairs – the services provided Massachusetts residents exceed the national average by about 30 percent.  Massachusetts could cut its spending on the same services by about $1.6 billion and still exceed the national average by 13 percent. (Massachusetts also spends far more on a fourth item, public transit that other states.)

The report also called upon the Commonwealth to adopt a tax and expenditure limitation. Adoption of this TEL would put an end to the perennial exercise in which legislators strain to formulate a budget on the basis of an uncertain revenue outlook and misplaced concerns about the adequacy of safety-net spending.  

Our proposed TEL would allow the state to increase spending at a pace that would maintain real, inflation-adjusted government spending per capita at a constant level and without interruption from unpredictable but inevitable revenue shortfalls.

Few policymakers listened last year but the study’s findings are still robust and applicable. Take for instance infrastructure. A major budget category in which Massachusetts spends far less generously than other states is highways.  In order to bring its spending closer to the national average for this budget category, it should increase spending by about $1 billion.  

We doubt our new-found environmentalist friends at the Audubon Society would like to spend more public dollars on highways but the fact remains Massachusetts priorities are unhinged from what’s really needed to keep the state economically competitive in the long-term. That’s worth a walk in the park.  

In other news from the Institute:

Based on the release of today’s national Gross Domestic Product number, the Beacon Hill Institute at Suffolk University estimates that the Massachusetts economy grew at 2% annual rate for the first quarter of 2011.

The institute based its estimate on the historical relationship between the U.S. GDP and MA GDP.  This morning the U.S. Commerce Department reported that the nation’s economy grew 1.8% during the first three months of the current year.  

The institute also estimated the state’s economy grew at a rate of 2.8% for calendar year 2010.  The most recent data from the federal government for Massachusetts state growth rang in at -2.17 in 2009. A preliminary estimate of the Massachusetts growth figure for 2010 will be released by the Commerce Department in June.

Meanwhile, BHI associates continue to make their economic commentary known across the internet. A former intern at the Institute and Suffolk University Economics PhD candidate, Nicolas Cachanosky, has a post over at the Atlas Foundation’s Sound Money blog titled, “Are Bank Runs a Problem for laissez-faire Banking?”. Last year, Nicolas won the Foundation’s Sound Money essay contest.  

About Beacon Hill Institute

The Beacon Hill Institute engages in rigorous economic research and conducts educational programs for the purpose of producing and disseminating readable analyses of current public policy issues to voters, taxpayers, opinion leaders and policy makers.