What Are the Facts About State Government Spending?

Every year, citizens, pundits, and elected officials in Nebraska engage in spirited debates about government spending. One viewpoint argues that spending continues to increase at an undesirable rate and that the Legislature needs to cut spending and use taxpayer dollars more efficiently. The other perspective claims that the state needs to increase taxes and spending to provide essential services and investments for the state’s citizens.

Despite these debates, many people are often left confused about how much the state actually spends.  Adding to the confusion is the lack of institutional knowledge in the Nebraska Legislature.

With term limits, senators are only in office eight years at a time.  Events and policies including the Great Recession, the creation of the education funding formula, state property tax relief programs, the Nebraska Advantage Act, or federal mandates like Obamacare, are now too far behind us for many elected officials to recall how these issues impacted the state budgeting process.
 

While state spending would unquestionably need to increase as population and public demand for services grow over many decades, the pace of spending growth in Nebraska has increased far more rapidly than population.

In a report I recently published with the Platte Institute, I review 50 years of state data, which show that total state spending per person in Nebraska is at the highest it has ever been: $6,180. 

This figure represents a 384 percent increase in state spending since the implementation of state income and sales taxes just over 50 years ago. Over the same period, Nebraska’s population grew only 31 percent. These figures are apples-to-apples: adjusted for inflation and population, including all government expenditures from the State of Nebraska, including cash funds, fines and fees, and federal funds sent to the state. 

As the budget has grown, priorities in the budget have shifted over time as well.  Historically, spending on transportation and roads was one of the largest expenditures in state government.  But since 1998, spending on state pensions has grown 441 percent, and now exceeds transportation spending.  The largest state agency expenditure in Nebraska is Health and Human Services, which has grown by 65 percent in inflation-adjusted terms since 1998.
 

Anyone who reads the newspaper is familiar with the on-going debate over whether Nebraska spends enough on education. But in this area, spending has also increased.  Higher education, which includes the University System and State Colleges, is spending 70 percent more today than they were in 1998.  The Department of Education has experienced 46 percent growth.
 

There are many lobbyists and special interest groups in Lincoln that will be quick to tell senators that funding for their specific area has been cut or that they are not at a level that meets their basic needs.  That might be true in certain circumstances, but overall the state is spending more today than it did last year or even five years ago.

The budget as a whole is more generous than in the past, and tax rates have not changed much recently, either.  Instead, a limited supply of taxpayer dollars is being stretched thinner to meet a greater supply of demands.  As the pie is sliced more ways, the recipients of each slice feel they are not getting their fair share, but more support for any one area can only come at the expense of the others, or at a greater expense to taxpayers.  

In a time when there is more pressure on the state’s revenues to fund federally mandated programs, lawmakers need to look at the whole budget picture to understand how and why Nebraska has reached the level of spending it is at today. 

Everyone, regardless of political ideology or special interest, ultimately wants to see Nebraska grow and prosper.  But as the state budget becomes more crowded, senators will face more difficult choices that have real economic trade-offs for Nebraskans.