Viewpoint: It's Time to Constitutionally Limit Ohio Government Spending
Ohio state legislators continue to struggle with taming the state budget. They can't be too happy about the situation.
State government has been growing more than 5 percent each year, a pace that doubles the state budget every 14 years, and ranks Ohio among the fastest growing states in terms of taxation and spending. Overall spending from the General Revenue Fund - the state's discretionary budget - has grown three times faster than the inflation rate since 1994.
Meanwhile Ohio's population and income growth continue to lag behind the national average. Within the span of about thirty years Ohio has gone from being a low tax, high growth state to being a high tax, low growth state.
By some measures, the Buckeye State ranks among the top ten highest spenders. The Washington, D.C.-based Tax Foundation now places Ohio's overall tax state and local burden in the top ten in the nation.
Voters seem to want lower taxes and less spending. They have elected a string of Republican governors and have given the Republicans control of the legislature for many years. And when given the chance they have consistently voted down new statewide tax increases. But taxation and spending continue to rise almost unabated.
This is the reason why Ohioans should consider forcing the state legislature restrict the growth of taxation and spending.
Twenty-three states have adopted some form of a Tax and Expenditure Limitation, or TEL. These initiatives essentially tell governors and state legislatures what their total budget increase will be, and require them to work within that boundary. In other words, these measures force state governments to make spending decisions like private businesses and households.
Most businesses and families don't have the ability to simply tell their customers or employers to give them more money when they spend too much. Yet that is what the Ohio legislature has done year after year. The last time was two years ago when legislators passed a sales tax increase even as the state remained mired in a nationwide recession.
The experiences of other states can be an important guide. After more than two decades of research, analysts and legislators have learned what works and what doesn't.
Careful analyses of TELs and state economic performance show they can work, but how they are designed makes a huge difference in their impact. The most effective limitation measures have the following three characteristics:
They are part of state constitutions, and cannot be manipulated by the legislature;
They allow government expenditures to grow at the inflation rate plus population growth, and no more;
They refund surpluses to taxpayers immediately once the rainy day fund has met a specific threshold.
Critics of TELs argue that they hamstring governments because they limit the freedom of legislators to determine their own spending levels. In fact, an effective limitation measure simply forces legislators to prioritize, look for efficiencies in government programs and services, and avoid raising taxes a first resort.
Most responsible TEL initiatives also provide a way out. Voters at the ballot box can override spending and tax limits. If the proposal for higher taxes or spending has merit, let citizens decide as part of an open and public statewide debate on fiscal priorities.
When designed well and implemented faithfully, state and local governments can meet their obligations without taking an increasingly bigger bite out of the private economy. In a state like Ohio, landlocked and struggling with a traditional manufacturing base, fiscal discipline is even more important.
A binding tax and expenditure limitation measure should be considered a critical component in the policy toolbox for achieving fiscal discipline and providing a more competitive business climate.
Robert Lawson is a Professor of Economics at Capital University and a senior fellow with The Buckeye Institute, and Russell Sobel is an Associate Professor of Economics at West Virginia University.
