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In fact, although state lawmakers claim to have learned

the lessons of the boom and bust cycle of 1982-90, the evi-

dence does not altogether support that conclusion.  On the

one hand, it is true that states have built up sizable

"rainy day" reserve funds.  The National Association of

State Budget Officers reported last year that "balances as a

percentage of expenditures in fi0scal 1996 and 1997 are at

1

the highest levels since 1980."

Over the past three years

state reserves have averaged a healthy 7 percent of reve-

nues.

But even as rainy day funds increase, state expendi-

tures are climbing at an even more frantic pace than in the

1980s.  After adjusting for inflation, state expenditures

have grown by 4 percent per year so far in the 1990s versus

3.4 percent per year in the 1980s.

One measure of the expansion of state governments is

the number of workers on the state payroll.  A recent cover

story in Governing magazine, titled "The Myth of the

Meataxe," revealed the extent of the hiring binge at the

state level in recent years.  According to author Jonathan

Walters,

In the mid-1990s as the words "freeze," "shrink,"

"cap," and "cut" have become staples of the execu-

tive lexicon, state government employment has con-

tinued to go up almost everywhere.  Nationally, in

the years from 1990-96, it increased by 5 percent,

according to the Bureau of Labor Statistics.

You might expect that the states have staffed

up at the expense of squeezing local governments--

which according to conventional wisdom are labor-

ing under the double hiring constraint of severe

budgetary stress and political pressure to out-

source and privatize. . . .

In fact, local and state government both win

a place on the BLS t1op-10 list of growth indus-

1

tries in the 1990s.

The story notes that in Georgia, where Zell Miller

boasts of "smaller is better" state government, public-

sector employment is up 13 percent in the last 7 years.  In

Wisconsin Tommy Thompson has allowed state government pay-

rolls to grow 7 percent in the last 6 years.

Even the barrage of tax cutting by the current crop of

governors is not as dramatic as fiscal conservatives might

have hoped.  Despite the tax cuts, in these times of eco-