No. 343
May 13, 1999
The State Spending Spree of the 1990S
by Dean Stansel and Stephen Moore
Executive Summary
percent or more in 1998. The states now spend
Today, almost without exception, state gov-
roughly $600 (adjusted for inflation) more per
ernments are awash in tax revenues. Between
person than they did in 1990. Seven states have
1992 and 1998 state revenues grew at almost
permitted their budgets to mushroom by more
twice the rate of inflation plus population
than 30 percent after adjusting for population
growth. If states had restricted increases in
growth and inflation: Mississippi, Oregon,
spending and tax collection to the rate of infla-
Arkansas, West Virginia, Texas, Missouri, and
tion and population growth over the period
New Hampshire.
199298, the state tax burden would be $75.2
Over the past four years, only about one of
billion lower today, or $278 less per person. In
every three dollars of the unexpected revenue
Michigan, the excess tax burden from 1992 to
surpluses has been returned to taxpayers. Unless
1998 came to $787 per person; in New Mexico,
states begin to cap expenditure growth and cut
$661; in Minnesota, $573; in Connecticut, $535;
taxes to reduce the revenue intake of state gov-
and in Wisconsin, $520.
ernments, they may be faced at the end of this
In 1999 state tax receipts are again exceeding
expansion with the same massive deficits that
expectations. States will also begin to receive
created tidal waves of red ink when the 1980s
from tobacco litigation settlements an addition-
boom ended.
al revenue bonus worth $206 billion over the
One of Jesse Ventura's most popular mes-
next 25 years.
sages in his improbable but successful indepen-
As record tax revenues have poured into state
dent campaign for governor of Minnesota was a
coffers, state government expenditures have
promise to "give back" the burgeoning budget
soared. In an era of almost no inflation, state
surplus revenues to the taxpayers of the state. It
budgets grew by 4.5 percent in 1996, 5 percent
is sad but revealing that so few of the governors
in 1997, and nearly 6 percent in 1998. Four
of either party have promised to do the same
states (Vermont, Florida, Nevada, and South
despite multi-billion-dollar windfalls.
Dakota) actually raised their spending by 10
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Dean Stansel is an associate policy analyst at the Cato Institute. Stephen Moore is director of fiscal policy studies at
Cato.