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Guest Post: Kudos to Governor Otter for Fiscal Restraint

December 17th, 2008 by Halli

From Bryan Fischer, Idaho Values Alliance

Although the drumbeat for higher fuel taxes or registration fees are likely to continue to come from the governor’s office, Gov. Otter is to be commended for proactively directing state agencies to make budget cuts to accommodate lower tax revenues.

He is directing state agencies to prioritize programs for fiscal year 2010 so they can slash a total of $169 million from their budgets. This is on top of the $130 million he has directed them to trim from budgets for the current fiscal year, which ends June 30.

Bizarrely, of the 36 states facing deficits, 22 of them are increasing spending anyway, simply digging themselves into deeper holes. New York’s governor is proposing a staggering 88 separate tax increases, affecting everything from iPods to soft drinks to health spas, which will only drive New Yorkers to New Jersey to purchase the same products for less money, and in the end only increase New York’s money woes.

We can be grateful that Idaho’s governor has chosen to do his constitutional duty and pursue the path of fiscal restraint instead.

The governor directed agencies to work on “eliminating entire programs if they are not in furtherance of or required by your statutory mission.”

There are two important observations to make here. The first is that this review is long overdue. Most Idaho taxpayers will be asking themselves why state agencies are spending money not “required by their statutory mission” in the first place, and the directive represents a candid admission by the governor’s office that even in Idaho government has grown in places beyond its proper boundaries.

The second thing is that cuts in government spending can in fact be made if there is sufficient urgency. This has relevance to the governor’s insistence that Idaho needs to spend an additional $240 million a year on transportation needs. Thus far he has suggested only increases in taxes and fees to find that money.

But increasing taxes raises costs to consumers, and elementary economics tells us that if you raise the cost of anything, you reduce consumption. In other words, the surest way to get consumers to spend less money on fuel is to increase its cost, which raising the fuel tax will do. Reducing consumption will of course then reduce revenue generated from fuel taxes.

(As an example of this dynamic, New York’s governor is proposing a draconian 18 percent “obesity” tax on soft drinks explicitly for the purpose of reducing consumption.)

Feature articles in today’s Statesman make precisely that same point. The spike in gasoline prices to $4 a gallon this summer has resulted in fairly dramatic reductions in gasoline purchases as Idahoans modify their driving habits. As the cost of fuel comes down, purchases will inch back up. In other words, if you want to generate more fuel tax revenue, the surest way to do it is to make gasoline less expensive through lowering the tax rather than making it more expensive by raising it.

The governor’s directives to state agencies will almost immediately reduce state spending by $130 million in order to meet the state’s constitutional requirement that the budget be balanced.

Why could not that same approach be used to free up additional dollars for transportation? In other words, if dollars are scarce, money has to be reallocated and spent where it is most needed. Families do this all the time, and as the governor’s recent actions show, government can do it too when it has to.

It admittedly will be difficult to find an additional $240 million in spending reductions in other parts of the state budget, but if $130 million can already be found this year, and $169 million next year, what logical reason is there to believe that another $240 million cannot be found? All that is required is sufficient will and motivation.

I believe most Idahoans are sympathetic to the need for the state to invest more in infrastructure. A well-functioning transportation system benefits all residents, whether they use roads to deliver product or take their kids to soccer practice. But they also would prefer the state to transfer funds from one government pocket to another rather than stick its hands deeper into their pockets.

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