Budget Cut: What is it?
Civitas Staff | January 25, 2008
The phrase “budget cut” is used in an equivocal manner when speaking of various budgetary actions and thus lends itself to misinterpretation. For the ordinary voter, a budget cut implies an actual reduction in the amount appropriated for an item or program — an amount that is less than the amount spent in the previous year’s budget. The problem here is that there is more than one budget – for instance, the governor’s recommended budget as opposed to the legislatively authorized budget. A “budget cut” to the 2007 recommended continuation budget may, in fact, still result in an increase in spending as compared to the 2006 authorized budget. In short, it is politically beneficial to claim credit for cutting the budget (while not cutting spending in certain areas), so the phrase tends to be interpreted in the broadest way possible.
In general, a “budget cut” is used to refer to the following actions:
- Reductions to the continuation budget itself. These are cuts to specific personnel, programs or line items that reduce the budget for those items below the level of the previous year. In 2002, for example, the General Assembly eliminated nearly 70 positions in the Department of Agriculture and Consumer Services. This reduction was an actual budget cut in relation to the year’s previous budget and saved the state $2.55 million annually.
- Reductions that slow down the growth in the continuation budget, typically by reducing (but not entirely eliminating) increases recommended by the governor for inflation or population growth. For example, in 2005 the Money Report specified a cut of $1.4 million to the Indigent Persons Attorney Fee Fund. This “cut” was a reduction to a $13 million increase placed in the continuation budget by the governor due to anticipated claims from attorneys representing indigent clients. Therefore, the budget for the fund actually increased by $11.6 million compared to the previous year. Another example of such a “cut” is the 2002 reduction of $2.3 million for public school classroom materials, supplies, and equipment. This cut was accomplished by reducing the rate of inflation used in the continuation budget from 5 percent to 3 percent. Thus the cut actually increased spending by 3 percent.
- Temporary reductions to the continuation budget. Nonrecurring cuts are temporary reductions to line items in an agency’s budget. Such cuts require the agency to make short-term economies that may not be possible on a long-term basis. One common example is a nonrecurring cut to the vehicle replacement line items in criminal justice agencies, requiring that the agencies postpone replacing some vehicles for another year. Another example of a temporary cut is a negative reserve placed in an agency’s budget (see Key Terms). Whether the cuts are recurring or nonrecurring, legislators tend to prefer line item cuts to the use of negative reserves because it allows the General Assembly to control which programs or areas are cut. The fear here is that agencies will use the negative reserve to choose to cut a program that legislators – and the public – want to keep. In voters’ minds, however, legislators will be blamed for the cut, rather than the agency heads.
- Reductions to the appropriation for an item that will be made up with funds other than the General Fund. For example, in 2005 the appropriation for the community colleges was reduced by $5.6 million due to an increase in the tuition rate. While the amount expected to be spent did not change, the General Fund appropriation was reduced.
- Reductions to an agency’s overall budget. Frequently, budget cuts to specific items or programs are more than balanced by the expansion of other items. In tight budget years, though, some agencies will actually see a reduction in their appropriation as compared to the previous year. For example, in 2002 the General Fund appropriation for the Department of Correction was $51 million below the governor’s continuation budget request and $43.9 million less than the amount appropriated by the 2001 General Fund.
Although every budget passed by the General Assembly has contained numerous “budget cuts,” the overall General Fund budget almost always increases from year to year. Even when some agencies receive lower appropriations than in the previous year, these reductions are more than balanced by higher appropriations for other agencies. In 2002, however, the General Fund budget passed by the General Assembly was actually slightly lower than the 2001 budget: $14.35 billion compared to $14.53 billion.
