Simulation of a Constitutional Spending Limit for a Conservative State: With Dynamic Adjustment and Sensitivity Analysis

Authors

  • JOHN MERRIFIELD,

  • DEREK MONSON


Abstract

Longstanding concern about the rate of state and local government spending growth, strengthened by “Great Recession” economic and fiscal conditions, sustains advocacy of constitutional amendments to cap the growth of state and local taxes or spending. For some states, interest recently changed to necessity, and current constitutional limits—most notably the California experience with the Gann Spending limit (1979–1990) and the Colorado experience with its Taxpayer Bill of Rights (1992-present)—contain numerous valuable lessons for fiscal restraint proponents.

We use those lessons, and others, to develop a constitutional spending limit (CSL) for Utah, and describe a CSL simulation for the state for 1990–2009. In contrast to what an “Institutional Irrelevance Perspective” suggests for a politically conservative state such as Utah, we find that Utah would have seen large and robust CSL impacts from setting the spending growth rate at school-age population plus inflation for K-12 education funding, and at population plus inflation for remaining nonexempt state spending.1 Those impacts include a reduced tax burden, sizable reserves to cope with emergencies, elimination of fiscal crises, and expanded personal income. Extensive sensitivity analysis identifies the key underlying factors and demonstrates the robustness of those findings. We compare the Utah results to a 1990–2009 CSL simulation for California, and a 1995–2009 CSL simulation for Ohio.

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