This article first appeared in the St. Louis Beacon, Oct. 28, 2013: Missouri’s budget priorities have long-term consequences and they are not good.
The recent snafu over the fiscal budget, the debt ceiling and the continued funding of Obamacare provides a teachable moment. Spending choices, whether at the federal or state level, have economic consequences.
Over the past 20 years, the Missouri budget has grown significantly. Adjusted for inflation, the Fiscal 2013 budget of $10.5 billion is about two-thirds greater than in Fiscal 1990. Leaving aside the argument about whether this increase is justified, how the composition of the budget has changed over time reveals the preferences of those in the state capital.
To facilitate comparisons over time, let’s break Missouri budget down into four components: Education (which includes both K-12 and tertiary), public safety, social services and a catchall category “other.” In the Fiscal 1990 budget, education accounted for slightly more than one-third of total spending, about 37 percent. This exceeded public safety (1.8 percent) and social services (20 percent) combined.
Spending priorities in Jefferson City have changed dramatically over time. Michael Rathbone of the Show-Me Institute has examined the numbers and what he finds is revealing.
It should be of no surprise that spending on social services comprised a much larger share of Missouri’s Fiscal 2013 budget than in 1990. Today, social services alone account for slightly over one-third of the budget. This reflects the rapid rise in social services over the past 20 years. Though total spending, adjusted for inflation, increased 68 percent since 1990, spending on social services jumped an astounding 182 percent.
This dramatic increase reflects the massive increase in spending on Medicaid. While the majority of Medicaid spending comes from federal funds, Medicaid makes up an increasing portion of the state’s general revenue spending.
While social services increased, the relative amount of spending on education was cut. Education comprises about 27 percent of total spending in Fiscal 2013 down notably from Fiscal 1990. Even more revealing is how the distribution of spending on education has changed. While spending on K-12 education increased (in real terms) more than 30 percent over the past two decades, real spending on higher education actually declined.
The fact that education (especially higher education) takes a less prominent place in the budget will not enhance Missouri’s economic future. Indeed, much research shows that education — the building of human capital — plays a key role in determining future economic growth. Gov. Jay Nixon recently said he will call for a “significant funding boost next year for colleges and universities and new resources for financial aid and scholarship programs” (AP article). But whether that change of direction actually happens remains to be seen.
Where does Missouri rank in terms of educational attainment? Using data from the U.S. Census Bureau, in 2008 Missouri ranked 28th in the nation when comparing the percent of those 25 years and older with at least a high school degree. It’s worse if we focus on persons 25 and older with a bachelor’s degree: Here Missouri ranks 33rd.
Many argue that merely counting degrees earned or years in school is not an adequate measure of educational attainment. That is why international comparisons of student achievement are done using results from standardized tests.
How does Missouri stack up using results for one such measure, the National Assessment of Educational Progress? Stanford professor Eric Hanushek and his colleagues have compared test score gains since 1992 across 41 states for which data are available. According to their computation, Missouri again lags the majority of states, coming in at 27th.
The upshot is that states with higher levels of educational attainment tend to be states that experience faster economic growth. Missouri is not one of them, in either category. University of Missouri economists Joseph Haslag and Michael Podgursky found in a 2012 study that the Missouri economy grew at a slower rate than any of our neighboring states since 1997.
I do not mean to suggest that simply throwing more dollars at education is the answer to improving our less than stellar academic report card. Still, policies that expand other government programs at the expense of intelligent funding of education will only perpetuate Missouri’s already lackluster economic performance.
Rik Hafer is a distinguished research professor in the Department of Economics and Finance at Southern Illinois University Edwardsville and a scholar at the Show-Me Institute.