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Bizarre Study on State Spending Exposed

Commentary
November 2, 2004By Chuck Sheketoff

When it comes to state and local government spending, should Oregon spend like Vermont or like Utah?

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Cascade Policy Institute

Read the Cascade Policy Institute's Report and Commentary

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Does Oregon Overspend? Their Commentary

A recently released study by two moonlighting ECONorthwest economists, Randall Pozdena and Eric Fruits, concludes that Vermont is a model of spending restraint. Massachusetts and Connecticut are also supposed to be low spenders, while South Carolina and Louisiana allegedly overspend. Utah is supposedly off the charts as an extraordinarily high spending state.

According to the study's statistical model, Utah spent well more than three times as much in 2000 as it should have, given the state's personal income, poverty rate, and other factors. Now, it could be that the good people of Utah really have gone mad. Or, maybe, just maybe, there's something wrong with this study's statistical model. After all, Utah ranked 40th for public school teacher salaries, 50th in public school expenditures per pupil, and 51st among the states and the District of Columbia in student-teacher ratios in 2002-2003.

It also could be that Howard Dean's Vermont really was the lowest spending state in the nation in 2000, as the study claims. But I think I want to take a close look at that statistical model, in part since salaries for public school teachers in Vermont ranked in the middle at 27th, and since Vermont ranked seventh highest for public school spending per student and had the lowest student-teacher ratio in the nation in 2002-2003. Add to that Vermont's generous Medicaid program and you kind of wonder how Vermont can be portrayed as the lowest spending state.

Oregon, according to this study, allegedly has been a relatively high spending state, not as spendthrift as Utah, but up there with big-spenders like Louisiana and South Carolina.

Statistics don't lie, and certainly some liars use statistics, but this study shows that sometimes the statistics just make no sense.

Maybe that's why the group that published the report, the libertarian Cascade Policy Institute, distanced itself from the authors and the data by saying "nothing in this document is to be construed as necessarily supporting" the report's views, and that "the views expressed herein are the authors' own."

Despite their disclaimer, however, Cascade is hawking the study because the report's extremist policy recommendations match Cascade's political agenda to dismantle much of government. For instance, the study asserts that Oregon should privatize everything possible, including public education, without connecting privatization data with their spending analysis. There's no evidence in the report that Vermont, Massachusetts, Connecticut, or any of the other states that allegedly show more fiscal restraint than Oregon spend less because they have privatized more state services.

The study also ignores what each state gets for its tax dollars when deciding whether states are spending too much. It ranks states' spending regardless of the quality or quantity of public services. That's like being told that you spent too much on groceries because your neighbor spent less. To these ECONorthwest economists the only thing that matters is that your neighbor's beer and junk food was cheaper than your healthy square meals; they don't care about the nutritional value for the dollars spent. These economists give new meaning to economics being "the dismal science."

The report certainly doesn't add much to the public discussion about the appropriate level of state and local government spending. It is designed simply to advance a political agenda bent on reducing the size of state and local government regardless of how that would impact the lives and well being of Oregonians. Perhaps that's the reason the economists had to do their work on the report outside the auspices of their respected consulting firm ECONorthwest, which itself garners thousands of dollars of government-financed or -inspired contracts each year.

The report's bizarre numbers and the shoddy, politically motivated analysis should give readers pause before they conclude that Oregon overspends. But then maybe it's true that spend-crazy maniacs have taken over Utah, and the study's authors are the only ones who know it.