Do we trust our state government?

Published 11:04 pm Wednesday, March 16, 2016

Alabama’s fiscal policy process, meaning how our state government taxes and spends, reflects a deep-seated lack of trust in our elected representatives.  Editorials and online reader comments at the state’s newspapers also voice this lack of trust.  And yet this distrust has not produced a demand to reduce the scope of state government.

First let’s consider how Alabama’s fiscal policy process illustrates a lack of trust.  Alabama is one of a handful of states with separate General and Education Trust Fund budgets, each with distinct revenue sources and spending programs.  Passing a General Fund budget required two special legislative sessions in 2015, despite a surplus in the Education Trust Fund approximately equal to the General Fund shortfall.  A single budget would have been basically in balance.

Over 80 percent of Alabama’s tax revenue is earmarked, more than any other state.  Michigan and Nevada, next in line, earmark around 60 percent of revenue, and the national average is less than 30 percent.  Earmarking means dedicating revenue from a tax to a specific purpose; essentially citizens tell lawmakers, “We agree to this tax but only if you spend the money on X.”  It reflects a lack of trust.

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Maximum tax rates for income and property taxes, as well as assessment ratios for the property tax, are set in the state constitution.  Increases in these taxes must go before Alabama voters.  Regardless of what one thinks of constitutionally limiting tax rates, the limits indicate that we do not trust lawmakers to set them.

Alabama lawmakers have transferred $15 million of state park funds to the General Fund since 2012.  Consequently Senator Clay Scofield has proposed a constitutional amendment to prevent future diversions of funds from the state parks.  Apparently Senator Scofield does not trust his colleagues to protect funding for our state parks.

Some legislators have proposed letting Alabamians vote on a state lottery this year.  Whether a lottery would be good for Alabama is a topic for another day.  The biggest concern with the proposal I have seen raised in editorials so far is a failure to earmark lottery revenues.

Trust is relevant in evaluating possible fiscal policy rule changes.  Some observers recommend combining the General and Education Trust Funds in one budget.  The Education Trust was created because lawmakers failed to adequately fund schools.  Do we trust lawmakers more now?

If we so distrust our state government, we should ask it to do less.  Otherwise Alabama taxpayers remain in Charlie Brown’s predicament in the Peanuts cartoons: we know Lucy is going to pull the football back when we try to kick it, but we keep asking her to hold for us.  Charlie Brown should really get a kicking tee, and we should consider alternatives to a government we don’t trust.

Innovative and effective market alternatives exist for many of the services currently provided by the state.  Consider state parks, which I discussed last week.  The operation of state parks could be privatized based on the fees visitors already pay, with development rights either maintained by the state or placed in a trust.

Markets could also better achieve our goals for K-12 education.  Our state constitution guarantees a right to education, but children do not need to learn in government-run schools.  As economist Milton Friedman argued, access to education only requires that government pays tuition.  Tax-funded vouchers or tuition tax credits can accomplish this, and a competitive education market will greatly improve the quality of education.

The state also regulates our economy in numerous ways.  For example, Alabama licenses professionals in over 120 occupations.  But politicians often allow occupational licensing to be used against the interests of consumers.  Market-based means of certification exist and almost always outperform government licensing, as my colleague Dan Smith explains in the Johnson Center’s book Improving Lives in Alabama.

Do we trust our state officials to tax, spend and regulate in our interest?  Our institutions and words suggest that we do not.  If so, then we should stop asking the state government to do things we don’t believe they will do well.

Daniel Sutter is the Charles G. Koch Professor of Economics with the Manuel H. Johnson Center for Political Economy at Troy University and host of Econversations on TrojanVision.  Respond to him at and like the Johnson Center on Facebook.

About Dan Sutter

I am the Charles G. Koch Professor of Economics with the Manuel H. Johnson Center for Political Economy at Troy University.

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