State’s Investment in Economic Growth Shrinking

There has been a lot of talk lately about the size and role of state government. Some claim that state spending is out of control. But that assertion falls apart when placed in a context that allows a meaningful comparison from years past.

In the current budget cycle, total state spending on education, health care, services for seniors, and other important investments is projected to be $31 billion. Compared to the $22 billion spent 12 years ago that might seem like a big increase.

But those numbers don’t tell the real story. Suppose the amount of money your household spent over 12 years went up, but during that time you got married, bought a house, and had two children? Not to mention that things like housing, health care, and other costs of living are much greater today than they were a decade ago. Just comparing one year’s spending to another wouldn’t give the real picture of what was happening. It’s the same with our state. Today there are roughly one million more people living in Washington than 12 years ago. That means more kids in school, more people needing health care, more effort needed to maintain the transportation grid.

Economists who want to compare apples to apples measure a state’s spending from year to year not just in dollar terms, but also as a percentage of the state’s entire economy. And they calculate the economy as the total income of everyone in the state.

Look at it that way and – as the chart below shows – Washington state government spending today is just under five percent of the entire state economy, compared to almost six percent 12 years ago. 

That’s a 15 percent drop. And, in fact, state spending as a share of the economy has been in a free-fall over the past seven years.

That is a cause for great concern because the state’s investment in our future is actually shrinking when you make the comparison that really matters. State government plays a critical role in our economy. It buys goods and services from the private sector, which creates jobs. State government directly pays the salaries of social workers, professors, State Patrol Troopers and many others who not only serve us, but also spend that money at businesses across Washington. And of course the state is the primary source of support for public services that ensure our prosperity, like education and health care.

Our future depends on the state maintaining and strengthening these investments.