Budget myths of the tax-and-spend crowd need correcting

One things liberals claim to know that isn't true is the assertion that Nevada colleges and universities would have to slash employee pay by 20 percent across the board or add five furlough days per month for each employee to meet the budget cuts the Legislature is considering.

Because Nevada System of Higher Education (NSHE) operations are funded from various sources that can't always be substituted one for another, we can't use across-the-board measures to make the cuts. The Legislature will be cutting only our general fund allocations, which supply 35 percent of our $1.7 billion operating budget. Using the $110 million cut previously estimated by NSHE staff for fiscal year 2011, the average effect (which would vary by campus, department, etc.) would have been pay cuts of 6.6 percent, or 1.4 additional furlough days.

I raised these points at the regents' Feb. 2 meeting, and our staff recognized that the 20 percent and five-day figures were wrong -- but they were not corrected when the system's presentation was sent to the Legislature. Nor were the errors I pointed out reported by the press. Since that meeting, the governor's special session proclamation has reduced the $110 million cut to $60 million, so average pay cuts would be 3.6 percent, not 20 percent; or 0.8 additional furlough days, not five.

Meanwhile, accounts of what system campuses might have to be closed are also very inaccurate.

The higher education system's typical overstatement of matters for political purposes should not be allowed to unduly alarm the many good folks who work hard and well in higher education. Average estimated cuts of 6.6 percent that actually turn out to be 3.6 percent are daunting enough; we shouldn't terrify people with false 20 percent claims.

Other claims about state budget and spending issues raise even bigger misinformation problems. Until this year, there have been no cuts in state-funded and overall NSHE operating spending as far back as I've found recorded information. In general, university system spending has grown with Nevada's economy -- while K-12 spending has grown much faster than the economy, even as the quality of its product (as measured by student achievement) has declined.

The "draconian" budget cuts you heard about? A mirage based on the definition of "budget." A budget is merely an itemized plan to spend money, based on assumptions about the funds that will be available. So the tax-eaters, seeking to guilt-trip taxpayers and public officials into giving them always more regardless of how business and private-sector families are faring, can invent any starting point and then wail about the awful carnage they've suffered.

For example, one can compare the university system's 2009 general fund budget of $683 million, approved by the Legislature in 2007 before the great recession, to the legislatively approved $592 million 2010 general fund budget (including federal stimulus funds) based on developments not anticipated in 2007 and calculate a 13.4 percent budget cut. This approach ignores the fact that actual general fund spending in 2009 was only $623 million (not $683 million), meaning the 2010 budget of $592 million was cut 5 percent (not 13.4 percent) as compared to a real -- not artificial -- baseline.

Further, this approach ignores that the general fund covers only 35 percent of the system's operating budget and that the non-general fund portion of the operating budget increased, meaning that before the upcoming cuts are made, there has been no cut in the 2010 total operating budget, as compared to actual 2009 spending. The salient facts are that system's total operating spending has risen with our economy and that 2010 is the first year it will actually be cut -- a cut finally coming after the worst recession in modern history has persisted for two years in Nevada.

Since "budget" numbers can be endlessly manipulated, the right thing to do is to compare actual spending or employment numbers for the public and private sectors to determine the relative impacts of the recession. Over the past 30 months, Nevada private-sector employment has fallen by 12.5 percent -- a loss of 143,300 jobs, or one in eight private-sector jobs since the June 2007 high water mark. Public-sector employment, including education, is essentially where it was 30 months ago. It grew through November 2008 before settling back over the past year to its pre-recession levels.

Similarly, double-digit declines in state tax revenues, exclusive of tax increases, show that businesses and private-sector families that pay them have been crippled by the recession. But education and the rest of the public sector, thanks to tax increases and federal borrowing, have fared better by further burdening those businesses and families.

A huge body of evidence supports the view that the recent hard times and the long-term bleak prospects for economic recovery and growth are due to the cumulative effects of a continuing public-sector over-reach in taxes, public spending, regulation and other interventions. In view of all this, the basic statist narrative is false in claiming that the public sector has not been "adequately" funded. Claims that a no-new-or-increased-taxes position is in any way unreasonable are based on lies, ignorance and greed on the part of tax-eaters and their political allies. What is happening now is only that the unreasonable state spending increases of recent years are, of necessity, being reversed.

Ron Knecht, of Carson City, is an economist and member of the Nevada state Board of Regents.