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Imagine: priority-based budgeting

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Imagine: priority-based budgeting

There has yet to be an economic recovery in North Carolina, unless you believe in a "jobless" recovery. Combine that with continued growth in state spending, and one can foresee budget shortfalls beyond 2013.

That is, if legislators continue to succumb to status quo bias and perpetuate the same old spending habits. To resolve this bias and promote priority-based budgeting, the American Legislative Exchange Council — the nation’s largest nonpartisan association of state legislators — has published the "State Budget Reform Toolkit."

"Priority-based budgeting means state officials and citizens must first determine the core functions of government," says Jonathan Williams of ALEC. By contrast, the prevailing approach "focuses almost entirely on inputs (more money). Building budgets the conventional way virtually assures overspending since there is little, if any focus on efficiency, effectiveness, or outcomes."

The full ALEC publication is more than 40 pages, including a host of useful ideas for legislators to resolve fiscal shortfalls without increased taxation, raids of rainy-day funds, or reliance on federal funds. But you can boil it all down to the following principles that call on legislators to reframe the discussion.

  • What is the role of government?
  • What are the essential services the government must provide to fulfill its purpose?
  • How will we know if government is doing a good job?
  • What should all of this cost?
  • When cuts must be made, how will they be properly prioritized?

This publication is worth your time, and this video from the Freedom Foundation in Washington State explains it well:

Why you’re feeling the pinch in your own budget

A new measure of inflation from the American Institute for Economic Research, the Everyday Price Index, has found an 8 percent rise in 2011. To get to this result, AIER confined their metric to purchases made on at least a monthly basis.

These items are particularly relevant because individuals have less ability to avoid or put them off. Additionally, one cannot plan well for them, and therefore price changes will have a greater impact on people’s wallets. They are also likely to reflect our price perceptions, since we make them more frequently, and they could well have predictive value, assuming that other prices lag behind and follow them.

The value of the Everyday Price Index merits further debate, but that inflation is rolling in should not be surprising. The Federal Reserve is now the nation’s largest creditor, through expansions of the money supply, so this 8 percent finding is another indication that the devaluation of the currency has arrived.


  • On Wednesday, March 7, I presented testimony before the House Select Committee on Agricultural Regulations at a hearing on raw milk legalization. Listen to that here. Last week, I followed up with a commentary, "The Absurdity of Raw Milk Prohibition," at Carolina Journal online.
  • There will be a Constitutional Candidate Forum, hosted by Founders’ Truth and Constitutionalist Gathering Place, taking place on March 31 from 8:30 a.m. to 12:30 p.m. at the Lighthouse Convention Center in Raleigh. Go here for more details.

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Fergus Hodgson (@FergHodgson) is Director of Fiscal Policy Studies at the John Locke Foundation, a Policy Advisor with The Future of Freedom Foundation, and a member of the American Legislative Exchange Council’s Tax and Fiscal Policy Task Force. He… ...

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