CHRIS EDWARDS, CATO INSTITUTE
One of the factors undermining efficiency and performance in American government is the rising complexity of laws, regulations, programs, and bureaucratic procedures. Complexity raises costs, reduces transparency, and undermines sound management.
The problem is partly caused by the flood of money pouring from the federal government to state governments and from state governments to local governments. These flows come with extensive reporting requirements and with countless rules that micromanage how money is to be used and not used.
Other sources of complexity include court‐ordered requirements, collective bargaining agreements, and activism by every incoming federal, state, and local politician wanting to add new programs as well as carve‐outs and additions to existing ones. Governors don’t just want to increase spending on public schools in general, they want signature achievements they can brag about, such as raising teacher pay X percent, reducing class sizes Y percent, or creating programs with buzzy and aspirational titles to signal their issue leadership.
The administration of Utah Governor Gary Herbert discusses the complexity problem in its proposed budget for 2021. Utah is a conservative state that spends only a fraction of what liberal states do on a per capita basis, so the problems identified in these Utah excerpts are presumably worse in states such as New York.
The number of bills, resolutions, funds, line items, programs, and performance measures continue to grow over time.
… While no single measure can precisely capture the increase in complexity, some data provides a point of reference. The Legislature passed 574 bills and resolutions during the 2019 General Session, which represents a 47% increase over the 391 bills and resolutions passed in the 2000 General Session.
Not only is the overall number of bills increasing, but the complexity of appropriation bills is also continuing to grow. Each appropriation identifies a funding source and funding use, typically referred to as a line item. Additionally, separate allocations for specific programs may be identified within a line item. In FY 2020, 1,472 active programs are identified in the state’s accounting chart of accounts. This is 205 (or 16%) more active programs than in FY 2011.
This trend of increasing complexity is particularly concerning in the area of public education. In FY 2010, the public education budget split funding into 44 different programs outside of the Weighted Pupil Unit (WPU)-based Basic School Program. This increased to 62 different non‐WPU programs in FY 2020, including 31 under the Related‐to‐Basic line item and another 26 under line items for the State Board of Education’s Initiatives, Science Outreach, and Fine Art Outreach.
Another recent trend is the creation of new funds or accounts to fence off funding for specific programs. In FY 2020, $688 million (or nearly 9%) of all Education Fund and General Fund appropriations passed through another fund or account before being allocated for their actual use.
… Excessive budget line items and programs also separates budget buffers. Agencies are permitted to move funding between programs within the same line item, but excluding a few statutory exceptions, may not move funding between line items. As a result, agencies may over budget for an individual line item because no other mechanism can reallocate funds to address emerging priorities or unexpected costs.
… There were over 800 performance measures in 2019 General Session appropriations bills.
… In the recent Performance Audit of Public Education Reporting Requirements, the Office of the Legislative Auditor General was unable to identify exactly how many different reports local education agencies (LEAs) are expected to submit each year. Based on reporting calendars from various entities, the auditors estimated the number of reports to exceed 300. The auditors said, “The difficulty lies in the large number of individual reporting requirements found in federal law, state statute, administrative rule, and department policy, let alone additional requests for data from various entities.”
This audit finding illustrates the needless overhead and complexity that occurs when people in positions of authority try to gain insight by breaking systems down into smaller and smaller measurable parts, often yielding more complexity and cost without improving performance.
… In summary, increasing complexity will make government more difficult to understand and lead to squandered opportunities. By contrast, replacing complexity with simplicity will help citizens better understand the services they are purchasing with taxpayer dollars and ensure that every tax dollar invested creates more value.
Chris Edwards is the director of tax policy studies at the CATO Institute and editor of www.DownsizingGovernment.org. He is a top expert on federal and state tax and budget issues. Before joining Cato, Edwards was a senior economist on the congressional Joint Economic Committee, a manager with PricewaterhouseCoopers, and an economist with the Tax Foundation.