Public Assets Institute > Policy Areas > Vermont Budget > ‘Level funding’ is rarely level

‘Level funding’ is rarely level

“(Governor) Shumlin says he plans to present a level-funded budget to the Legislature in January,” Bob Kinzel reported on Vermont Public Radio last week.

Level funding: The words suggest two things: no cuts, no increases.  For that reason, politicians love to use them. But what does level funding really mean?

Any one of three different things, depending on the speaker and the context.

1. We’ll maintain services, hold the status quo: In hard economic times like these, maintaining existing levels of service usually requires higher spending. More Vermonters need services, and some costs are difficult to control, like oil and health care. Providing the same services from year to year can require a 5 percent to 7 percent increase in dollars spent.

2. We’ll keep up with inflation: Even though inflation is low these days—2 percent in the Northeast in 2010—prices are rising. Level-funding the budget in real terms—that is, after adjusting for inflation—will result in somewhat higher spending. But there also will be services cuts, thanks again to costs that rise faster than general inflation and also to increasing human need. State officials like to say that they can make up for the difference through greater efficiency. That’s possible once in a while, but not year after year.  Using this definition, level funding means real cuts to state services.

3. We’ll spend the same next year as this year: If the state spends $1.2 billion for General Fund services this year, a budget of $1.2 billion for next year would result in even deeper cuts than with the inflation-adjusted approach. Again, there are some increases that simply can’t be avoided, and covering those increases means taking bites—big ones—from other areas of the budget.

At best, the term “level funding” creates public confusion. At worst, it’s an opportunity for mischief. The citizen thinks: “Phew, at least we won’t see budget cuts this year.” The speaker means: “We’re making aggressive cuts again.” Our advice: Strike “level funding” from the official fiscal lexicon and tell it like it is.

Posted by Paul Cillo on August 24, 2011 at 8:14 pm

2 Responses to “‘Level funding’ is rarely level”

  1. Mary Claire Carroll says:

    I add my voice to your advice to strike the words ‘level funding’ from the official fiscal lexicon and tell people the truth. Every group that depends solely or partly on state funds will tell you that level funding actually means cuts to programs. Any business person will tell you that if their income stays level from one year to the next…they are in trouble. Expenses will rise and profits will drop.

  2. […] So “level funding” really will mean less money for services next year than this year (see also 2011 blog on level funding). And because department managers are being warned there will be no state funds to […]