Wednesday, April 7, 2010

The Hidden Costs of 2010 Budget

In economics, there is something known as a hidden cost. As defined by hidden costs are:

Expense not normally included in the purchase price of an equipment or machine, such as for maintenance, supplies, training, and upgrades.

In the process of setting the state budget, members of JFAC will routinely attempt to identity what the fixed and variable costs of any budget setting action might be. They look at the world with little complexity and simply as a matter of "balancing the state's checkbook." Unfortunately, this de minimis view of the budgeting is neither useful nor realistic.

While Governor Otter and majority legislative "leadership" praised themselves for a "stellar" session, they failed economics 101. Yes, the state budget is "balanced" but the true costs are not calculated. As has already been reported, not more one week after the end of the legislative session, the Department of Health & Welfare is closing nine regional office and laying-off 126 employees. Now instead of helping struggling Idahoans get access to services to give them a hand-up, they'll be putting their own hand out.

Unfortunately, the 126 employees is only the tip of the iceberg. Most of the job losses will be seen in the private sector by private social service providers that will no longer be able to offer services, especially in our small rural communities. The multiplier effect is a funny thing, when you cut off income to one group, it finds its way to all segments of our economy. Whats more, as clients of private providers and H&W are unable to get access to services, many of which are preventative in nature, they will undoubtedly be accessing more expensive services in the form institutional care either in corrections or a state hospital. It is a lose-lose propisition with the Idaho taxpayer stuck holding the bill.

The Department of Health & Welfare is only the beginning. In future weeks other agencies will face the budgetary reality that our nearsighted Governor and majority leadership placed upon them and make similar cuts to services and jobs. In education, this will be felt very close to home. In fact, many local districts in rural Idaho will be faced with the choice of closing down entire schools or trying to raise property taxes. So rather than address the funding problem at the state level, the decision was made to make the local district make the tough decision. What kind of leadership is that?

After all is said and done, productivity will decline, marriage and family situations will strain, students will be less well prepared, and Idaho will be worse off. These are the hidden costs to the 2010 budget.