| February 1, 2012

Oversight of federal funding needed

State spending is at an all-time high. The most significant driver of state spending growth is federal funds, or what tax users like to think of as “free” money. It is the federally induced welfare programs, such as Medicaid, that require ever-increasing state funding matches for the programs’ exploding costs. (Michael S. Greve has an excellent blog post here.)

According to Oklahoma’s latest Comprehensive Annual Financial Report (CAFR):

•Total state spending on social services has grown from $1.59 billion in FY-2005 to $2.25 billion in FY-2011—an increase of 41.7 percent in six years.

•Total state spending on health services has grown from $3.13 billion in FY-2005 to $4.85 billion in FY-2011—an increase of 54.3 percent in six years.

Based on this enormous growth, lawmakers must take a serious look at state programs operated with federal funds. In particular, oversight of state agencies’ application for federal funds, and operation of programs using federal funds, must begin immediately.

The current budget review process is inadequate. There are simply too many programs being operated by state agencies, and too much money being spent. Just as lawmakers have established committees specifically for certain policy issues needing intense review (e.g., DHS) it’s time to form an oversight committee designed specifically to review and make recommendations for all state programs utilizing federal funds.

The current unchecked growth in state government spending is irresponsible. It is time for policymakers to take fiscal federalism seriously, and chart a new course towards economic freedom.

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