Sustainable State Budget Revolution Across the U.S. (Updated)

Government Spending Is The Problem

The late, great economist Milton Friedman said, "The real problem is government spending." This is true as spending comes before taxes or regulations. If people didn't form a government or politicians didn’t create new programs, there would be no need for government spending or taxes. And if there were no government spending or taxes to fund spending, then there would be no one to create or enforce regulations. 

​While this might sound like a utopian paradise, which I desire, there are essential, limited roles for governments outlined in constitutions and laws. Of course, most governments do much more than provide limited roles that preserve life, liberty, and property. This is why I have long been working diligently for decades to enact strong fiscal rules, including a spending limit, for federal, state, and local governments. I believe my God-given calling is to "let people prosper," whereby limiting government spending promotes greater liberty and more opportunities to flourish.

Empirical research underscores the importance of spending restraint over tax hikes in promoting economic growth. Studies by renowned economists Alberto Alesina and Silvia Ardagna, John Taylor, Casey Mulligan, and others have consistently shown that fiscal adjustments that reduce government spending are more effective at fostering economic growth than those that raise taxes.

Fortunately, multiple state think tanks have championed this sound budgeting approach through what they've called either the Responsible, Conservative, or Sustainable State Budget. I recently worked with Americans for Tax Reform to publish the Sustainable Budget Project, which provides spending comparisons and other valuable information for every state. This groundbreaking approach was outlined in my co-authored op-ed with Grover Norquist of ATR in The Wall Street Journal and has been discussed at NRO, the Club for Growth Foundation, and elsewhere.

When Did This Budget Approach Begin?

I began this approach in 2013 with my former colleagues at the Texas Public Policy Foundation, focusing on the Conservative Texas Budget. The approach is a fiscal rule based on an appropriations limit that covers as much of the budget as possible, ideally the entire budget, with a maximum amount based on the rate of population growth plus inflation and a supermajority (two-thirds) vote to exceed it. A version of this approach was initiated in Colorado in 1992 with the passage of their Taxpayer's Bill of Rights (TABOR), which key individuals like Dr. Barry Poulson and others championed  (picture below is from a road sign in Texas).

Why Population Growth Plus Inflation?

​While there are many measures for a spending growth limit, the rate of population growth plus inflation provides the most reasonable measure of the average taxpayer's ability to pay for government spending without excessively crowding out their productive activities. It is essential to look at this from the taxpayer’s perspective rather than the appropriator’s view, given that taxpayers fund every dollar that appropriators redistribute from the private sector. Population growth combined with inflation is a stable metric that reduces uncertainty for taxpayers (and appropriators), essentially freezing inflation-adjusted per capita government spending over time. ​

The research in this space shows that the best fiscal rule is a spending limit based on the rate of population growth plus inflation, rather than on gross state product, personal income, or other growth rates. Population growth, combined with inflation, typically grows more slowly than these different rates, allowing more money to remain in the productive private sector, where it belongs.

To get technical for a moment, personal income growth and gross state product growth are essentially equivalent to the sum of population growth, inflation, and productivity growth. There's no reasonable basis to believe the government is more productive over time, so the last term would be zero, leaving only population growth plus inflation. And suppose you consider the productivity growth in the private sector. In that case, more money should be allocated to the more productive sector at the margin to achieve the highest rate of return, leaving only population growth and inflation.

Population growth plus inflation becomes the best measure, no matter how you look at it.

Given the recent high inflation, it is wise to use the average of population growth and inflation over several years to smooth out increased volatility (ATR's Sustainable Budget Project uses the average rate over the three years before a session year). And this rate of population growth plus inflation should be a ceiling, not a target, as governments should be appropriating less than this limit because they have been overspending for years, if not decades. Ideally, governments should freeze or reduce spending at all levels of government to provide more room for tax relief, less regulation, and more money in taxpayers' pockets.

Overview of Conservative Texas Budget Approach

This approach was partially introduced into state law in Texas in 2021 with Senate Bill 1336, as the state already has a spending limit in its constitution. The bill improved the limit to cover all general revenue ("consolidated general revenue") or 55% of the total budget rather than just 45% previously, base the growth limit on the rate of population growth times inflation instead of personal income growth, and raise the vote from a simple majority to three-fifths of both chambers to exceed it instead of a simple majority. 

Some improvements should be made to the recent statutory spending limit change in Texas, such as enshrining it in the constitution and adjusting the growth rate to reflect population growth plus inflation, rather than population growth times inflation calculated by (1+pop)*(1+inf). This limit is one of the strongest in the nation, as historically, the gold standard for a spending limit of Colorado's Taxpayer's Bill of Rights (TABOR) has been watered down over the years by its courts and legislators, as it currently covers just 43% of the budget instead of the original 67%. 

Unfortunately, the weaknesses in Texas's expenditure limits, including the weak constitutional spending limit and the consolidated general revenue spending limit, have contributed to excessive spending in recent years. The table below highlights the Texas Budget for the latest 2026-27 biennium. The Legislative Budget Board's (LBB) Reported Budget compares spending to appropriations, which is like comparing apples to oranges. Both are expenditure types, but appropriations are at the beginning or during the budget period, while spending is at the end. The table also includes the Budget since 2024-25, with an apples-to-apples comparison of initial appropriations across biennia. The budget since 2023, which uses this consistent comparison from 2022-23 to the proposed 2026-27 appropriations, shows that state fund appropriations are up 42.2% compared with population growth plus inflation of just 25%. These are historically significant increases in the budget over such a short period and are a major reason for concern. 

The figure below shows how the growth in Texas’ biennial budget was cut by 13.3% from 12% to 10.4% after the creation of the Conservative Texas Budget in 2014, which first influenced the 2015 Legislature when crafting the 2016-17 budget, along with changes in the state’s governor (Gov. Greg Abbott), lieutenant governor (Lt. Gov. Dan Patrick), and some legislators. ​The 10.4% average growth rate of biennial appropriations since 2016 was above the 7.9% biennial average rate of population growth plus inflation, which was driven substantially higher after the latest 2024-25 budget, which was well above this key metric (previously, the biennial budget growth was 5.2% compared with 9.3% in the rate of population growth plus inflation). ​

Making matters worse, the growth of the budget has increased substantially faster than population growth plus inflation in Texas since Republicans gained their first trifecta in control of the Governor's mansion, Senate, and House in 2003. Their first budget was in 2004-05, which the work of House Appropriations Chairman Talmadge Heflin (one of my wonderful mentors) helped address by closing a budget shortfall without raising taxes through spending cuts and restraint. The figure above highlights how the budget has grown nearly 30% faster than the average taxpayer's ability to pay for it over this period. The figure above illustrates how these excesses have accumulated over time, resulting in massive spending and substantial tax burdens on Texans. There is more work to do!​

My Work On The Federal Budget In The White House

​From June 2019 to May 2020, I took a hiatus from state policy work to serve Americans as the associate director for economic policy (the "chief economist") at the White House Office of Management and Budget. There, I learned a great deal about the federal budget, the appropriations process, and the economic assumptions used to provide the upcoming 10-year budget projections. In the President's FY 2021 budget, we identified $4.6 trillion in fiscal savings, and I was able to include the need for a fiscal rule, which is a rare occurrence (see President Trump's last budget).

Sustainable Budget Work With Other States, ATR, and CFGF

When I returned to the Texas Public Policy Foundation in May 2020, I sought to regain a sense of freedom during the COVID-19 pandemic and be closer to family. I started an effort to work on this sound budgeting approach with other state think tanks. This led me to work with many fantastic people who are trying to restrain government spending at the state, local, and federal levels. Here are my latest data on the federal and state budgets as part of American for Tax Reform's Sustainable Budget Project and a recent publication by the Club for Growth Foundation.

​From 2016 to 2025, the following happened:

Federal spending skyrocketed 81.9% to $7.0 trillion in 2025, which is two and a half times faster than the 32.4% increase in population growth plus inflation.

• If Congress had restrained spending to this sustainable growth rate:
  • The federal government would’ve spent $1.9 trillion less in 2025.
    
  • The national debt would’ve increased by less, with a $2.7 trillion increase instead of $15.6 trillion.
    
  • Cumulative debt since 2006 would have risen by less, by $4.2 trillion rather than $23.2 trillion.
• That’s trillions of dollars that could’ve stayed in people’s pockets or been invested in future prosperity, not siphoned off to fund bloated bureaucracies and waste.

Aggregate state spending, by the 50 state governments, excluding funds received from the federal government, increased by 65.8% during that decade to $2.1 trillion. 

• Had states’ spending grown by the maximum rate of 32.4% in population growth plus inflation from 2016 to 2025, they:
  
  • Would have spent $419 billion less in 2024.
    
  • Would have had cumulative spending be $1.8 trillion less over that decade, leaving more money in people’s pockets.​

Result: When combining federal and state overspending, Americans lost over $3.1 trillion in 2025 and more than $20.8 trillion in excess taxes and debt across the decade.

I hope that if we can get enough state think tanks to promote this budgeting approach, get this approach put into constitutions and statutes, and use it to limit local government spending as well, there will be plenty of momentum to provide sustainable, substantial tax relief and eventually impose a fiscal rule of a spending limit on the federal budget. This is an uphill battle, but I believe it is necessary to preserve liberty and provide more opportunities that let people prosper.

​Sustainable State Budget Revolution Across The Country

Below are the states and think tanks with which I'm working on this sustainable budget revolution. You can find an overview of this budgeting approach in Louisiana, which should be applied elsewhere. 

Here are the latest efforts:

1. Americans for Tax Reform released the Sustainable Budget Project, which compares every state's spending with population growth and inflation, along with valuable comparisons and data for each state.
2. Alaska: Alaska Policy Forum released the Responsible Alaska Budget.
3. Colorado: The Independence Institute recently released the Sustainable Colorado Budget.
4. Florida: James Madison Institute released the Conservative Florida Budget.
5. Iowa: Iowans for Tax Relief Foundation released the Conservative Iowa Budget.
6. Kansas: Kansas Policy Institute released the Responsible Kansas Budget.
7. Louisiana: Pelican Institute released the Responsible Louisiana Budget; see the comparison between RLB and ATR's Sustainable Budget project.
8. Michigan: Mackinac Center released the Sustainable Michigan Budget.
9. Mississippi: Mississippi Center for Public Policy released the Responsible Mississippi Budget.
10. Montana: Frontier Institute released a Conservative Montana Budget and a report on Responsible Local budgets.
11. South Carolina: SC Policy Council released the South Carolina Sustainable Budget. Oconee County Council in South Carolina employed this approach and submitted its sustainable budget. 
12. Tennessee: Beacon Center released the Conservative Tennessee Budget.
13. Texas: Texas Public Policy Foundation released the Conservative Texas Budget and Responsible Local Budgets. Texans for Fiscal Responsibility released a similar metric.
14. Federal: The Let Americans Prosper Project, along with the Responsible American Budget, aims to rein in federal spending to support fiscal sanity in Washington, D.C., which is essential to our country's future.

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If you're interested in pursuing this initiative in your state, please don't hesitate to contact me.

For more details, check out these write-ups on this issue by Grover Norquist and me at WSJ, Dan Mitchell at International Liberty, and The Economist.