Financial Innovation on Beacon Hill

If you deal with budgets regularly, you know the pain of trying to get through those last final steps of balancing spending and revenue to the penny.

But our friends at the State House may have delivered a new innovation — the negative expenditure. What’s that? It’s a spending account with a negative number, which has the virtue of canceling out actual spending.

If you download the FY12 budget line items from the state’s website, you find an account — 1599-0015 Intergovernmental Secretariat Budget Team Savings Reserve — with an amount of -$25 million attached to it.

That account doesn’t exist in the budget the Legislature posted online, nor does it exist on the initial detail page on the State Budget website. But the careful observer will note that the totals on the detail page don’t foot out to the line items listed on the same page.

Only on a lower sub-page with historical information does the account surface. And the narrative that accompanies the budget discusses in general terms the potential savings from the Budget Savings but doesn’t explain the $25 million. Plus, if you expect savings at various departments, their budgets should be reduced by that amount, or how would they be stopped from spending the savings on something else?

In the context of a $30 billion+ budget, is $25 million a huge discrepancy? No. But the use of accounting gimmicks (particularly ones that are not consistent across budget documents) is not a good practice. As we enter the next budget season, I’ll watch more carefully this time.

Crossposted on Pioneer Institute’s blog.