Tuesday, September 22, 2015

Record Breaking Numbers!

In a recent blog post, the Kansas Policy Institute (KPI) reports that the “Kansas General Fund spending sets new records.” KPI’s claim is that the general fund spending is increasing at a rate higher than inflation, but the data presented is potentially misleading.  

The post presents the following table:




Here is the data presented in chart form:




KPI’s table has a column called “adjusted for inflation,” but that is not actually what it is.  


In statistics, when you say you are adjusting for something, it typically means you are controlling for, or removing, the effects of that something.  However, in KPI’s table, the “adjusted for inflation” amount is just the opposite; it is the effects of inflation with all other effects removed.


To calculate their “adjusted”column, KPI has taken the General Fund amount from 1995 and then added to it the annual inflation amount through 2017. So essentially they are saying that the General Fund should be exactly the same as it was in 1995 aside from the effects of inflation.


To explore this further, let’s first replace KPI’s “adjusted” line with a line representing the actual general fund amounts from each year with the effects of inflation removed. To do this, we take the actual dollar amount for each year and subtract from it the dollar amount times the cumulative inflation amount for that year.  This results in the yearly state general fund amount being expressed in 1995-equivalent dollars.    




The new line shows that dollar amounts have generally increased over time, but it also shows that the peak for state general fund amounts was in 2008-2009, and that the amounts have been fairly stable since 2012 or so. It shows the effects of everything but inflation, whereas KPI’s line shows us the effects of inflation alone.  


This is what you will usually see when people talk about adjusting for inflation. The chart above shows the state general fund amounts expressed in 1995 dollars, but it can also be done using the current year (2015) as the constant, as shown below:




Notice that when using 2015 equivalent dollars, the trend is essentially the same; the difference is where the actual and the adjusted numbers intersect.


Here is the table showing the data used for the two charts above:


Fiscal Year
Actual / Planned
Midwest Urban CPI
CPI % Change (1995)
CPI % Change (2015)
Adj. for Inflation (1995 Dollars)
Adj. for Inflation (2015 Dollars)
95
3.310
148.40
-  
(0.35)
3.310
5.510
96
3.439
153.00
0.03
(0.33)
3.336
5.513
97
3.538
156.70
0.06
(0.32)
3.353
5.511
98
3.799
159.30
0.07
(0.30)
3.556
5.701
99
4.196
162.70
0.10
(0.29)
3.877
6.006
00
4.368
168.30
0.13
(0.27)
3.924
6.025
01
4.43
172.80
0.16
(0.25)
3.886
5.964
02
4.466
174.90
0.18
(0.24)
3.875
5.942
03
4.138
178.30
0.20
(0.22)
3.471
5.522
04
4.317
182.60
0.23
(0.20)
3.554
5.583
05
4.69
188.40
0.27
(0.18)
3.798
5.798
06
5.139
193.00
0.30
(0.16)
4.144
6.121
07
5.608
198.12
0.34
(0.13)
4.499
6.451
08
6.102
205.38
0.38
(0.10)
4.831
6.746
09
6.064
204.06
0.38
(0.11)
4.822
6.744
10
5.268
208.05
0.40
(0.09)
3.938
5.840
11
5.667
214.74
0.45
(0.06)
4.187
6.056
12
6.098
219.10
0.48
(0.04)
4.521
6.368
13
6.135
222.17
0.50
(0.03)
4.490
6.321
14
5.983
225.43
0.52
(0.02)
4.265
6.080
15
6.251
228.99
0.54
-  
4.454
6.251
16
6.322
232.28
0.57
0.01
4.451
6.232
17
6.399
235.65
0.59
0.03
4.453
6.217


The point to everything above is this; KPI is providing a baseline figure indicating what the state general fund would be today if it had only increased based on inflation since 1995. That is a perfectly legitimate way to present the data, but it is misleading to call it an “adjustment for inflation.”  


The question we should ask is this: Is it reasonable to expect the amount we are spending today to be exactly the same as what we were spending in 1995? Because that is what KPI’s post implies; that we should expect the rate of state general fund increase to match the rate of inflation. Have there been any other changes in Kansas over the past 20 years that would justify spending more now than we did then?


When looking at education-specific dollars, we frequently talk about “per student” amounts to control for the effects of the student population. What if we did the same with this information?  Should we not take into consideration the population of Kansas when we look at the state general fund amounts?


The next table and chart show the information KPI presented when adjusted for the population in Kansas:


 


Fiscal Year
Population
Per Person Actual/Planned
Per Person Adj. for Inflation (KPI's Way)
Variance
95
  2,565,000
1,290.45
1,290.45
-  
96
  2,615,000
1,315.11
1,326.32
(11.21)
97
  2,635,000
1,342.69
1,367.25
(24.56)
98
  2,661,000
1,427.66
1,392.20
35.46
99
  2,678,000
1,566.84
1,415.98
150.86
00
  2,693,681
1,621.57
1,458.48
163.09
01
  2,702,162
1,639.43
1,508.38
131.05
02
  2,713,535
1,645.82
1,527.49
118.34
03
  2,723,004
1,519.65
1,558.28
(38.64)
04
  2,734,373
1,578.79
1,587.13
(8.34)
05
  2,745,299
1,708.37
1,631.58
76.80
06
  2,762,931
1,859.98
1,686.94
173.04
07
  2,783,785
2,014.52
1,719.30
295.23
08
  2,808,076
2,173.02
1,781.68
391.34
09
  2,832,704
2,140.71
1,800.00
340.71
10
  2,858,837
1,842.71
1,819.49
23.21
11
  2,870,386
1,974.30
1,860.43
113.87
12
  2,885,905
2,113.03
1,913.84
199.19
13
  2,893,957
2,119.93
1,946.98
172.96
14
  2,904,000
2,060.26
1,972.32
87.94
15
  2,939,000
2,126.91
1,979.34
147.58
16
  2,912,319
2,170.78
2,001.95
168.83
17
  2,918,440
2,192.61
2,020.66
171.95


When looking at this data on a per-person amount, you see that the actual amounts are much closer to the inflation line, and actually dip below it in 2003.  


When you look at the actual “adjusted for inflation” amounts on a per-person basis, you see this:




Fiscal Year
Population
Per Person Actual/Planned
Per Person Adj. for Inflation (1995 Dollars)
Variance
95
  2,565,000
1,290.45
1,290.45
-  
96
  2,615,000
1,315.11
1,274.34
40.76
97
  2,635,000
1,342.69
1,267.60
    75.10
98
  2,661,000
1,427.66
1,322.80
 104.86
99
  2,678,000
1,566.84
1,415.86
 150.98
00
  2,693,681
1,621.57
1,404.12
 217.45
01
  2,702,162
1,639.43
1,369.87
 269.56
02
  2,713,535
1,645.82
1,351.93
 293.90
03
  2,723,004
1,519.65
1,213.46
 306.18
04
  2,734,373
1,578.79
1,214.94
 363.85
05
  2,745,299
1,708.37
1,247.90
 460.48
06
  2,762,931
1,859.98
1,300.98
 559.00
07
  2,783,785
2,014.52
1,339.54
 674.99
08
  2,808,076
2,173.02
1,338.63
 834.39
09
  2,832,704
2,140.71
1,337.74
 802.97
10
  2,858,837
1,842.71
1,102.07
 740.63
11
  2,870,386
1,974.30
1,091.68
 882.62
12
  2,885,905
2,113.03
1,106.35
  1,006.68
13
  2,893,957
2,119.93
1,066.11
  1,053.82
14
  2,904,000
2,060.26
990.91
  1,069.35
15
  2,939,000
2,126.91
971.94
  1,154.98
16
  2,912,319
2,170.78
943.78
  1,227.00
17
  2,918,440
2,192.61
903.47
  1,289.14


So, when you take the state general fund amount, adjust for inflation, and adjust for the population, you discover that we are actually spending less per-person than we were in 1995.  


And keep in mind that this doesn’t take into account changes in the percent of children and adults in poverty or any other demographic changes that could have resulted in a population in need of more assistance.  


To summarize, what does all of this tell us?


  • First, it tells us that in terms of actual dollar amounts, KPI is right; the state general fund amounts for 2015-2017 will be record breakers.
  • Second, when you accurately adjust the dollar amounts for inflation, you see that the peak spending period in Kansas between 1995 and 2017 was in 2008-2009, and that the amount in 2015 is about what it was in 2006-2007.
  • Third, when you adjust for the population and inflation, the per capita amount for the state general fund in 2015 is actually lower than it was in 1995, and the trend would suggest this per capita decline will continue through 2017.  


But most importantly, this once again illustrates the importance of considering what data has been presented and how it is presented when determining how much credence to put into any kind of research, article, or blog post involving data such as this.  





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