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The cost of corruption

Tuesday, Jul 15, 2014

* A new study on public corruption and state spending started out with five hypotheses

Hypothesis 1: All other things being equal, states with higher levels of public officials’ corruption are likely to have larger total expenditures.

Hypothesis 2: All other things being equal, states with higher levels of public officials’ corruption are likely to spend more on items that may provide a larger rent to corrupt officials, such as capital, construction, and highways

Hypothesis 3: All other things being equal, states with higher levels of public officials’ corruption are likely to spend more on items that may provide larger benefits to corrupt officials. This predicts that debt financing and expenditures on total wages and salaries will become larger in a more corrupt state.

Hypothesis 4: All other things being equal, states with higher levels of public officials’ corruption are likely to spend less on items that provide fewer opportunities for corrupt officials to collect bribes, such as education, welfare, health, and hospitals.

I’d quibble with some of that, particularly that last part. Rod Blagojevich tried to shake down a children’s hospital for a huge campaign contribution, for example.

* But it played out pretty well for the researchers in the end. As the Times of Indiana reports

Spending comparisons between highly corrupt Illinois and Indiana, which placed in the middle tier of corrupt states, seem to bear out the researchers’ conclusions.

In 2013, Illinois spent $932.47 per person more than Indiana, according to the National Association of State Budget Officers. At the same time, Indiana spent more than twice as much from its general fund on education than Illinois.

Illinois lawmakers this year approved a $1.1 billion “mini” capital spending program for road and bridge construction throughout the state. It follows a $31 billion construction spending plan approved in 2009.

Meanwhile, Hoosier legislators have resisted borrowing money to fund state construction programs and this year paid cash for new university buildings and some road projects.

- Posted by Rich Miller        


12 Comments »
  1. - Illiana - Tuesday, Jul 15, 14 @ 2:06 pm:

    Perhaps we should pass a rule that says any state spending on road construction can only come from motor fuel taxes. If it is possible, I might even take it a step further & demand that it be spent in the same IDOT district as where the retail purchase of the fuel occurred.


  2. - Been There - Tuesday, Jul 15, 14 @ 2:11 pm:

    ===In 2013, Illinois spent $932.47 per person more than Indiana===
    A little apples to oranges here. Indiana municipalities and counties have an income tax. Those funds don’t show up in Indiana’s financials. Illinois gives a percent of the sales tax to the locals so those funds do show up as revenues and expense to Illinois. There are other comparisons but that jumped out to me why you can’t just look at raw numbers.


  3. - Illiana - Tuesday, Jul 15, 14 @ 2:16 pm:

    Re: Been There’s comment

    As diverse as this state is we should give the locals much more room to choose how they want to generate the revenue they need, including allowing locals to have their own income tax instead of requiring everyone in the state pay the same state rate.


  4. - John A Logan - Tuesday, Jul 15, 14 @ 2:17 pm:

    Not surprising.


  5. - steve schnorf - Tuesday, Jul 15, 14 @ 2:27 pm:

    It’s almost hard to start with such crap, but
    Illinois is a much wealthier state than Indiana, no surprise we spend more
    Illinois schools are funded primarily thru local property taxes, no surprise we don’t spend as much at the state level
    The state tax burden in Illinois is lower than in Indiana
    Illinois has fewer employees per capita than Indiana
    etc.


  6. - wordslinger - Tuesday, Jul 15, 14 @ 2:34 pm:

    Meh, little too dorm room for me.

    I’ve seen “studies” that claim Mississippi and Louisiana are the most corrupt states in the Union, and they don’t spend anything on anything.


  7. - Try-4-Truth - Tuesday, Jul 15, 14 @ 2:35 pm:

    Correlation is not causation. I don’t think the study addresses why Illinoisans spend more per person.


  8. - Lil Squeezy - Tuesday, Jul 15, 14 @ 3:03 pm:

    Its not uncommon for Indiana to have to close highways during winter storms. Happened quite a few times this winter. Just one small example of a difference in services provided.

    Indiana unemployment benefits are much lower. Just one example of a difference in protection/dignity provided to its citizens.

    We could go all day with this one.


  9. - Shark Sandwich - Tuesday, Jul 15, 14 @ 3:38 pm:

    I’ll take my turn throwing the researchers under the ceterus parabus…
    Neat as an exercise, but ultimately meaningless. ‘Most corrupt’ based on federal convictions is flawed. You can be corrupt and not get caught, and still cost money; and that’s all before you get into whether or not they properly compared the way states run their revenue and spending. Vermont has a population on par with Lake County, it’s not just per capita, there is also geography, gdp for a state, etc.


  10. - Formerly Known As... - Tuesday, Jul 15, 14 @ 5:24 pm:

    The “mini” capital spending bill seemed like a flawed idea at the time and remains so, imho.


  11. - Formerly Known As... - Tuesday, Jul 15, 14 @ 5:40 pm:

    == At the same time, Indiana spent more than twice as much from its general fund on education than Illinois. ==

    And while I appreciate the very real and important nuances Steve Schnorf brings up, I still find this disturbing. It’s too bad the entire original study is behind a paywall, since it seems to be getting some attention in media outlets around the country.


  12. - no clever name - Wednesday, Jul 16, 14 @ 9:37 pm:

    A couple of things regarding a few of the criticisms here:

    1(been there/steve): It does appear that the authors attempt to control for fiscal centralization (state spending/state+local spending). I would think this would account for differences in local government responsibilities across state lines.

    2(wordslinger): The authors also control for ideology of both state legislators and citizens which might account for why states like Louisiana and Mississippi have low levels of public spending despite high levels of corruption.

    3(steve): The authors do expect spending to increase with personal income, so they control for that as well.

    4(Shark): A perfectly valid argument about the use of convictions. I’m not sure what I make of their justifications. It might be interesting to see if the results would change if they used perceived corruption, but if they are highly correlated as they claim, it might not change the results much.

    5(Rich): In regards to hypothesis 4, I don’t think they are saying that politicians can’t engage in corrupt activities in these areas, just that it won’t increase spending in these areas in the same way as other areas. Let’s say official X wishes to extract a certain amount personal benefit from their position. I would guess that X starts by looking for the path of least resistance. If X finds this effective, they would likely push for more spending in this area. There might well be more risk in extracting a bribe in one area of government than in another. I would think it to be perfectly plausible for corrupt officials to respond to the risk/reward calculation.

    All in all, I don’t think their findings are too shocking. Why wouldn’t an official looking to benefit from corruption try to increase opportunities for additional corruption by increasing the budget for activities particularly susceptible to corruption?


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