State government spending grew almost twice the rate of inflation in the last 10 years.

The governor’s pledge to rein in state spending has been met with applause from Republicans in the Maine State Legislature. His no-tax-increase budget was a good start, but we can and should do more to help prevent spending from spiraling out of control.

Limitations on state spending are constitutionally mandated in several states and these tax and expenditure limitations have helped those states weather the latest economic downturn. This idea has been batted around in Augusta for some time with no success. But now the time is right for the governor and Legislature in Maine to implement such a policy and give it teeth by adopting it into the Constitution.

TELs have been around since the late 1970s and have been enacted in about 30 states throughout the country. As a result, how much the state spends from year to year is not based on how many new programs are needed or even what was spent last year. Instead, states have established guidelines that tie spending to something specific, such as the growth in the average paycheck or inflation.

If tax dollars flow into the state coffers at record levels, as was the case here in Maine in the late ’90s, the state would not automatically spend every penny, but would commit to a modest increase and return the excess back to the taxpayers. Some states put the excess toward debt retirement, while others stash it away in some type of savings account.

In Maine, government spending grew almost twice the rate of inflation in the last 10 years, and it grew even faster than the growth in the average Maine paycheck. Creating stability in our state budget can be done through our own TEL.

The Maine Heritage Policy Center recently pointed out that almost every state that has the limits in place does it differently, but we believe that the limits should be in the Constitution and should include limits on both the spending side and the revenue side. In addition, excess money should go into a budget stabilization fund until it reaches a certain percentage of the total state budget, and the rest should be returned to the taxpayer.

Many believe that personal income creates a solid connection to the ability of the state to support programs and the overall health of the economy. However, using personal income as a guide raises several concerns. As the chart below indicates, personal income in Maine is subject to some significant fluctuations that could present policy makers with overly optimistic or pessimistic budget expectations. If the goal in Maine is to increase stability and predictability in government spending, then reliance solely on personal income may be less than optimal.

The second category most often used by states is a combination of population and inflation.

Colorado uses the sum of inflation and the growth in the population. This method is particularly useful in states with growing populations, as it reflects the likelihood of increased costs – particularly in education. In short, it combines inflation with pressures resulting from growth.

In Maine, the results from 1991 through 2001 indicate a substantially lower growth rate than that of the measure of income. From 1991 to 2001, Maine incomes grew by 46.6 percent. Using the sum of population and inflation that number is just 30.9 percent. Meanwhile, actual spending in Maine increased by 58.1 percent in the same period.

A third way in which several states manage their spending is to target spending at a number below 100 percent of projected revenues. For example, Rhode Island, Mississippi and Delaware use 98 percent of estimated general fund revenues.

Finally, several states have created hybrid solutions that incorporate some combination of income, population and/or revenues.

Gov. Baldacci told us that he is interested in this concept and willing to pursue it further. We have a tremendous opportunity to move forward on this, and put in place some real limits on the way we in the Legislature spend your money.

Ten years from now our colleagues in the Legislature, as well as the future governor (not to mention the people of Maine), will reap the benefits.

Paul Davis, R-Sangerville, is the Senate Republican Leader and Chandler Woodcock, R-Farmington, is the Assistant Republican Leader.