Our Opinion: Budgeting process meets law of diminishing returns

If there is truth in the adage that one must spend money to make money, the ensuing question is: How much?

The question now is before state lawmakers in the form: How much must the state budget to advertise its Lottery, which channels proceeds to education?

The House Budget Committee is considering a proposal to reduce the Missouri Lottery’s advertising budget from $9.3 million this year to $1 million for fiscal year 2012.

Under the proposal, the $8.3 million difference would be transferred to an education fund where a portion of Lottery proceeds are directed.

Would the budget cut diminish anticipated Lottery revenues by more than $8.3 million?

Lottery Director May Scheve Reardon says yes.

She told the committee the budget cuts are expected to decrease revenues for education by $24 million, from $259 million this year to a projected $235 million.

But House Budget Committee Chairman Ryan Silvey, R-Kansas City, disagrees. He pointed out the Lottery’s approximate $1 million advertising budget in fiscal year 2010 generated about $250 million. He wondered why the dramatic budget increase this year isn’t translating into a significant hike in revenues.

“It seems to me that instead of doing more with less, you’re doing less with more,” he said.

His reference raises another economic concept — the law of diminishing returns.

The basis of the theory is that continued effort, or money, declines in effectiveness once a certain saturation point has been reached.

Discussion also focuses on variables — competition from other state lotteries, the price of gas — that influence projected and actual revenues.

Despite those variables, we believe Silvey advances a valid argument. If a $1 million advertising budget generated $250 million in 2010, why is a $9.3 million budget expected to produce only $259 million?

Has the Lottery advertising budget reached the point of diminishing returns?

And doesn’t state government have financial experts — in legislative research or the offices of treasurer or auditor — able to make realistic projections?

In the final analysis, budgeting must be about efficient, effective spending.

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