State funds spending will rise 7.4 percent– nearly three times the rate of inflation — under the budget deal struck Tuesday night (4/12) by Governor Pataki and the Legislature.

This is the biggest budget increase since … well, since last year, when state funds spending rose by just under 8 percent. Assuming the latest figure holds, it will mean that state spending has expanded another 28 percent in the five budgets adopted since the spring of 2001 — a period encompassing a national recession, a stock market meltdown and the attack on the World Trade Center, all culminating in what Pataki frequiently describes as the worst downturn in tax collections since the Great Depression.

There hasn’t been nearly enough recurring revenue to pay for this growth. And so, despite a resurgent economy and growing revenues, the state is looking ahead to another shortfall of $3.3 billion next year, according to Governor Pataki. Left unchecked, that gap gap would grow to $4.2 billion by fiscal 2007-2008.

The Governor himself set a relatively high floor for this year’s budgetary bidding with a proposed 5.5 percent state funds spending hike, as reviewed in this FiscalWatch memo back in January.

The state funds portion of the budget (roughly $70.3 billion for fiscal 2005-06) is the best continuing measure of what Albany needs to raise in taxes, fees and borrowing, excluding matching federal grants and formula aid from Washington. This is not a figure commonly ballyhooed at news conferences inside the Capitol, however. Both the Governor and legislative leaders prefer to focus on the somewhat lower growth trends reflected by the budget’s general fund (up only 4.7 percent, because it excludes dedicated and off-budget accounts) or the nearly $107 billion all-funds figure (up 4.3 percent, because federally funded spending isn’t growing as fast as state funded spending).