Civitas Series: Filling The Budget Gap

A Series of Recommendations to Fill the Budget Hole Without Raising Taxes or Requiring Across the Board Agency Cuts

The Civitas Institute has identified roughly $1.1 billion in resources to help close the current State Budget shortfall. These recommendations serve as a counter – and as an addition – to the recently unveiled “Budget Management Plan” from the Office of State Budget and Management (OSBM).

Due to overzealous spending commitments and unrealistic revenue projections, North Carolina is facing a “budget crisis.” In short, the state budget spends significantly more money than is available.

Recent projections estimate the current year gap could grow as large as $1.6 billion. Fortunately, Governor Easley has had the foresight to preemptively take action rather than let the next Governor (Bev Purdue) inherit a potentially unmanageable budget hole.

The OSBM plan includes $1.2 billion in total savings and stopgap funds, an amount equal to the shortfall amount deemed “most likely” by prognosticators. The plan includes:

• Withholding money from all major state agencies. Holdbacks range from 1.5 percent (Public Schools) to 5 percent (General Government, Natural and Environmental Resources) of each agency’s budget.
• Freezing capital projects not receiving federal matching funds.
• Holding back reversions from FY2007-08 and other reserves.
• Freezing repair and renovation spending.
• Tapping a portion of the “Rainy Day Fund.

This is a good first step, but very well may prove to be insufficient to cover the massive budget shortfall. General Assembly economists predict the budget gap could end up as high as $1.6 billion based on the current revenue information. And if revenue continues to drop, even high-end projections could be understated. Moreover, shortfall predictions do not take into account an estimated $300 million required to fully fund the state health plan.

This Civitas Institute series will offer up more than $1 billion in specific funds, spending cuts and other measures designed to better brace the state government for a worst-case scenario budget hole. Some of these recommendations could serve as guidance for agencies searching for non-essential or wasteful spending to cut, and others still could be implemented should the OSBM plan prove to be inadequate to fill the budget gap. 

SOLUTIONS

1. Dissolve Golden Leaf
2. Eliminate $12.4 Million in New Pork Spending
3. Freeze New Capital Projects; Refrain From Issuing New Debt
4. Transfer the Balance of the Voter-Owned Elections Fund