When you go camping, you are supposed to leave the campgrounds “better off than when you arrived” so others who come along later will be able to enjoy the area, as well. Shouldn’t the same principle hold true for our state government? When they adjourn their session, shouldn’t we expect them to leave the state better off than they found it? Unfortunately, the recently completed short session proves the North Carolina General Assembly is ignoring this principle.
From a fiscal standpoint, the General Assembly began this year’s session with a modest $150 million budget surplus — despite a struggling economy. This says more about N.C. entrepreneurs than it does government’s stewardship of our dollars. Nevertheless, as the months ticked by and each unemployment report worsened, the General Assembly did nothing to address the economic slowdown. While just about every U.S .household was cashing its economic stimulus check from the Federal government, the N.C. General Assembly was writing a budget that is out of balance, authorizes nearly a billion dollars in new debt and ignores a number of emerging crises.
First, according to the N.C. Constitution, the General Assembly must pass a balanced budget —which means, unlike Congress, it’s not allowed to spend into a deficit. The state’s revenues and expenditures fall in to two types: recurring and non-recurring. Recurring revenues and expenditures are those that can be counted on every year, while non-recurring means they are a one-time infusion or expense. The budget passed this year spends approximately $160 million more in recurring programs than it receives in recurring revenues. Thus, budget writers next year start off $160 million in the red because those recurring programs are automatically funded in perpetuity.
Second, this year’s budget authorizes $857 million in new debt, mostly for university construction projects—all without voter approval. It also includes planning funds for an additional $1.2 billion in future debt obligations – again, mostly for the UNC system construction projects and without voter approval. This authorization of more than $2 billion in new debt will likely use up all, if not more than, the current debt capacity for the state, leaving North Carolina maxed out on the amount of money it can afford to borrow for the foreseeable future. Hoping for relief from crowded highways through a transportation bond? Want relief from crowded schools via a school construction bond? You are probably out of luck. Prison projections also show the state will need another 7,000 prison beds in the next eight years. But we can’t afford any of this now. The insistence of this General Assembly to burn up the state’s unauthorized credit card for university building projects has tied the hands of future governors and legislators who will face the challenge of building more roads, more schools and more prisons – a recipe for higher taxes or dramatic spending cuts.
Third, the General Assembly was aware of, but took no action on, the nearly $150 million hole in the funding of the State Health Plan (some estimate this deficit to be closer to $225 – $250 million). Isn’t it strange how the General Assembly just happened to “discover” the problem just a few days after it had passed the budget, which allowed them to continue to fund pet projects without having to make the necessary sacrifices? Nonetheless, the General Assembly decided to take no action to solve the problem, leaving it over to the next governor, and next year’s Legislature to fix. The one fix that did pass the House, but didn’t pass the Senate, was to raid $100 million out of the state’s savings and reserves fund (aka The Rainy Day Fund) that is designed to be a safety net in case of a severe economic downturn. The General Assembly put no new money into this fund in 2008, despite a budget surplus and despite the fund being below the statutorily required level.
The legacy of this General Assembly will be one of setting the state on the course to financial ruin. A budget that is $160 million out of balance, a state health plan underfunded by at least $150 million (not to mention the approximately $25 billion in future retiree health care costs coming due), and a maxed-out credit card with no debt capacity to meet the challenges of a growing state. Unlike their Washington, D.C. counterparts, our elected officials did nothing to address our struggling economy by cut taxes or rebating back to the taxpayers the $150 million budget surplus, which would have helped to create jobs. They also failed to address any of the major infrastructure needs facing our state: roads, schools or prisons. Instead, they spent everything they had and ran up the credit card for an additional $2 billion – all the while passing the buck on making any tough decisions for fear of it harming their electoral chances.
Don’t be surprised in the next few years when many of these same elected officials show up hat-in-hand to ask for huge tax increases. Their financial mismanagement caused the problem, and you’re the only one who can bail them out. It’s time the voters held the General Assembly accountable, not only for its actions in setting the state budget up for failure, but its inaction in addressing the real problems facing our state.
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