House Bill Introduces Meaningful Spending Reform

House Bill 188 – Taxpayer Bill of Rights – filed yesterday in the House would create a much-needed measure to reform state spending.

The Taxpayer Bill of Rights (or TABOR) would amend the state constitution in order to restrict North Carolina’s unsustainable growth rate of state government spending. Here’s how it would work:

• The bill would create a formula using the average sum of inflation plus population change for each of the preceding three calendar years to create a “fiscal growth factor.”
• Then each year, the General Fund expenditures can only increase by the amount of the calculated fiscal growth factor. When revenues exceed the expenditure limit, excess revenue will be set aside in an “Emergency Reserve Trust Fund.” When the emergency fund reaches an amount equal to 5% of the General Fund expenditure in the prior fiscal year, any excess revenue collected will be returned to taxpayers.
• To exceed the expenditure limit in any given budget year, a two-thirds vote by the General Assembly would be required.
• Similarly, a two-thirds vote would be required to spend any funds from the emergency reserve fund.

This bill would also adjust how the state determines its annual revenue estimates for budgetary purposes. Instead of the state budget office and Fiscal Research Division developing revenue projections (a very inexact science, to say the least), the revenue availability for budget writers will be equal to actual revenue collections from the previous calendar year.

The TABOR would amend the state constitution and requires voter approval in the 2012 election.

I’ve written recently about the need for such a measure to curtail state politicians’ appetite for spending our money. The reality is that the state ratchets up state spending during flush economic times, creating and expanding unsustainable spending obligations which can not be financed when the economy (and thus revenues) hits a downturn. A TABOR would smooth out this roller-coaster budget pattern, limit the growth of state government, and severely limit any negative budgetary impacts of economic recessions.

We’ll be sure to update you on the progress of this fiscally-responsible measure.