Thomas Jefferson once wrote, “We might hope to see the finances of the Union as clear and intelligible as a merchant’s books, so that every member of Congress and every man of any mind in the Union should be able to comprehend them, to investigate abuses, and consequently to control them.”
North Carolina’s state government does a poor job of providing the transparency Jefferson saw as necessary to a democratic government. Citizens wishing to understand how their tax dollars are being spent encounter a complex myriad of lengthy and confusing data sources. For example, the annual document known as the “money report” only reflects new spending – a fact many recipients of state funds don’t even understand. The bulk of the state budget is actually found in the “continuation budget,” which includes current spending adjusted for inflation and program enrollment increases. This massive document is typically subjected to little or no discussion or public debate.
Making matters worse, the 2007 budget – not to mention previous budgets – included millions of dollars of appropriations inserted into the budget without prior discussion. While crafting the 2007 budget, the General Assembly repeatedly broke its own legislative rules, adding new pork projects that had not been debated on the floor, making major changes to budget provi¬sions, and inserting new laws into the budget bill.
Greater transparency regarding state expenditures will empower taxpayers, activists, and the media by providing them with easily accessible details on state expenditures. Greater transparency will also enhance public debate regarding the size of North Carolina’s government.
Every year our budget grows and grows, and if you don’t stop and take a look at things, you sort of wonder if you’re getting your money’s worth. - Senate Appropriations Co-chair Linda Garrou (D-Forsyth)
Total State Debt More than Doubled from
Increased spending has also brought about a rapid expansion of state debt. From FY2000-01 to FY2005-06, debt service (the amount of General Fund expenditures dedicated to paying principle and interest on debt) increased 124 percent. For a family of four, the annual debt service burden ballooned from $140 to $303. This means the average North Carolina family must reach deeper into its pockets to finance a state government that insists on living beyond its means.
TRANSPARENCY for State Expenditures
- Create a transparency Web site. Like the federal government and several other states, North Carolina should create a free, publicly searchable and user-friendly Web site that publishes every aspect of state government spending. The Web site should also provide information on tax credits and grants provided to businesses, nonprofits, community development projects, and other entities. In 2006, the federal government authorized the creation of such a site for federal expenditures via the Federal Funding Accountability and Transparency Act. Likewise, seven states – Kansas, Minnesota, Oklahoma, Texas, Hawaii, Missouri, South Carolina – have passed legislation to create such a database. In 2007, Nebraska’s state treasurer committed to creating a transparency Web site while 13 other states considered similar legislation.
- Follow procedural rules when crafting the budget. The Legislature should be held publicly accountable by disclosing on the General Assembly Web site every item and provision that violates procedural rules. Unbeknownst to most voters, the General Assembly violated its own rules more than 100 times last session by including new budget items and provisions at the last minute (after both chambers passed a version of the budget); changing items that had already been agreed to in both chambers’ budgets; and providing more money for items than was proposed in either chamber’s budget.
- Implement rotating zero-based budgeting. Instead of placing the continuation budget on cruise control, the state should adopt a rotating zero-based budgeting process that re-evaluates programs and expenditures on a regular basis. Under this reform, each state agency budget would return to “zero-based” status on a rotating basis – perhaps every sixth year. Evaluating the continuation budget is a much-needed process that has been neglected for too long.
- Stop paying for vacant positions. The money from “lapsed salaries” should be held centrally in the Office of State Budget and Management, with agencies petitioning to use the funds only in connection with the specific duties of the vacant positions. Items that have in the past been funded by lapsed salary should instead be included as line items in the budget and reviewed along with all other expenditures. Section 6.18 of the current budget orders the Office of State Budget and Management to analyze the use of lapsed salary by all state agencies and report its findings by April 30, 2008.
TRANSPARENCY for Bonds and Other Forms of Debt
- Apply “truth in lending” practices to state and local bonds. The state should mandate that “responsible lending” language be included on bond referendums. Specific details about the total amount required to repay the debt, including a breakdown of principle and interest, should be required in the ballot language. Voters should also be clearly informed that the spending of bond funds is above and beyond the current operating budget and thus constitute a new spending burden. Finally, the ballot language should clearly explain that the debt will be repaid using tax dollars and that a tax increase might be required to finance the debt.
- End or reduce the use of nonvoter approved debt. Over the past five years, state lawmakers have approved nearly $2 billion worth of new debt (plus interest) in the form of certificates of participation (COPs). Certificates of participation are tax-exempt lease financing agreements that are guaranteed, not by the state, but by liens on property or equipment. For this reason, the General Assembly can issue COPs without voter approval. From 2001 to 2006, the General Assembly relied exclusively on COPs – presumably because such debt can be issued without a public referendum. COPs not only cost taxpayers more in terms of interest, but also permit legislators to create debt without direct voter approval.
Transparency Web site a Popular and Affordable Investment
The establishment of a “taxpayer transparency” Web site has proven to be an effective and affordable tool for providing citizens with the information they need to hold legislators accountable for their actions. Critics who oppose the establishment of such Web sites sometimes argue that the sites will not be used by average citizens and are not worth the cost to implement and maintain. Early results from Missouri and Oklahoma show otherwise. According to an October 2007 report by Americans for Tax Reform (ATR), “In less than two months after the Missouri Accountability Portal went live, it registered over 1 million hits.” In regards to cost, ATR found that “the fiscal impact statement for the Oklahoma bill estimated costs for website development and programming at $40,000. Future costs to fully implement were estimated at $245,000 to $260,000.” In the end, the cost of creating a transparency Web site will be a small price to pay to ensure greater government transparency – a vital resource in a democratic society.