North Carolina’s $3 billion budget shortfall awaiting the winners of November’s elections is sure to dampen many a victory party.
Those lucky legislators will be inheriting a fiscal bomb and win a trip through a gauntlet of special interests, state employees, and other state-funded groups seeking to avoid becoming a casualty of a balanced budget. November’s victors can thank their predecessors for doing everything in their power to avoid responsibly balancing the budget in an election year. Their patchwork methods included rerouting lottery receipts and burning through temporary stimulus money, all to avoid rocking the boat and thereby endangering their own reelection.
In anticipation of this budgetary bedlam, Civitas has produced an itemized list of 10 programs and methods to trim the budget in order to save the state some much needed cash. While this is by no means an exhaustive or sufficient list to put the state’s finances completely in order, it does provide a foundation to cut the fat from a morbidly obese budget.
1. Sell 5 percent of the least-essential state-owned assets
Savings: $305 million
North Carolina State Government has a vast number of properties situated all across the state. Fiscal Research reports that the state government owns over 11,800 buildings, totaling 107.8 million square feet, at an "insurance value" of $6.1 billion. If the least necessary 5 percent of these assets were sold, the state could realize approximately $305 million immediately, as well as save money in the long run for not having to maintain those properties.
2. Prisoner Education Program
Savings: $21 million
After undergoing a continuation review in 2009, the General Assembly felt it appropriate to restore $21 million to a prisoner education program run through our state’s community college system. This program provides a variety of free community college courses to inmates serving time. Historically, the list of courses offered have included curriculum such as music, art, and even manicuring. While the state trimmed down this program and prevented jails or federal prisons from receiving these services, the state ignored glaring inadequacies in the data used to support this program. No assessment has been taken on the effectiveness of prisoner education reducing prisoner recidivism in our state. Furthermore, data found in other states shows a vast number of courses offered in their Prisoner Education programs have no effect on prisoner recidivism. By trimming this program down to offering only GED programs to prisoners, the state could save additional tens of millions of dollars.
3. Prisoner Healthcare Waste
Savings: $11.5 million
The state auditor found that North Carolina has been wasting millions of dollars by providing unnecessarily expensive medical coverage to prisoners. If North Carolina billed its prisoners on Medicaid (the federal government reimburses the state $.65 for every $1.00 spent on Medicaid), the state could realize savings of $11.5 million dollars.
4. Golden LEAF Foundation
Savings: $570 million immediately, $80 million every subsequent year
North Carolina’s Golden LEAF Foundation doles out tens of millions of tobacco settlement dollars every year to some of the most obscure, redundant and inconsequential projects. Included are grants such as $380,000 for the construction of a teapot museum, an additional $325,000 to finance UNC-TV programs that promote Golden LEAF and its beneficiaries, and a series of other fiscal fiascos. If this frivolous and wasteful program were dissolved, the state could reroute this much needed capital to helping balance the budget.
5. NCDOT’s Idle Equipment
Savings: $56 million
The North Carolina Department of Transportation has approximately 2,300 pieces of heavy equipment costing $153 million. The NC State Auditor reports that much of this equipment lays idle, wasting taxpayer money. One third of the equipment, costing $56 million, was used less than 15% of the time during each year of a three year period (between October 2006 and September 2009). If these underutilized pieces of equipment were sold, the state could realize tens of millions of dollars that could be transferred to the General Fund. The NC Department of Transportation has no reliable method for detecting underutilized or idle heavy equipment, thus allowing this wastefulness to continue.
6. State employees contribute to state health care premiums
Savings: $156 million
Full-time state employees don’t pay a penny in premiums for their enrollment in the State Health Plan. If state employees contributed even a minimal amount to premiums, the state could raise a large amount of revenue. The state health plan reports the average number of active employees on the plan in the first quarter of 2010 was 323,242. Assuming around 300,000 of those on the plan are full-time employees, a contribution of $20 per paycheck would generate $156 million in revenue, and still provide an affordable healthcare plan for state employees.
7. Eliminate Corporate Welfare
Savings: $36.3 million1
Corporate welfare rewards big industries that have political muscle and paid lobbyists to turn the heads of legislators, such as the Film Industry and cigarette manufacturers. State programs like the One North Carolina Fund, which doles out $12.5 million a year, was created ostensibly to "enhance the competitive position of North Carolina when recruiting national and international business and industry projects," however this program uses funding wantonly and is a burden on North Carolinians and businesses that are not recipients of its funding.2 Not only would cutting corporate welfare help in reducing the multibillion budget shortfall, but it would contribute to a more equitable tax system for all businesses. By broadening the corporation tax base and lowering the rate, the state could achieve a more equitable and mutually profitable tax system for both businesses and government. By eliminating corporate welfare, North Carolina could save tens of millions of dollars.
8. Trim More at Four funding to 2007-08 levels
Savings: $20 million
More at Four is a service provided by the Department of Public Instruction to pre-kindergarten students to encourage what they call "school readiness." Since its inception. More at Four’s budget has grown exponentially, from $3.9 million in 2001-02, to $158 million in the last fiscal year. In FY 2007-08, the allotted budget for More at Four stood at $140 million and provided services to 31,071 students. By FY 2009-10, expenditures for this program had risen to nearly $160 million, yet the number of students participating increased by just over one hundred, totaling 31,197 students. The More at Four budget increased by 14 percent over the course of three years as the number of students increased by .004 percent. If the funding for More at Four was reduced to FY 2007-08 levels, the state could save around $20 million.
9. State employees contribute more of their pay to pension
Savings: $195 million
State employees currently contribute a mere 6 percent of their salaries to their pension. The total amount accrued by that contribution in FY 2007 was $798 million. If state employees agreed to a slight increase in contributions of just 1.5 percentage points, amounting to 7.5 percent, the state would generate an additional $195 million per annum.
10. Three percent across the board cut
Savings: $390 million
Allow state government bureaucracies to each examine their own departments to determine the most appropriate ways to reduce costs. With a broad three percent cut, bureaucracy will be trimmed back universally and in a way that minimizes the impact on services rendered to North Carolinians, yet saves hundreds of millions of dollars.