- The state has nearly $3 billion in available funds to fight the virus and respond to the economic aftermath
- If Gov. Roy Cooper had his way, however, the state would be ill-equipped to respond to the current challenges
Thanks to fiscally responsible measures over the past 10 years, North Carolina is on far better financial footing to combat the coronavirus outbreak and to weather its economic fallout.
The most recent General Fund monthly report shows the state’s rainy day fund balance at nearly $1.2 billion, with another $1.5 billion in “non-reverting Department Funds.”
If Gov. Cooper and other Democratic legislative leaders had their way, however, this wouldn’t be the case.
Dating back to his days on the gubernatorial campaign trail, then-candidate Cooper criticized Gov. Pat McCrory for “building up the rainy day fund in excess of what’s necessary for the state.”
Cooper further mocked the importance of building up reserves, insisting that “You need to invest it and not let it just be sitting there.”
And as John Hood pointed out in 2018, “Larry Hall, then the Democratic leader in the North Carolina House, complained during the 2016 legislative session that the Republican majority was saving too much and spending too little. ’We artificially starved ourselves,’ he said just before that year’s budget bill passed the House. ‘We have funds available, and we’ve decided not to invest.’”
Joining the chorus was the left-wing NC Justice Center in 2017, prioritizing spending more money in the present at the expense of saving for the next crisis. The Justice Center’s top concern was that “savings don’t squeeze out immediate needs” and ensuring state budget writers don’t “prioritize savings over addressing immediate needs.”
What short-sighted, tax and spend liberals like Hall, Cooper and the Justice Center don’t understand is that setting aside money into a rainy day fund is an investment – it’s a hedge against uncertainty. Thankfully, conservative budget writers didn’t follow the advice of the likes of Cooper and Hall and had aggressively built up $2 billion in reserves prior to Hurricane Florence in the fall of 2018, when it ravaged many communities in North Carolina.
Contrast that with how poorly previous leadership had prepared our state to weather the economic storm of the Great Recession.
During the boom years from 2003-04 to 2007-08, General Fund total revenues grew by 33 percent in just four years, an increase of about $5 billion.
Also in those years, General Fund surpluses totaled $3.4 billion. The state’s rainy day fund, however, only grew from $267 million to $786 million, an increase of about $519 million. This means legislators set aside only 15 percent of surplus monies into the savings reserve fund during that time, choosing instead to ramp up government spending.
Ironically, the same NC Justice Center that opposed building up the rainy day fund in 2017 had to admit in 2011 that “failure to save adequately during times of growth has limited the ability of the RDF to help address budget shortfalls during economic downturns.”
A combination of low savings reserves and escalated spending commitments created a far more dire financial condition when the economic downturn hit.
First and foremost, North Carolina needs to be prepared to contain and fight the spread of the virus. Protecting the health of North Carolinians is of utmost importance. This will require financial resources.
Financial reserves will also likely need to be called upon to combat the economic damage caused by responses to the virus that will negatively impact the economy. Fortunately, the state’s fiscal responsibility over the past several years has generated a reserve fund that will help North Carolina fulfill its most important obligation: to protect its citizens.
If short-sighted policies favored by the likes of Cooper had instead been followed, North Carolina would be ill-equipped to respond to the current crisis.