In late March, I wrote about how North Carolina state government is likely better financially prepared than most states for the coronavirus shutdown, and certainly more prepared than it was prior to the Great Recession.
The state has a combined $2.7 billion in rainy day and unspent funds to help cover revenue shortfalls, however, that amount would likely be insufficient.
Indeed, late last week House Speaker Tim Moore told reporters that state budget writers will likely be facing at least a $4 billion budget hole for the coming fiscal year that starts July 1. And that doesn’t count the massive shortfall the state budget will be facing the remaining months of the current fiscal year.
While more than a month has passed since I first made the recommendation, it’s still not too late to take much needed action. Governor Cooper should replicate Executive Order 21 issued by Gov. Bev Perdue in August 2009 to address the budget shortfalls being faced by state government at that time, and order a five percent reduction in state spending for non-health agency spending.
Doing so would enable the state to save roughly $71.5 million per month by eliminating the most non-essential five percent of spending from each agency.
To calculate this figure, I referenced the state controller’s office monthly General Fund report to arrive at the dollar amount being spent by state agencies. Because there was no state budget passed for this fiscal year, this resource provides the most accurate representation of state expenditures for the current fiscal year.[i]
Looking at the report from March, we can see how much each agency has spent year to date, which would be 9 months of the fiscal year. We can divide the total by nine months to get the average monthly expenditures, and then take five percent of the average monthly expenditures to find the total savings from a five percent reduction.
[i] Source: State of North Carolina Office of State Controller, General Fund Monthly Report; March 2020. Available online at: https://files.nc.gov/ncosc/documents/files/GFMR/2020/March_2020_Gen_Fund_Monthly_Report.pdf