In the latest installment in the Civitas Institutes’s “20 Changes for 2010: A Primer for State Reform,” I recommend a few desperately needed checks on North Carolina’s long-term irresponsible spending trends.
The pattern repeats itself time and again. During flush economic times, rather than sensibly setting aside excess funds in a rainy day fund, the state ramps up its spending commitments by adding new programs and rapidly expanding existing ones. When recession hits, spending commitments prove to be unsustainable, and a budget crisis emerges. And because short-sighted budget writers refused to set aside any significant savings during the good times, North Carolina families pay the price of legislative irresponsibility: another round of tax hikes to cover the state government’s reckless spending.
In addition to short-sighted, irresponsible spending increases, North Carolina state government faces alarming levels of state debt and unfunded liabilities. State debt, measured as principle plus interest owed calculated as of June 30, 2008 (the latest data available) is $9.4 billion. That figure is more than half of all state tax revenue collected in fiscal year 2008-09.
Furthermore, North Carolina also faces a $29 billion unfunded liability for state retiree health benefits. At a combined $38.4 billion, this means an average North Carolina family of four is saddled with nearly $17,000 in debt and unfunded liabilities.
A recent Debt Affordability Study released by the State Treasurer, in fact, concluded that the state has virtually exhausted its debt limit and its AAA bond rating may soon be in jeopardy.
North Carolina elected officials have embarked on an irresponsible long-term spending binge that hampers the state’s economy. Budget writers have proven to be incapable of reigning in their spending habits or effectively prioritizing budgetary spending. Measures to institute fiscal responsibility are sorely needed.