This N&O article predicts another difficult budgetary process on tap for this summer. State budget writers will once again struggle to balance the budget as revenue will continue at a slow pace as North Carolina remains mired in recession and strapped with high unemployment.
A few comments in the article deserve a little scrutiny to better provide context for the situation in which the state finds itself.
Bottom line: Legislators will have a hard time finding the money to keep state government going even at the reduced level mandated in the current fiscal year’s budget – because the money just isn’t there.
But the needs are. They don’t go away in a recession, and in many ways they have intensified.
For the legislature and for state employees, then, a relentless drive for greater efficiency, which includes Perdue’s pledge to “shed services that are not core to our mission,” is the only logical and reasonably humane route to balancing the budget
Sounds sensible, but the current recession was preceded by five or six years in which state coffers were swelling with money. What “needs” and “core services” did lawmakers devote our money to during that time? They certainly didn’t set aside much for a rainy day. In spite of more than $3.4 billion in surplus revenue being available during 2004-5 thru 2008-9, the state’s rainy day fund stood at only $787 million as we entered last summer’s budget process.
A look at the major spending trends during those flush years is revealing. Spending on the UNC system ballooned 50% in just five years, during a time that enrollment increased only 17.6%. And that is just operating expenses and doesn’t count the unprecedented debt-financed spending binge the state embarked upon for new buildings in the UNC system. From 2003-4 thru 2008-9, the state authorized $3.2 billion in new debt (none of it approved by taxpayers, BTW), with most of it going toward capital projects on UNC campuses.
Similarly, enrollment in North Carolina’s community colleges rose 19%, but funding for their operations shot up by 42%.
Anybody think these trends were a result of the state simply maintaining “core services” in those systems?
Furthermore, the N&O article says that “needs” such as Medicaid are deeper during a recession. On that logic, one would assume that such needs would be lessened during good economic times. From 2003 to 2008, unemployment in North Carolina remained under 7%– compared to the 11% current rate. During those times of relatively low unemployment, however, state spending on Medicaid/Health Choice leaped by 40%. If demand for “needs” such as Medicaid are supposed to be light during good economic times, why the rapid increase in spending?
Fact is, the state finds itself in yet another massive budget deficit because of its short-sighted, irresponsible spending habits. And the trend is nothing new.
Will NC lawmakers learn from this experience, and take a more responsible approach to budgeting when (if) the economy recovers and revenue once again starts flowing?