News: Quick Takes

Budget-paring tool would save N.C. taxpayers $455 million next year

JLF report arrives as House, Senate negotiators work on final compromise

North Carolina legislators could save taxpayers another $455 million in the next budget year. They would meet that target by using a tool called consensus-based budgeting. A new John Locke Foundation Spotlight report offers details.

JLF is releasing its report as N.C. House and Senate budget negotiators work out final details of their two-year General Fund budget plan for 2017-19.

A consensus-based budgeting process would result in a General Fund spending plan of $22.4 billion for the 2017-18 budget year that starts July 1. “That’s just 0.2 percent higher than the budget for the current budget year that ends June 30,” said report author Joseph Coletti, JLF Senior Fellow. 

“The consensus-based budget spends $455 million less than the competing $22.9 billion proposals put forward by the N.C. House and Senate,” Coletti added. “The consensus-based budget number is also more than $1 billion less than the proposal Gov. Roy Cooper submitted to lawmakers. That’s $1 billion that state government wouldn’t take away from taxpayers.”

Coletti calls the consensus-based budgeting tool a “simple concept.” “Most people are familiar with the term ‘logrolling.’ You accept someone else’s proposal to get their acceptance of yours,” he said. “In government, it often means more programs and more spending to get a budget passed. Consensus-based budgeting asks: What if logrolling worked in reverse?”

“What if one legislator agreed to give up a pet project in exchange for another legislator doing the same?” he added. “It might seem impossible. This report shows how this concept would work. It would create the smallest budget possible for the next two years based on budget plans passed by the N.C. House and Senate.”

When House and Senate budgets disagree on the amount of funding for a particular program or department, negotiators using the consensus process would take the option that spends less recurring money over the course of the two-year spending plan, Coletti explained. The consensus-based budget also would include less total money for a budget item if the House and Senate plans include only one-time funding.

If there is no difference in spending between the House and Senate plans, but one plan makes a policy change or creates a new program, the consensus-based budget would drop that policy or program, Coletti added.

In addition to the $455 million savings for 2017-18, the consensus-based budgeting tool would produce a $23 billion General Fund budget for 2018-19. “That would be $492 million less than the Senate’s plan, $827 million less than the House, and $896 million less than the governor. Remember, this is money that would remain in the hands of N.C. taxpayers rather than heading to state government.”

Within the overall spending figure, the consensus-based budget for 2017-18 would produce $12.8 billion for education, including $8.9 billion for K-12 public schools. It would provide $5.1 2 billion for health and human services, $2.6 billion for justice and public safety programs, and $853 million for debt service and reserves.

“Teacher pay would increase an average of 3.3 percent, equal to the House’s proposal, and other state employees would receive the greater of $750 or 1.5 percent of their salary, based on the Senate’s proposal,” Coletti said. “Government retirees would not receive the one-time cost-of-living bonus proposed by the House. This mirrors the Senate plan.”

“Updates to core accounting systems for public schools, the University of North Carolina system, and all state government would continue to move forward with $31.7 million in 2017-18 and $37.9 million in the following year,” he added.

Coletti cautions that consensus-based budgeting serves as a comparative tool, not a commentary on the worth of particular budget items. “For instance, this tool offers no recommendation about the desirability of film production grants, which are included in the consensus budget,” he said. “It also says nothing about the value of the Raise the Age initiative for 16- and 17-year-old criminal offenders, which does not appear in the consensus-based budget.”

“It’s also important to note that this plan focuses only on appropriations, not the allocation of unreserved fund balances to the state’s rainy-day savings reserve or the repair and renovation fund,” Coletti added.

Still, the tool should prove useful to House and Senate budget negotiators, Coletti said. “We would encourage them to adopt the consensus-based method employed here,” he said. “Consensus-based budgeting also offers the casual observer of the state budget process a way to assess similarities and differences in the House and Senate plans, while showing that there is more opportunity for savings that benefit taxpayers.”