News: CJ Exclusives

GOP Pushes Spending-Cap Bill

Act would place controls on annual growth in North Carolina budget

Republicans in the General Assembly on Monday introduced a Taxpayers’ Protection Act, which would constitutionally place controls on lawmakers’ spending and refund any excess revenues to taxpayers.

At the same time the bill’s sponsors acknowledged the political reality of their minority status. State Sen. Fred Smith of Clayton, who sponsored the legislation, presented the bill as a vehicle to open a “dialogue” on fiscal restraint with Democrats. But he said that if leaders in both the House and Senate weren’t willing to discuss ideas on how to rein in government spending, Republicans would take the idea “directly to the people.”

“This issue is not going to go away,” Smith said at a press conference at the Legislative Building.

Asked how his group would hold Democratic leadership accountable on the issue with North Carolinians, Smith replied “elections.” Democrats have held the governorship and had either shared or had total control of each chamber of the legislature since 1997. Smith vowed an improved performance by Republicans in 2006.

But in the meantime, the proposed act would seek to impose an annual state spending limit based on a previous year’s expenditures, plus an increase that reflects the growth rate of inflation and population. The bill would establish a reserve fund “for declared emergencies only,” which would be maintained by excess revenues over the spending limit and kept at a level of 3 percent of the fiscal year’s spending limit. It would also create a Budget Stabilization Fund for years when state revenues fall short of the fiscal year spending limit, which would be maintained at a level of 18 percent of the fiscal year spending limit.

“What’s missing in government budgeting is discipline,” said State Sen. Richard Stevens of Wake County, a cosponsor of the bill. “The Taxpayer Protection Act will let North Carolina have discipline in its spending while making sure that we take care of our needs in education, roads, and jobs.”

Smith said the entire Senate Republican caucus, with 21 members, supported the bill, as did 51 members of the House GOP.

“It’s an idea whose time has come,” he said.

Smith and other Republican lawmakers criticized Gov. Mike Easley, who released his budget recommendations last week, for proposing $1.7 billion in new taxes over the next two years. They said the governor’s plan would increase spending by 6.1 percent. Smith said that lawmakers need a mechanism in the law that would impose a limit on how much they could increase expenditures each year.

“The good things that can be done [with state money] are unlimited,” Smith said. “(The Taxpayer Protection Act) makes sure we can meet the needs of the state.”

While Republicans disapproved Easley’s plans, the libertarian Cato Institute in Washington D.C. gave him a “C” grade in its biennial Fiscal Policy Report Card on America’s Governors. He received the passing mark even though Cato, which supports tax cuts, said he enacted the largest rate increase in the top income tax rate and also raised sales taxes.

Among the 17 governors that Cato determined were in their “senior class,” or in office at least two years, Easley ranked eighth. Only Washington Gov. Gary Locke, with a “B,” finished ahead of Easley among the six senior Democrats who were graded. Six senior Republicans graded higher than Easley, while five senior Republicans graded lower.

Paul Chesser is associate editor of Carolina Journal. Contact him at [email protected].