North Carolina’s fiscal policy is relatively strong when compared to much of the country.
A 2017 survey by the National Association of State Budget Officers found state governments have collected less revenue than expected after tax season.
North Carolina, though, has done pretty well.
NASBO says governors are recommending spending increases averaging 1 percent in fiscal 2018 compared to the levels budgeted for this year. This is the slowest level of growth governors have sought since 2010, when states were still in recession.
In 2017, 33 states failed to collect enough tax revenue to meet projections, four states met their goals, and 13 exceeded projections in actual revenue collected. Twenty-three states have made midyear budget cuts totaling $4.9 billion to deal with the lower-than-expected revenue.
North Carolina has forecast above average increases in revenue and spending, and did not make midyear budget cuts in 2017.
Despite 10 states seeing revenues decline over the past two years, eight other states increased tax collections by more than 10 percent. The discrepancy doesn’t appear to have a single cause.
Joe Coletti, senior fellow at the John Locke Foundation, says falling energy prices have hurt states that rely heavily on energy taxes.
The National Conference of State Legislatures suggests Alaska could face a budget shortfall of nearly $3 billion in the next two years if oil prices stay the same. The state may have to dip into its financial reserves to keep state government running.
Still, a majority of states continue to increase rainy day funds despite slowing growth. In April, North Carolina passed a law requiring 15 percent of its annual projected revenue growth to be diverted to the state’s savings reserve.
The NCSL report notes that North Carolina revenues are outpacing expectations while state spending has remained within projected margins.
Coletti says it’s no fluke. He credits a conservative mind-set in the state budget office and legislature for putting North Carolina in a sound fiscal position.
“Their forecasts of what revenue will do have been restrained, unlike other states, and so the state has ended up in really good shape over the past few years,” Coletti said.