News: CJ Exclusives

North Carolina Considers a Taxpayer Bill of Rights

A ‘TABOR’ amendment to the state constitution would slow budget growth and create a rainy day fund

Lawmakers are considering adding a taxpayer bill of rights to the North Carolina Constitution. The amendment would allow the state budget to grow only as fast as inflation and population and would require all surplus revenue to flow into an emergency reserve fund.

At a public hearing Wednesday, supporters said the proposed legislation would smooth out state spending over the business cycle, while opponents said it would hurt children and the sick.

Bill sponsor Rep. John Blust, R-Guilford, said legislators need a constitutional restraint to keep them from overspending in the good years, so there is money left over for the bad years.

The temptation to grow government in times of economic prosperity is too great, said co-sponsor Rep. Nelson Dollar, R-Wake. And then when recession hits, he said, “we’re forced to raise taxes when people can afford it least or cut services when people need them most.”

Vance Holloman, deputy treasurer for the State and Local Finance Division, said the state treasurer’s office opposes a TABOR amendment because it creates a loss in budget flexibility.

“There could be very legitimate reasons expenditures need to increase beyond this limit, such as emergencies, an increase in fuel costs, or the need to put new programs in place,” Holloman said.

The bill allows for temporary budget increases, but they would have to be approved by a two-thirds vote of the General Assembly. Holloman said the two-thirds requirement is too restrictive.

Kathy Hartkopf of Freedom Works North Carolina welcomed a loss in legislators’ flexibility to increase spending. Over the last two decades, inflation-adjusted spending in the state has grown 1.5 times faster than population, she said.

Edwin McLenaghan, a budget and tax analyst for the North Carolina Justice Center, called the TABOR budget formula “arbitrary” and “rigid.”

The cost of health care and education services grows faster than inflation or population, McLenaghan said. By not allowing the budget to increase at the same rate, he argued, public schools, community colleges, universities, and hospitals would suffer. A TABOR amendment passed in Colorado in 1992 has “seriously weakened public structures” in that state, he said.

“TABOR hurts children,” said Mandy Ableidinger, director of policy and budget analysis for Action for Children North Carolina. Ableidinger attributed increased immunization rates, decreased uninsured rates and improved infant mortality statistics to the state’s ability to increase spending over the last couple of decades.

Blust agreed that we should think about the children. “We need another constraint on this body and on the governor to keep from spending everything that comes in or there is going to be a very bleak future for the children.”

TABOR is a more “compassionate” way of managing the state budget than the “short-sighted cycle of overspend, panic, tax, and slash,” said Chris Farr, state grass-roots director for Americans for Prosperity.

The House Judiciary Subcommittee A may hold one more public hearing before it votes on the bill. Because the bill is a constitutional amendment, it does not have to pass one house of the General Assembly by the June 9 crossover deadline to remain alive for the remainder of the 2011-12 session.

If it passes the House and the Senate by three-fifths margins, it could be placed on the 2012 ballot for voter approval.

Sara Burrows is an associate editor of Carolina Journal.