Section 6.3(a) of North Carolina’s 2016 state budget act didn’t attract a lot of attention when signed into law. It took up less than two pages of a 209-page bill detailing billions of dollars in state government spending.
But now, five years after that budget law took effect, it’s clear that Section 6.3.(a) has had a much larger impact than most other provisions in the 2016 budget.
Fans of prudent, conservative state government spending ought to celebrate the law’s anniversary — July 14 — this year and in years to come. Section 6.3(a) has saved N.C. taxpayers from overspending during the past three years. It has helped limit the potential negative revenue impact from the COVID-19 pandemic.
And it ensures that current and future disputes about state budgets will favor those willing to accept less government spending.
Before examining Section 6.3(a)’s impact, some state budget history might be helpful.
Lawmakers typically draft a two-year budget plan in each odd-numbered year. It’s scheduled to take effect on July 1 of that year. Writing the budget typically involves resolving disagreements between the state House and Senate. Budget writers from both chambers express different priorities. Neither side wants to budge.
Since the governor gained veto power in the late 1990s, lawmakers have had to consider the chief executive’s budget priorities as well.
Regardless of the political party in charge, budget disputes often mean there’s no new state budget approved by June 30.
Prior to 2016, the absence of a timely agreement forced lawmakers to approve short-term continuing resolutions. Without them, state government ran the risk of a partial government shutdown.
Even the debate over a continuing resolution could generate heat. Sometimes House and Senate negotiators sparred over details. They haggled over which uncontroversial elements of a new budget plan could take effect as sticking points remained unresolved.
The shutdown threat emerged near each pending deadline. Those who feared the political repercussions of a shutdown had the greatest incentive to compromise.
But even with recurring deadlines, budget debates often extended far into the summer. In 2001, with a Democratic governor and Democratic House and Senate, a final agreement on a two-year budget plan arrived Sept. 26, nearly three months into the new budget year. In 2015, with Republicans controlling both legislative chambers and the governor’s office, the budget took effect Sept. 18.
The long slog over the 2015 budget agreement helped pave the way for Section 6.3(a).
Titled “Budget Stability and Continuity,” the section created a new process for addressing potential budget delays. Lawmakers wanted to avoid deadline gamesmanship, haggling over continuing resolutions, and threats of a government shutdown.
Moving forward, Section 6.3(a) of the 2016 budget law changed the permanent “enactment deadline” for budget plans. New rules applied any time “a fiscal year begins for which no Current Operations Appropriations Act providing for current operations of State government during that fiscal year has become law.”
In other words, if July 1 arrives with no new budget law in place, “budget stability and continuity” provisions take over.
Here’s the main point. “Unless otherwise provided by law, the Director of the Budget may continue to allocate funds from all funds for expenditure by State departments, institutions, and agencies at a level not to exceed the level of recurring expenditures from those funds for the prior fiscal year. If the Director of the Budget finds that projected revenues for the fiscal year will not support expenditures at the level of recurring expenditures for the prior fiscal year, the Director of the Budget shall allot funds at a lower level.”
So if new no budget takes effect, the old budget remains in place. If the state doesn’t have enough money to cover the old budget, government must cut spending to match available revenue.
The Senate approved the 2016 budget, including Section 6.3(a), with a 36-14 vote. The House endorsed it, 91-22. Nineteen House Democrats and two Democratic senators joined every voting Republican to support the measure. There was no threat of a gubernatorial veto, but both votes signaled that the bill had veto-proof supermajority support.
It’s not clear that anyone anticipated the role Section 6.3(a) would play in 2019. That’s when Democratic Gov. Roy Cooper and Republican legislative leaders began their long-running standoff over N.C. state spending. Cooper wants more spending than Republicans are willing to accept. He also wants to dictate policies such as Medicaid expansion. He has vetoed budgets that failed to endorse his priorities.
Prior to 2016, this type of stalemate would have pushed Republican lawmakers and a Democratic governor to the brink of shutdown. Thanks to Section 6.3(a), Republican lawmakers have taken a different approach. They have allowed budget provisions enacted since 2018 to remain in effect. The only exceptions involve mutually agreeable items tweaked through various mini-budgets.
Because N.C. government has avoided spending hikes proposed since 2019, the state treasury has piled up billions of dollars of unspent revenue. That revenue is coming in handy now as the state navigates its way through the world of COVID-19.
Republicans have paid no political price for refusing to accept Cooper’s demands. State government has continued to operate. Paychecks have been deposited. Bills have been paid. The GOP even made net gains in 2020 legislative elections after more than a year of relying on Section 6.3(a).
It’s not clear that any big-spending politicians — now or in the future — will have enough leverage to force frugal state lawmakers to accept a budget deal that doesn’t work for them.
For that reason alone, the July 14, 2016, enactment of state “budget stability and continuity” provisions deserves recognition. Not just on this fifth anniversary, but in years to come.
Mitch Kokai is senior political analyst for the John Locke Foundation.