The state budget is the most important policy document of the legislative year. The 2008-09 budget spends $21.3 billion, includes modest pay increases of 3 percent for teachers and of 2.75 percent for state employees, postpones the gift tax and expansion of the earned income tax credit, and increases spending over last year by more than 3 percent.
And it gets nearly every policy wrong.
It commits government resources in the wrong places, with the wrong assumptions, and with no evaluation of the results. Worst of all, it increases the state’s debt to dangerous levels with no approval from those paying the bill, the voters.
This budget spends more money than ever. Although there are no tax increases, there are plenty of fee increases and transfers of funds that had been set aside for other uses. It’s a shell game of moving money from one pot to another. There is no long-range, responsible fiscal plan to move the state forward.
State government is a closed club. Budget negotiations took place, not with the 170 duly elected members of the General Assembly, not with the 121 members appointed to the budget-negotiating conference committee, but with 13 appropriations committee chairs — all from the majority party — with final decisions made by two people: Joe Hackney and Marc Basnight.
Copies of the 237-page budget were available late July 3, and the vote was taken July 7. Debate was limited. No amendments were allowed. Members voted either yes or no. Take it or leave it.
There is spending in this budget that’s unclear, at best. A total of $700,000 goes into a “tax relief” account, but the budget does not designate for whom or for what. There is a $45 million reduction in availability due to “economic uncertainty.” In a transparent and open budget, it should be clear where every penny goes.
Government doesn’t just get bigger with more spending. Legislators added 400 full-time state employees to state government. All will require health insurance, retirement contributions, and other benefits.
There is plenty of money spent with no program evaluation or accountability. The budget pours $15 million into dropout prevention grants. The programs that were funded with $7 million last year have not been fully implemented, and certainly there is no effectiveness evaluation available yet. Programs such as More at Four and Smart Start continue to receive millions of dollars without a full evaluation to determine whether the programs are working or whether the money is well-spent.
This budget continues to pour money into tax breaks for targeted companies. There is $42 million more for corporate welfare in various funds and specific projects. This money would be much better spent on infrastructure, roads, Internet access, water facilities and sewerage, and providing an attractive environment for all businesses to grow and flourish.
There is next to nothing in the budget to address the state’s transportation needs. Legislators finally reduced the transfer out of the Highway Trust Fund so $25 million stays in the transportation budget instead of going into the General Fund. This move is a good one, and it needs to be expanded. But with road maintenance and construction and bridge repairs ignored again, and the state’s debt limits pushed, there is little debt capacity left to address these critical needs.
But the most egregious flaw in the budget is new debt. The budget increases borrowing by more than $1 billion, with more than $200 million in additional debt that will be realized under the 2009 legislature, all for capital projects. The state constitution requires that debt be paid before anything else, which is a responsible requirement. However, when the debt is so large and extended so far, as in this budget, less money is available for more pressing needs. The debt also limits the state’s flexibility to address future declines in revenue.
As of June 30, 2007, North Carolina had $6 billion in bond debt: $5 billion in general obligation bonds and $1 billion in certificate of participation bonds. The budget adds more than $1 billion in new COPs indebtedness for 31 projects.
North Carolina deserves better. With a process of only a few legislators meeting behind closed doors, limiting debate on the budget and holding to old failed policies, and recklessly incurring debt, no one wins. We need open and transparent government, where all voices are heard and true democracy is the rule of the day. This budget does nothing to move our state forward. Let’s hope there is a change in the 2009 session.
Becki Gray is vice president for outreach of the John Locke Foundation.