RALEIGH – Let’s take a break from electoral politics and talk about another issue: North Carolina’s seemingly endless string of “unforeseen” state budget deficits.
The state legislature is actually struggling with the fourth such budget gap in a row, though memories are short on this point. Back in 2000, outgoing Gov. Jim Hunt was presented with what appeared to be a gap between expected revenues and expenditures in the hundreds of millions of dollars. There were several causes: Hurricane Floyd, court-ordered tax rebates, the completion of expensive Hunt projects such as Smart Start expansion and a huge teacher-pay hike. To bridge the gap, Hunt proposed a classic “smoke-and-mirrors” budget that relied on phantom budget savings and even a sort of “bridge loan” of special obligation bonds.
The General Assembly, thankfully, didn’t go along with all of Hunt’s fiscal gimmicks. They made some real adjustments, and some fake ones, to balance the FY 1999-2000 budget and enact a 2000-01 budget that appeared, at the time, to balance out.
They were wrong about the second year of the biennium. Shortly after the 2000 elections, it came to light that the state budget wasn’t going to be balanced. Indeed, estimates of the fiscal shortfall as new Gov. Mike Easley took office started out in the hundreds of millions of dollars and then proceeded throughout the spring of 2001 to approach $1 billion.
To erase the deficit, Easley did have to adjust some spending downward, and began his now-infamous practice of tapping reserve funds. The problem recurred for the 2001-02 fiscal year, leading to last year’s massive tax hike, and now lawmakers are looking at a $1.5 billion or so deficit for the 2002-03 fiscal year.
You’d think being slapped around by all this fiscal guesswork would have convinced the powers-that-be to get more conservative about state budgets, or possibly even to rethink the entire process. You’d be wrong. The N.C. Senate was supposed to release its revised FY 2002-03 budget this week, and pulled it back for a variety of reasons, one perhaps being that it relied on huge transfers of non-recurring funds to cover recurring expenses – a move guaranteed to generate big deficits in the future. Indeed, legislative staffers have already forecast big deficits through the middle of the decade.
Whether you think our problem is too little taxation (shame on you) or too much spending (congratulations), surely the prospect of all these sudden deficits should be unwelcome. There is an alternative. Years ago, former Democratic Sen. William Goldston and Republican Rep. Art Pope suggested that the state budget be based not on fiscal year projections but actual and estimated revenue collections for the calendar year.
Now Rep. Fern Shubert (R-Union) has filed a bill, HB 1756, to set up such a system. It would amend the constitution, and thus needs a supermajority, but the appeal should be broad. Eliminating most of the guesswork associated with budgeting the taxpayers’ money would be a marked improvement over the current fiscal and political mess.