RALEIGH – When Gov. Mike Easley announced his 2002-03 budget plan on Tuesday, he made several statements that, to put it delicately, are difficult to reconcile with a reasonable person’s understanding of the available facts. For example, he claimed that his budget did not contain a tax increase, even though it raises taxes by nearly $500 million (mostly through the fiction of a “local” sales tax hike that the governor would essentially compel localities to enact by withholding $333.4 million in tax reimbursements).

Another statement he made, and that most media reports took at face value, is that the governor’s budget would be the first in a generation to actually reduce state spending. This one is also at odds with reality, though in not as egregious a fashion. Bear with me for a moment and I’ll explain.

Traditionally, both government fiscal staffers and outside analysts have computed North Carolina’s state budget by referring to “authorized spending.” This simply refers to the amount that the governor and the General Assembly agree to allocate to a department at the beginning of a fiscal year.

Usually, state agencies spend slightly less than the authorized amount, primarily due to positions becoming vacant or specific purchases coming in at less than the expectedcost. The unspent funds are called “reversions” because they revert back to the state’s General Fund. Often these reverted funds get folded into the following year’s budget. Sometimes they get spent in the current year, either because the original budget preemptively “reappropriated” reversions to other purposes (a naughty practice called a “negative reserve”) or, as has happened in the past two years, the money is needed to cover revenue shortfalls.

Most of the time, it is perfectly reasonable to compare budgets from year to year based on authorized, rather than actual, expenditures. During normal fiscal years, reversions are predictable. That being the case, it is easier to use authorized numbers because you can make real-time comparisons rather than having to wait a year to find out how much money the state has actually spent in that year.

Unfortunately, this practice breaks down in situations like our current budget mess, because the authorized number differs so dramatically from the actual expenditure. This is the source of Easley’s confusing claim. In reality, his proposed authorized budget for FY 2002-03 is around $14.3 billion. Actual spending in the previous fiscal year will likely come in at around $13.9 billion. The governor is claiming to “cut” the coming year’s budget because he is comparing it to last year’s authorized budget of $14.5 billion – but that budget hasn’t really been relevant since October.

It is possible, of course, that the $14.3 billion the governor wants to authorize won’t all be spent. Some may revert back to the state. But it is highly unlikely that nearly $400 million will. In fact, Easley has already stated explicitly that if additional revenues become available during the year, he’d like to offer pay raises to non-teaching state employees, who otherwise get nothing in 2002-03.

I know this may sound like nitpicking, but the governor didn’t need to fudge on this. According to my calculations, he did in fact reduce state spending back in 2001 vs. the previous year. It was a very small cut, far less than 1 percent, but it actually happened, unlike the one Easley is claiming for the coming year.