RALEIGH – Would giving North Carolina Gov. Beverly Perdue more power over the state budget lead to lower government spending?
Conservatives and Republicans may have good reason to question Perdue’s commitment to sound budgets and low taxes, given recent events, but academic research does suggest that strengthening the hand of governors is good for fiscal restraint.
In particular, researchers who study the effects of state institutional arrangements on state budgets have increasingly found evidence that stronger forms of gubernatorial veto are a plus if your goal is to produce fiscally conservative budgets.
North Carolina was the last state to give its governors the power to veto legislation. We were late to the “executive negative” party, in other words, and until 2011 no governor had used veto power on state budgets or any other significant legislation. After Republicans won control of the General Assembly in 2010, Gov. Perdue made a few rightward feints in their direction before setting up a series of high-profile veto confrontations, most notably of the legislature’s budget bill.
The Republican supermajority in the state senate and a bipartisan supermajority in the state house overrode Perdue’s veto. A conservative 2011-13 budget became law. North Carolina’s temporary sales tax hike expired on schedule – which among other things will disproportionately benefit lower-income taxpayers – and North Carolina’s state government was substantially reformed and reorganized.
From the standpoint of taxpayers, it was a welcome outcome. But the 2011 legislative session was only the beginning of what will have to be a multi-year effort to rebuild North Carolina’s fiscal position and enhance the state’s economic competitiveness. Our tax system is still anti–growth. Our Medicaid program and other entitlements are still too expansive and expensive. Our infrastructure budget is still misallocated. Our education system still generates a subpar return on the tax money it receives.
Moving forward, North Carolina policymakers need not just to tackle all these challenges in detail but also to restructure our fiscal institutions – the laws, policies, agencies, habits, and constitutional provisions that guide the development of state budgets.
North Carolina has some of the tools required. Our state constitution requires balanced budgets and voter approval of general-obligation debt, and gives governors the power to veto entire budget bills and cut spending during fiscal emergencies. In the General Assembly, lawmakers wisely keep their Revenue committees separate from their Appropriations committees, and have recently made it easier for lawmakers, reporters, watchdogs, and average citizens to read and digest budget bills before they are voted on.
But North Carolina’s toolbox remains inadequate to the task of ensuring fiscal restraint. The tools we already have need to be sharpened, and we also need to put additional tools in the box. I’ll write more about updating the state’s budgetary toolbox in a subsequent column.
For now, it’s worth zeroing in on the chief fiscal hammer of the executive branch: the veto. It’s good that North Carolina governors can now wield that hammer. But it would work even better with a chisel.
When considering the issue of budgetary reform, it is important to set today’s personalities aside. While a Gov. Beverly Perdue might bring a very different political philosophy to the negotiating table than, say, a Gov. Pat McCrory would, it would be a mistake to try to craft budgeting policies on the basis of any particular person or short-term goal.
Actually, the latest research examining the effectiveness of the veto power encompasses every case you can imagine: Democratic governors with Democratic legislatures, Republican governors with Republican legislatures, and all other mix-and-match possibilities.
After accounting for all that, the studies suggest that giving governors the power not just to veto entire budgets but to zero in on particular spending categories – a power called an item-reduction veto – has salutary effects. In the 12 states with item-reduction vetoes, state budgets end up lower by hundreds of dollars per resident.
Keep in mind that an item-reduction veto is exactly what it sounds like – a type of line-item veto with which governors can reduce spending. It is not an item-increase veto.
That I wouldn’t give to Gov. Perdue, or anyone else.
Hood is president of the John Locke Foundation.