RALEIGH – Hearing news like this – state revenues exceeding projections for the first quarter of the fiscal year – some state lawmakers and politicians are liable to start wishing away next year’s fiscal train wreck. No such luck, folks. The rails are still bent.
Looking underneath the reported $74 million surplus for the July-September period, legislative fiscal analyst David Crotts observed that virtually all of that came from higher-than-anticipated revenues from corporate taxes, that about half of the corporate take came from a single resolution of a long-standing tax dispute, and that corporate taxes are among the most volatile in the revenue mix.
There is, in short, no justification for complacency about the budget problemss likely to present themselves next year to whomever voters decide to put in the governor’s office and General Assembly in November. Because of the use of one-time revenue sources and the scheduled disappearance of “temporary” sales and income taxes in 2005-06, policymakers will probably have to come up with hundreds of millions of dollars in revenues or budget savings to fund existing programs and routine expansion items such as school-enrollment growth.
And then there are the politicians’ new ideas. There will be some. If Easley is reelected, he’ll want to expand preschool programs further and implement other second-term priorities such as Leandro funding for some poorer school districts. If Ballantine pulls an upset, he’ll boost state-employee pay more than Easley will and potentially reduce some of the flow of dollars from highway funds to the General Fund, a good idea but one that obviously has signficant fiscal implications. Shifting attention to the legislature, both House and Senate leaders have their own wish-list of projects, including more money for mental health, universities, and economic-development boondoggles — I mean, projects.
Can the budget hole be filled? Of course, if our leaders start exhibiting some leadership. A glance back through the John Locke Foundation’s Freedom Budget will reveal some of the steps necessary to do so. They include Medicaid reform, adjusting the level of subsidy of the University of North Carolina system, reorganizing state government, rethinking our approach to preschool and child care policy, and getting control of our surging debt load.
But don’t expect politicians of either party to get specific about fiscal solutions, as these will require setting priorities and telling some rather-loud interest groups “no.” Not exactly the kind of politics we’ve been treated to lately.
Hood is president of the John Locke Foundation and publisher of Carolina Journal.