RALEIGH — In yesterday’s Daily Journal, I compared the 2003 budget debate in the North Carolina General Assembly to the Battle of the Five Armies from J.R.R. Tolkien’s The Hobbit. With the conflict now over, the governor and legislative leaders all claiming “victory,” it’s worth taking a closer look at the field of battle to assess the casualty rates for the various sides.
First, Gov. Mike Easley. Having compared his administration to the army of eagles who saved the day in the Tolkien story, I feel compelled to note that the governor and his much-vaunted veto threat never really got off the ground. Easley had argued that the state legislature was relying on overly optimstic revenue projections for the next two fiscal years, that the amount of spending growth in the second year of the biennium was excessive, and that he would veto an unbalanced budget.
On Monday afternoon, the governor signed a patently unbalanced budget that still relied on the legislature’s revenue forecast and that still included significant spending growth (5 percent, or $730 million) in the second year.
Yes, Easley did get some movement in his direction. And he did get to sign an additional bill that authorizes him to make certain adjustments to the state budget as needed, such as withdrawing dollars from the state’s Rainy Day Fund, without getting specific approval from the General Assembly. But how big a deal was this? As Scott Mooneyham of the Associated Press reported Monday night, more than a few lawmakers and observers wondered whether the governor hadn’t simply realized that his veto might well be overridden (the key was the possibility of some GOP defections in the NC Senate). This theory asserts that he hatched the new idea of great spending flexibility as political cover for backing off his veto threat.
Among legislative leaders, Senate President Pro Tem Marc Basnight was the big loser, with he and other advocates of even more tax increases than the half-billion-dollar package in the final deal having to back off their position. It’s the worst situation to be in: blamed for proposing large tax increases but prevented from being able to spend the proceeds. On the other hand, House Co-Speaker Richard Morgan turned out to be a bit of a political winner here, having sided with mainstream Republicans against the few fiscal liberals in his own GOP faction, such as Cary’s David Miner and Asheville’s Wilma Sherrill, who had indicated some support for the higher excise taxes that Basnight and Co. wanted. Morgan probably won’t earn any new friends in the Republican caucus — those bridges are so burned that the ashes have distintegrated — but he may salvage a relationship with Republican activists and donors back home who feared the worst on the tax issue (they got only the pretty bad, half-a-billion more in sales and income taxes).
Liberal hand-wringers in both houses and beyond took some casualties in my estimation, as well. One of their major talking points was that North Carolina health and human services programs were taking huge and unsustainable hits in the budget, thus justifying the Senate’s tax package. But in the final analysis, HHS spending will grow significantly over the next two years, by $263 million. Admittedly, it looks like the department takes a significant 6 percent whack in the 2003-04 fiscal year, but that’s not really true. About more than $400 million in “cuts” to HHS are actually nothing more than 1) a correction of a previously exaggerated rate of Medicaid spending and 2) state dollars supplanated temporarily by the emergency federal Medicaid relief approved by Congress some weeks ago. No one loses any access or services due to these “savings.” There was some trimming here and there, but also some new programs. The overall trend line for public-assistance spending in North Carolina is up, always up.
The main casualties of North Carolina’s budget battle this year, as has been true for years now, are to be found among the state’s beleaguered taxpayers. Their economy grows slowly, their wallets grow lighter, and their government just plain grows — by a staggering $1.2 billion over the next two years.
Hood is president of the John Locke Foundation and publisher of Carolina Journal.