RALEIGH – Defenders of the competing tax-hike plans from the NC House and Senate argue that if the General Assembly balanced next year’s budget without a tax increase, the resulting budget cuts would set the state back a generation.
In other words, they equate government spending with progress. They assume that more the state spends, the more progress the state makes. So if lawmakers roll back inflation-adjusted state spending per North Carolinian to mid-1990s levels, the theory goes, they’d be rolling back all the improvements in governmental services we’ve experienced since then.
Set aside all the left-wing ideology and special-interest pleading. What you have left is an empirical claim. Let’s test it.
Last fall, JLF fiscal analyst Joe Coletti conducted an innovative study of the cost-effectiveness of state governments in North Carolina and elsewhere. He compared the size and growth of state budgets in all the 50 states to measurements of program outcomes such as educational performance, the quality of public infrastructure, health statistics, and the crime rate.
The result was a set of letter grades assessing each state’s Taxpayer Return on Investment. A high grade indicated a state that saw significant service improvements for every new tax dollar spent. A low grade indicated a state that delivered a low “bang for the buck” in government spending.
North Carolina fared poorly, earning a D. Some states looked worse. But most looked better, including Florida (A), Tennessee (A-), South Carolina (B), and Virginia (B). In the press release accompanying the study, Coletti explained some of the key differences in spending and outcomes:
“While states with lower tax burdens earn most of the top grades and those with higher tax burdens earn some of the lowest grades, the policy differences are important,” Coletti said. “North Carolina’s road system performance deteriorated between 2001 and 2006, while Arkansas and Florida showed significant improvement and Texas roads improved slightly. More than half of the other 50 states also saw greater crime-rate reductions than North Carolina from 2001 to 2006.”
North Carolina’s increased education spending has yielded few results, Coletti said. “Gov. Mike Easley’s efforts in education seem to have produced little effect as North Carolina improved less than all but nine other states in the country,” he said. “Reading scores on the National Assessment of Educational Performance fell 2.2 percent between 2002 and 2007. Math scores improved, though not as much as in most other states. To put this in perspective, North Carolina clearly outperformed South Carolina at the start of the decade and was on par with Virginia, but by 2007 trailed Virginia and was on par with South Carolina.”
During the late 1990s, state spending in North Carolina exploded, reflecting the impact of new programs such as Smart Start and teacher-pay hikes. Then the state took on billions of dollars in new bonded debts. Then Gov. Easley came along and added still more new programs, such as More at Four and class-size reductions.
These and other decisions have made North Carolina’s state government too big, too unwieldy, and too costly. Bringing the state budget back into line with economic reality does not mean losing years of educational and social progress – because the spending binge of the past 15 years never accomplished what its proponents promised.
Other states provide similar services at a lower cost, or better services at the same cost. It’s time for real progress in North Carolina government, starting with an end to costly and counterproductive tax increases.
Hood is president of the John Locke Foundation