RALEIGH – As Gov. Beverly Perdue and the new Republican legislature grapple in the coming months with a state budget deficit exceeding $3 billion, they’ll get a lot of advice – and little of it will be “free.”
For every dollar of public expenditure or targeted tax break on North Carolina’s books, there’s a lobbyist or interest group paid to protect or expand that dollar. They’ll make every possible argument to accomplish their goal, as is their obligation. At the same time, it is the obligation of every elected official to listen to these arguments carefully and skeptically.
The basic truth of the matter is that there will always be more noble causes, good intentions, and interesting ideas than North Carolina taxpayers are willing to finance. Isn’t that true in your own household or business? It’s true in government, too. So policymakers have a duty to ask tough questions and demand hard answers. After all, they’re spending someone else’s money, not their own.
If it were me, I’d apply the following decision rule: if a program has been created or expanded in the past 20 years and there has been no significant improvement in its relevant outcomes, then it should be defunded.
A related concept is that if North Carolina spends far more than it used to on a given function, and more than similarly situated states spend on that function, then it should be posting better outcomes – or a spending reduction is in order.
For a recent nationwide project, I constructed a table comparing government spending as a percentage of gross domestic product for every state going back to 1992. The findings for North Carolina were most revealing.
Over the past two decades, government spending as a share of North Carolina’s economy has grown by about 16 percent – which is, interestingly enough, roughly the same proportion as the projected 2011-12 deficit is to the state budget. This growth hasn’t been spread evenly across all state functions, however.
In the single-largest area of expenditure, for public schools, North Carolina devotes about as much of its GDP to K-12 education as it did nearly two decades ago. The actual spending per pupil has grown significantly, of course – to about $10,000, when all expenditures are properly accounted for – but it’s fair to say that K-12 education has not been among the main drivers of budget growth as a share of GDP. North Carolina also doesn’t rank high in K-12 funding, it must be said.
The situation is far different for higher education. North Carolina public colleges and universities are among the most subsidized institutions in the United States, and the share of state output devoted to higher education has grown by more than a fifth since 1992. Unfortunately, college graduation rates and other outcomes have not shown similar gains.
The largest percentage increases in real government spending in North Carolina have come in health care and public assistance programs, which are up 25 percent and 35 percent respectively. Again, outcome measures such as health status or poverty rates don’t reflect similar gains.
A couple of years ago, a John Locke Foundation colleague, Joe Coletti, conducted a study comparing North Carolina spending and policy outcomes to the rest of the nation. He assigned a letter grade based on the cost-effectiveness of government spending. States that got a bigger bang for each taxpayer buck they spent got high scores. The A honor roll included the likes of Florida, Texas, and Tennessee. Expand the list to the A-B honor roll, and it included Virginia and South Carolina.
North Carolina got a D. We spent more and got less.
So as Perdue and the General Assembly fashion a smaller state budget for the coming year, they should take heed of the Bigger Bang Theory. North Carolina taxpayers aren’t just upset about the size and scope of government, and how much of their income it consumes. They are also dissatisfied with the results.
So set aside the atmospherics, ignore the special pleading, and reward results.
Hood is president of the John Locke Foundation and publisher of CarolinaJournal.com.