RALEIGH – And so it begins – the great budget-deficit dance of 2009.
Fittingly, the University of North Carolina was the first performer on stage. The UNC system is one of the most generously funded public universities in the United States. That’s no accident. Its lobbyists are skillful, its alumni influence is vast, and its hold on state lawmakers is second to none among North Carolina’s spending lobbies.
Last week, UNC officials released what they characterized as a “lean, focused budget” that requests $168 million in new spending for FY 2009-10. That’s the fiscal year that, according to fiscal analysts across the political spectrum, is likely to feature a budget deficit of $2 billion or more.
Under orders from the Easley administration, the university system has been paring expenses for the current fiscal year ending in June. So far, the savings target has been four percent across state government, though it may rise soon to five percent. But for the next fiscal year, the one that seems likely to bring a fiscal crisis of gargantuan proportions, UNC is requesting a 6 percent hike in state subsidy.
“Lean” and “focused”? Well, I suppose it’s all relative. During the past two fiscal years, the UNC system’s state funding has grown more than twice that fast. Once you get used to double-digit increases in appropriations, six percent may indeed start to look lean.
But given the fiscal situation, it remains grossly excessive. Unlike public safety or public schools, public universities serve a disproportionately wealthy slice of North Carolina’s population. They charge artificially low tuition, thus simulating artificial demand for their services, while directing their huge private endowment not to undergraduate education but to a variety of lower priorities. The fiscal crisis of 2009 would be an opportune time for policymakers to adjust UNC’s state funding to a more sustainable level, and one similar to the rate of subsidy enjoyed by other state universities in the country.
UNC’s opening bid was only the first of many. Expect the public schools, community colleges, DENR, HHS, Commerce, and other departments to submit their own proposals in the coming weeks. With a new administration taking the reins of power in January and state legislators still digesting the results from Election Day, spending lobbies inside and outside of state government will waste no time trying to set the terms of the coming budget debate.
You’ll hear the same refrain from just about all of them: we’ve cut as much as we can. The only answer is to raise taxes.
We’ve heard the refrain before. We heard it in 1991, when lawmakers enacted income and sales-tax increases that were never subsequently repealed. We heard it in 2001-03, when lawmakers enacted another round of income and sales-tax increases, only some of which were subsequently repealed. Each time, once the crisis passed, lawmakers happily continued collecting revenues from the higher tax rates and plowed them into expanding their pet programs and creating new spending obligations. It’s a familiar boom-and-bust cycle, fueled by a wobbly tax system and the lack of any formal spending discipline.
So here we are again, facing a big budget gap with inadequate reserves and a long line of spending lobbies with their hands out for more. Welcome to the top job, Gov. Perdue. You asked for it.
Hood is president of the John Locke Foundation