RALEIGH – I’m going to out on a limb here and predict that the legislature’s new spending plan for 2012-13 will not result in the demise of public education, the collapse of North Carolina’s economy, a plague of locusts, or the end of western civilization as we know it.
I know, I know. I’m taking a great risk by rejecting the Left’s apocalyptic predictions. Just call me a daredevil.
When I look at the actual plan, which funds a $20.2 billion General Fund and a total state budget exceeding $52 billion, I don’t see a fiscal famine in state government. I see a big, expensive state government. I see that total spending from all sources – General Fund taxes and fees, highway funds, federal funds, and other revenues – will exceed $5,000 per resident in 2012-13.
Adjusted for inflation, that’s close to a record high in North Carolina. It’s nearly 30 percent higher than real state spending per person in 2003. Now, it is true that the composition of the state budget has changed dramatically over that decade. While total education spending will be about the same in 2012-13 as it was in 2002-03 (after adjusting for inflation and population), spending on Medicaid, unemployment insurance, and other transfer programs will be much higher. Other spending will be lower.
Many lawmakers, reporters, and activists pay attention only to the General Fund. That’s why they say “the new budget” is $20.2 billion, the General Fund amount. But that’s not the whole story. The General Fund has been shrinking as a share of total spending. It used to account for a large majority. Now it accounts for less than 40 percent.
I’m not discounting the fact that many areas of state government, public schools included, will have less funding in 2012-13 than they did before the start of the Great Recession. Unfortunately, past North Carolina governors and lawmakers approved budget increases during boom years that were not sustainable in the long run. Fiscal conservatives warned against the practice, to no avail. We were dismissed as naysayers or spoilsports. As should now be obvious, past legislatures should have said nay more often. They shouldn’t have viewed state budgeting as a political sport where your side “wins” if you score more money from taxpayers than your competitors do.
Still, some context is called for. While it is too early to project the 2012-13 figure for total federal, state, and local spending on K-12 public education, we know that North Carolina spent about $8,500 per public-school student on operating expenses in the 2011-12 school year. If you add in average capital spending, a reasonable estimate for the total cost of district-run public schools was just over $9,000.
That’s certainly a little less than it was three or four years ago. But it is still a huge amount of money by historical and international standards. It’s about 8 percent more in inflation-adjusted terms than what North Carolina spent as recently in 2000, the year Jim Hunt completed his fourth and final term as governor. It is more than Germany, Japan, Korea, France, and virtually every other industrialized nation in the world spends on education. It is about 6 percent more than the average per-pupil spending in North Carolina charter schools, and about a third more than the average per-pupil spending in private education.
North Carolinians are still suffering the effects of a severe recession and a weak recovery. Real per-capita incomes are lower today than they were a decade ago. Many households and businesses have suffered far greater revenue losses than public school districts have sustained. To impose higher taxes on these households and businesses to boost state spending, as Gov. Perdue and most Democrats lawmakers proposed this session, would have brought only significant economic costs, not significant educational benefits.
By crafting a 2012-13 budget plan without a tax increase, the General Assembly did the right and responsible thing. Yes, there will be much gnashing of teeth by some. But the Republic will be fine.
Hood is president of the John Locke Foundation and author of Our Best Foot Forward: An Investment Plan for North Carolina’s Economic Recovery.