Earlier this year, the Carolina Journal reported on the use of “reserve funds” in the state budget: billions of taxpayer dollars that are appropriated, yet not accounted for in the general fund’s headline numbers. This has allowed sizable expansion in the state budget while keeping the headline budget number at a more acceptable level.
So where is the money going, and how do reserve funds work?
Carolina Journal is examining some of these “reserve funds” to share just how the process operates. This week, we focus on the “Economic Development Project Reserve,” or the “Economic Development Reserve,” as outlined in the House or Senate Budget proposals, respectively. This reserve fund is not to be confused with the “Regional Economic Development Fund,” however. The fund in question was created in 2021 to fund various economic development initiatives and has had more money appropriated by the legislature each year.
“The Economic Development Project Reserve appears to largely divert taxpayer dollars toward sites the state is prepping for large corporate welfare projects,” Brian Balfour, VP of Research for the John Locke Foundation, told the Carolina Journal. “And making matters worse, the use of this ‘reserve fund’ amounts to a shell game with hundreds of millions of taxpayer dollars. Budget writers set aside money into this ‘reserve,’ only to then immediately designate the funds for use in the budget bill. This way, they can label the appropriations as ‘receipt supported’, and it won’t be included in the General Fund total expenditures. The result is a fiscal slight of hand making the sate budget look smaller than it really is.”
According to the latest cash watch report, the Economic Development Reserve Fund currently has a balance of $735.8 million. Over the 2024 fiscal year, $630 million was appropriated to the fund, and another $100 million for fiscal year 2025.
The appropriations for this fund can be found in the Joint Conference Committee Report on the Current Operations Appropriations Act of 2023.
The legislature approved four appropriations from the Economic Development Project Reserve for fiscal year 2024:
- $10 million went to the Golden Leaf Shell Buildings Pilot Program (pg D33);
- $600,000 went to the Mega-sites and Select-sites Administration;
- $10 million went to the Megasites Readiness Program (pg D39); and,
- $1 million was appropriated to Regional Water/Wastewater Planning (pg D51).
(Notably, back in 2022, the state auditor found that Golden Leaf failed to monitor $83 million in federal money from the Covid federal loan program.)
These appropriations totaled $21.6 million, leaving $608.4 million remains to be deposited into the reserve.
On April 12th, the cash watch report had the Economic Development Project Reserve balance down to $248.55 million.
A week later, on April 19, the balance jumped to $856.95 million., reflecting the $608.4 million deposit.
Then, on April 26, the cash watch report showed that the reserve balance had dropped to $744.45 million; showing that $112.5 million was withdrawn from the reserve.
On May 10, the cash watch report showed that the reserve had dropped to $736.8 million, pointing to another $7.65 million withdrawal.
On June 7, the cash watch report showed that the reserve had again dropped, to $735.8 million, marking another $2.65 million withdrawal.
In total, between April 26-June 7 of this year, $121,188,000 was withdrawn from the Economic Development Project Reserve.
So where did the money go?
The April 26 withdrawal was accounted for in the budget adjustments outlined in the 2022 budget legislation (pg 120) .
This $112.5 million is part of a Job Development Investment Grant (JDIG) allocated in the 2021 budget (2022 adjustments) for Wolfspeed. $57.5 million was allotted to reimburse Wolfspeed for site development, and another $55 million was allotted to the city of Asheboro for infrastructure. This money was originally appropriated for Wolfspeed in the 2021 budget (2022 adjustments).
From the May 10th withdrawal of $7.65 million, the 2022 budget adjustment only accounts for $5 million. The $5 million is out of a $60 million allocation appropriated to the EDPNC (Economic Development Partnership of North Carolina). Of the $60 million, $40 million was set aside for the 2021 biennium and $20 million for the 2023 biennium.
The remaining $2.65 million from the May 10th withdrawal was appropriated in the 2023 budget (pg 344). This allocation comes from the $10 million appropriated to the Megasites Readiness Program. As mentioned earlier, this money was never put into the fund because it was allocated to be spent in FY 2023-24.
On June 7th, another $968,000 was withdrawn from the fund, bringing the balance to $735,832,000. The State Controller’s office says this money is also accounted for in the 2023 budget (pg.12). This $968,000 is out of the $1 million appropriated to the Regional Water/Wastewater Planning. However, just as with the $2.65 million mentioned above, this money was never put into the fund because it was allocated to be spent in FY 2023-24.
The State Controller’s office says that this money is accounted for in the 2023 budget (pg.12).
Simply put, after the $608.4 million was deposited into the Economic Development Project Reserve on April 12, no FY 2023-24 budget allocations should have been withdrawn because the $21.6 million in FY 2023-24 appropriations were never deposited into the account.
This means that the FY 2023-24 withdrawals made on May 10 and June 7, represent $3,618,000 in unaccounted-for funds. According to the Office of the State Controller, these dollars seem to have never been deposited, but were withdrawn.
According to the latest cash watch report, the balance of the Economic Development Project Reserve Fund remains at $735,832,000. Of this balance, $600 million remains unappropriated. The Carolina Journal will continue to monitor the withdrawals from this fund closely.