Progressive Voices

It's official. The state budget bill has been signed by the governor. All things considered, the budget adopted this year is a reasonable plan for North Carolina. There was very little new money available to budget-writers because tax revenue growth, along with the economy, has slowed to a crawl. The lion's share of the new money was spent on pay raises for teachers and state employees. In addition, considerable resources went to maintaining the quality of current public services by paying for things like the thousands of new students attending the state's community colleges and universities and accommodating the rising cost of diesel fuel for school buses.

Advocates for most causes saw their preferred programs and services get a little bit more money this year - smart start, affordable housing, public schools, toll roads, probation and parole and so on and so on. Perhaps it was battling for these crumbs that led many advocates to ignore the negative long-term consequences of this budget. In the long term this budget could eat up any resources that could provide for more substantial new investments in improving public services.

Here are the three factors that make this budget a poisoned pill for future budget-writers and advocates. First, there is a hole in this budget. More specifically, this budget includes $156 million more in recurring spending than it has in recurring revenues. Any revenue growth that comes in next year must go first to fill this gap.

Second, the new budget authorizes the state to issue approximately $1 billion in non-voter approved debt over the next few years. It will cost approximately $90 million per year to make the payments on this additional debt.

Third, lots of spending was put into the budget as nonrecurring that should really be considered recurring. The two largest and most obvious examples are the $90 million for ABC bonuses for high performing public schools and the $35 million increase to cover the rising cost of purchasing diesel fuel for school buses.

Add these three factors together - the recurring spending versus revenue gap plus payments on the debt plus these two nonrecurring but really recurring spending items - and that comes to $371 million. Then hypothetically assume that assume that tax revenues grow by 2% next year - a generous assumption giving the current state of the economy. If that's the case then all of that growth will go to fill in the $371 million budget hole created by this year's budget leaving nothing for future pay raises or other priorities.

During the heat of the legislative session it's difficult for the folks involved, both the advocates and the lawmakers, to think past the immediate tasks at hand. But this year, most advocates and legislators were bought too cheaply. In time the small increases they helped to steer toward their priorities may not seem worth it once the long-term consequences of this budget become more apparent. When the dust settles and the difficulty of budgeting for the next few years becomes clearer people will sit around scratching their heads and wondering where all of the money went and why they got so little of it.

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This entry was posted on Monday, July 21st, 2008 at 7:41 am and is filed under Progressive Voices. You can follow any responses to this entry through the RSS 2.0 feed.