The state’s continuing budget resolution: a dangerous autopilot
Tuesday, July 7th, 2009
By Elaine Mejia
North Carolina's House and Senate couldn't agree on a final two-year budget before the start of the new fiscal year on July 1, so they've passed a "continuing resolution" to get North Carolina through the two next two weeks. The resolution authorizes state agencies to spend up to 85% of their originally authorized budgets from the previous fiscal year.
There are several problems with this plan, not the least of which is fuzzy math. Allowing agencies to spend up to 85% of last year's budget is like a pilot plotting a course for San Diego when the plane only has enough fuel to get to Tulsa. This is because the tax revenue forecast for the state's general fund is not sufficient to allow agencies to spend 85% of last year's budget. Even including federal stimulus dollars, the continuing resolution, when annualized, would require a $600 million tax increase to support it.
Not surprisingly, some state lawmakers who passionately oppose tax increases are supporting the resolution. Rather than acknowledging that the continuing resolution's spending targets cannot be met without a tax increase, these lawmakers are acting as if the resolution allows for current spending levels to be maintained.
In addition, by passing this continuing resolution, state leaders have missed the chance to launch important savings measures at the very beginning of the fiscal year. The resolution fails to enact those measures proposed in the House and Senate budgets that will likely end up in the final agreement, such as negotiating for better drug prices with pharmaceutical companies and closing several inefficient rural prisons. Every week the state does not enact these savings options, it costs precious dollars that North Carolina can ill-afford to waste in these difficult economic times.
And if fuzzy math and the delayed chances for savings aren't enough to raise widespread concern, the latest state unemployment numbers scream for leadership and resolution on the budget. North Carolina's jobless rate in May was the highest on record at 11.1 percent, much higher than the national average of 9.4 percent, and 82 of the state's 100 counties are now experiencing double-digit unemployment. Every week the budget is delayed means thousands of state workers who are sure to be laid off have less notice about the loss of their jobs.
Moreover, important state services that support laid-off workers may not be available. These include the state children's health insurance program, which the children of many current workers may be eligible for once the layoffs are implemented. But the program needs additional funding in order for new children to be enrolled. Also, the state's 58 community colleges are experiencing an explosion in enrollment, as the tens of thousands of laid-off workers seek to learn new skills. The colleges cannot accommodate these students without additional funding.
Using the continuing resolution to oversee state government is equivalent to putting an airplane on autopilot when the pilots already know the plane is in trouble - meaning it should only be used as a last resort and only for a few moments while the pilots decide on the best course of action.
The continuing budget resolution, which appears harmless at first glance, will have serious consequences if it's allowed to remain in place. The sooner the General Assembly passes a final budget, the sooner the people of North Carolina can get a true sense of the state's fiscal situation, the sooner families and business owners can assess their financial situation, and the sooner we can all focus on how to set the state on a course for a better, less turbulent future.
Elaine Mejia is the Director of the North Carolina Budget and Tax Center.
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