by Becki Gray
Former Senior Vice President, John Locke Foundation
The latest revenue projections and forecasting report from the NC General Assembly’s fiscal research division say NC will experience a $271 Million shortfall this year, a small fraction of the $21 Billion budget. It’s a concern but is it reason for panic?
To put this into perspective, the $271 Million shortfall represents a 1.3 percent shortfall for 2014-15. Going back to 1987, the median forecasting error is 2.5 percent. The shortfall that was overcome last year? About $450 million.
Even with the shortfall, General Fund revenue is expected to increase by 2.9 percent over the amount collected in the 2013-14 fiscal year. Back in May, analysts projected a 4 percent increase over 2013-14. So revenues are up, just not up as analysts had projected. Maybe we need to adjust the model those analysts are using.
Due to responsible budgeting over the last few years, leaders have put money into savings accounts – in Rainy Day funds and in Medicaid reserves – more than $800 Million. No one wants to tap into savings but it’s there if needed. And North Carolina taxpayers can rest easy, knowing that tax hikes are not on the table.
As the tax reforms settle in and revenue re-adjusts, this is a small bump in the road, hardly a roadblock.
In the meantime, unemployment continues to go down and outpace the nation and the southeast, GDP and personal income is growing, North Carolinians are getting jobs, the economy is growing, and prosperity is being realized. Rather than panic, it’s time to continue responsible budgeting, smart applications of tax changes, sensible regulations and stay the path we’re on.