by Paige Terryberry
Senior Analyst for Fiscal Policy, John Locke Foundation
On Wednesday afternoon Governor Roy Cooper released his recommended budget adjustments for the upcoming fiscal year that begins on July 1.
On the heels of revised revenue projections that predict state government will have more than $6 billion worth of additional funds beyond what was predicted last year for the biennium, the big question was: how will Cooper spend the windfall?
He recommends expanding enacted budget appropriations by $2.3 billion, or 8.5% over the current dollar amount, bringing the total spending to $29.3 billion for the fiscal year. He also recommends setting aside an additional $2.4 billion into various reserves, above the already budgeted $4.3 billion worth of reserves enacted in last year’s biennial budget plan.
Today’s inflationary pressures combined with economic uncertainty and an elevated risk of recession call for fiscal prudence now more than ever.
North Carolina’s fiscally conservative leadership and pro-growth tax reform have allowed the state to recover well from the recent economic downturn brought on by the Covid lockdowns. The recently released revenue revisions illustrate these truths and should remind legislators to save any extra revenues for the coming rainy day.
Below are some highlights from Cooper’s budget proposal:
Education spending alone accounts for $1.9 billion of the funding increase proposed by Gov. Cooper.
Notably, the plan proposes funding year three of the Comprehensive Remedial Plan for K-12 education (commonly referred to as Leandro) as well as the unfunded Year Two items.
The governor proposes half a billion dollars in recurring funds for this undertaking, meaning at a minimum, half a billion dollars will be needed each year to fund the plan in perpetuity. The plan would cost taxpayers at least $5.6 billion, bolster the education bureaucracy, and circumvent the essential legislative process by allowing an out-of-state consultancy firm to make educational choices for North Carolina students.
Notably, Cooper yet again fails to support school choice in his budget document.
Salary increases, Bonuses, and Cost of Living Adjustments
The governor’s proposal doubles the proposed compensation increase for all state employees and teachers in the recent budget. With his recommendation, all state employees would receive a 5% salary increase. This increase, along with other labor market pay adjustments, would cost taxpayers roughly $650 million each year.
Moreover, the recommended budget would provide retention bonuses of up to $3,000 for all state and state-funded local employees, costing $827 million in the upcoming fiscal year.
The proposal would also fund an additional 1% one-time cost of living adjustment for retired state employees and a recurring 1% cost of living adjustment. This is in addition to the 3% one-time cost of living adjustment already scheduled for the upcoming fiscal year.
The governor would also restore master’s pay for classroom teachers, despite the evidence that this is a poor investment of education dollars.
With this recommended budget, the Governor again calls for Medicaid expansion. Medicaid expansion is often advertised as being free to the state. Yet the additional federal funding comes with strings attached.
600,000 additional North Carolinians would receive government coverage under expansion, according to Cooper’s proposal. But coverage does not equal care.
Expanding Medicaid would extend coverage to more people, crowding out those who need it most and adding to their struggle to find care. Medicaid expansion would discourage private insurance and prompt more employers to drop their coverage. Research suggests that roughly half of those in the expansion population already have private insurance.
Adding hundreds of thousands of individuals to government care is fiscally irresponsible and could prompt a care shortage. Patients are harmed when providers stop accepting Medicaid altogether.
Medicaid expansion is, unfortunately, a step toward a government single-payer system and does nothing to address care.
Other spending items in Gov. Cooper’s recommended budget adjustments include:
State coffers are taking in $4.24 billion more this fiscal year than initially predicted in June 2021. Next year’s revenue has been revised by an additional $2 billion. Now is the time to save for the future. As the legislative short session begins next week, lawmakers should build on the reforms that have made North Carolina prosperous and advocate for limited, responsible government.