Due to years of prudent fiscal policies, when Hurricane Helene stormed through the Appalachian Mountains, the state’s Savings and Disaster Relief Reserves contained $4.75 billion and $732.6 million, respectively.

In the wake of Helene, the benefits of robust public savings are evident. In 2021, however, progressive policy analysts warned that increasing the Savings Reserve to $3 billion demonstrated “an unreasonable commitment to savings for the future while hardship today is widespread.” They argued that saving for future disasters was irresponsible. Thankfully for the people in Western North Carolina, these pleas were ignored by state budget writers.

Ironically, progressive analysts now claim that “drawing down the Savings Reserve Fund that stands at $4.75 billion is essential but insufficient.”

Taking it a step further, such organizations have exploited Helene’s devastation by politicizing the tragedy as a justification to “pause the scheduled income tax reductions for profitable corporations and the wealthy few.” The claim is that continuing previously scheduled income tax cuts at this time is “harmful and irresponsible,” but this scare tactic is not novel. This is the same battle cry progressives have espoused for years; however, now there is a crisis to help fuel fear.

In a previous article, I demonstrated that North Carolina has increased its capacity to generate tax revenue and budget surpluses since income tax cuts passed in 2013. In the remainder of this article, I will prove that lower tax rates – coupled with spending restraint – have also been more effective at bolstering the state’s Savings and Disaster Relief Reserves, even when adjusting for inflation and population growth.

Saving for a Rainy Day

Data on the state’s Savings Reserve date back to fiscal year (FY) 1996. Table 1 depicts the end-of-fiscal-year balances for the Savings Reserve before and after income tax reductions were implemented. The state fiscal year ends and the hurricane season begins in June. When income tax rates were higher, from 1996 to 2013, the Savings Reserve balance per capita dwindled from $136.82 to $89.09, a drop of 34.9 percent. Following income tax reductions, from 2014 to 2024, the Savings Reserve balance per capita increased from $86.53 to $438.37, or 406.6 percent.

Data on the Disaster Relief Reserve date back to FY 2001. Table 2 outlines the end-of-fiscal-year balances for the Disaster Relief Reserve. Prior to tax cuts, from 2001 to 2013, the Disaster Relief Reserve balance per capita plummeted from $96.17 to an abysmal $1.81, a 98.1 percent decrease. The sharp decline was caused by policymakers draining the reserve to support general operation expenditures, which lacked funding due to years of imprudent fiscal policies. However, since income tax reductions were implemented in 2014, the Disaster Relief Reserve balance per capita has swelled from $1.99 to $66.50, or 3,238.6 percent.

In 2017, when the Savings Reserve balance was less than $1.5 billion, progressives argued that the state was “saving for a rainy day when North Carolina needs an umbrella today.” Following suit, Governor Cooper consistently proposed saving less money than the General Assembly. Table 3 shows that from FY 2018-2025, Cooper’s recommended total allocations to the Savings and Disaster Relief Reserves were $4.1 billion compared to $5.9 billion approved by the General Assembly. If it were up to Cooper, the state would have $1.8 billion less to help the victims of Helene rebuild.

The Federal Government

Unfortunately, the Federal Emergency Management Agency (FEMA) is not financially equipped to support states during a natural disaster. FEMA’s September 2024 Disaster Relief Fund (DRF) Report shows the organization has approximately 6.3 billion dollars in remaining unfunded obligations for FY 2024. Making matters worse, FEMA estimates that the FY 2025 DRF balance will be exhausted by February. It is also worth noting that over the last two years, the Biden administration has provided more than $1 billion in benefits to illegal aliens through FEMA’s Shelter and Services Program (SPP).

Regardless of the actions of the Biden administration and FEMA, the federal government will face fiscal challenges in the coming years due to decades of deficit spending. Since 1960, the federal government has generated only six budget surpluses, the most recent in 2001. This chronic accumulation of deficits has placed the federal government on an unsustainable fiscal trajectory. The national debt is approaching $36 trillion with interest payments alone expected to exceed $1 trillion next year.

Moving Forward

Since reductions to income tax rates launched in 2014, the state has drastically improved its ability to fund the Savings and Disaster Relief Reserves. In the future, policymakers in North Carolina must continue to stow away funds for unforeseen natural disasters and economic downturns. To do so, it will be vital that policymakers ignore the cries for class conflict and continue to implement the low-tax policies that have proven to be superior at accumulating revenue, surpluses, and savings. Also, we must remember that moving forward, the fiscally unstable federal government cannot be counted on to be a reliable partner in disaster relief efforts.