by Joseph Coletti
Senior Fellow, Fiscal Studies, John Locke Foundation
In his proposed budget released on Wednesday, Gov. Roy Cooper has provided the tax and spending details for his vision of a North Carolina determined to spend a lot more on state government.
The strong economy allows him to recommend a $1.3 billion spending increase without rolling back any of the tax reforms enacted by Republicans in the past decade. But Medicaid expansion and a proposed $4.2 billion borrowing binge would leave state finances vulnerable to any future economic slowdown.
Although supporters of Medicaid expansion claim that the program’s $6 billion cost over two years is a benefit, the federal portion has a cost, as does the portion paid by the hidden hospital tax. Even those familiar with state budget documents easily could miss the fact that 10 percent of the cost of expansion would be paid through a tax on hospitals and prepaid insurance plans. The budget also acknowledges that Medicaid expansion would pull more of those already eligible for assistance into the current Medicaid program at a total cost of $190 million over two years, $51 million of which will come from state appropriations. And the expansion is not just for working adults but for anyone below the income threshold and not eligible for Medicaid already, that is, able-bodied working-age men and women who may or may not have a job.
Unfortunately, the governor also proposes to phase out the Opportunity Scholarship Program, which provides resources to low-income parents to choose private schools when the local school district has failed their families. Cooper would close the door behind those already in the program and leave other families constrained by zip code and income from giving their children access to a quality education. While limiting choices for parents of school-age children, Cooper’s budget would spend another $15 million on child care and direct $16 million from the lottery for pre-kindergarten vouchers, which would enable parents to send younger children to the preschool education providers of their choice. With these expansions, funding for early childhood programs would surpass $300 million.
If the budget proposal survives the legislature, voters would be asked to approve Cooper’s $3.9 billion debt proposal in the November 2020 general election. Cooper’s plan is double the $1.9 billion that is moving ahead in the N.C. House. The $2 billion for public school district facilities alone is equal to the entire Connect NC bond passed in 2016. In addition, the proposal would borrow $500 million for projects at community colleges, $800 million for water and sewer projects, $100 million for the Museum of History and the NC Zoo, and $500 million for university projects.
Cooper suggests borrowing another $288 million, this time without voter approval, to move the Department of Health and Human Services headquarters to Blue Ridge Road in Raleigh and to update a water lab for the Department of Environmental Quality. Blue Ridge Road is the current site of Troop C of the State Highway Patrol, the state’s textbook warehouse, motor fleet management, and mail service center.
More spending, more borrowing, and a bigger role for government are the hallmarks of this budget proposal. The House and Senate will likely provide more restrained visions of what government can do, what it can afford, and what it should even attempt. Expect the legislative proposals to increase the Savings Reserve and possibly return some taxpayer dollars to businesses and people who pay taxes.