Even though North Carolina and 48 other states require a balanced budget, either constitutionally or statutorily, there is no definition of a balanced budget and accounting trickery has allowed states to avoid paying for future obligations. This is highlighted in Volcker’s report, Truth and Integrity in State Budgeting, where he brings attention to the “gimmicks and short-term measures that obscure actual financial conditions” of state budgets. While each state in the nation has unique circumstances they must address in their budgets, there should be an accepted approach by all states to have transparent and performance-based budgeting practices to avoid future debt obligations and budget shortfalls.
Here is an overview of the report and what was found:
The report, Truth and Integrity in State Budgets, focused on New Jersey, California and Virginia. All three have opted for gimmicks at one time or another. California in 2009 issued $2.6 billion in what were essentially IOUs to pay businesses, local governments, and tax filers due refunds after legislators failed to pass a budget by the beginning of the fiscal year and the state was short on cash to pay bills. Since 2008, New Jersey has relied on transfers from its Clean Energy Program, a fund financed by utility revenue and intended to promote energy efficiency, to help balance its budget. And Virginia, which is often lauded for its conservative fiscal management, moved most of its payments for an $80 million transportation project into 2016 so that it could close a 2015 budget gap.
North Carolina has its own fair share of accounting tricks in its budget. For example, the $20 billion budget is only the General Fund. There is about $5 billion for transportation that is not subject to the balanced budget requirement, as well as a number of other state government functions that are funded through either the federal government or off the general fund balance sheet. This year is the first time the film grant was put into the revenue statement (by the House). This is a form of spending that is in the revenue side of the ledger.
When the Volker Alliance studies North Carolina, hopefully lawmakers will see and change the way they write the state budget so it is honest and transparent. Taxpayers have been fooled by dishonest budgeting for too long – it’s time to put an end to it.
