by Joseph Coletti
Senior Fellow, Fiscal Studies, John Locke Foundation
Yesterday afternoon, on September 1, North Carolina legislators described their plan to use more than $1 billion from the Coronavirus Relief Fund. Today, they will provide legislation and vote on it.
It pulls back an unspecified portion of the $125 million for small business loans through Golden LEAF. The Foundation had not been able to distribute the money as quickly as desired, and according to Rep. Jason Saine, “We don’t want the money to go back to Washington.”
Gov. Roy Cooper apparently agrees with Saine’s sentiment. His proposal last week would use $978 million of the federal funds, with $62.5 million of the Golden LEAF money for small businesses included.
Cooper also proposed adding $542 million in one-time spending to the $24.5 billion budget already in place, bringing total appropriations from the state General Fund to $25 billion. Actual expenditures for Fiscal Year 2019-20 were $24.1 billion.
Revenue for the current year is projected to be $23.5 billion. Cooper would use all of that revenue, plus $85 million from Opportunity Scholarships, $17 million in interest savings on state debt, and $1.5 billion unspent from previous years to pay for his $25 billion plan. With just $559 million in one-time expenses, that means he would use $1 billion in one-time money to pay for continuing programs.
As if that weren’t enough, Cooper would ask voters to take on $4.3 billion in new debt — and add another $988 million in debt without seeking voters’ permission. He would pretend he could expand Medicaid this year (costing more than $4 billion in state and federal funds for a full year) without any already eligible people signing up for the program, in what is called the “woodwork effect.” He would increase the maximum allowed unemployment benefit to $500 while doubling the length of time a person could receive benefits.
For those of you keeping score, all that is more than $30 billion in state spending from taxes, savings, and borrowing, in addition to at least $23 billion in federal funds even before counting more than $3 billion in transportation funds and likely $10 billion more from other receipts.
While we wait for details on the legislature’s plan for the Coronavirus funds — and they are holding off on a plan for state funds until they have more clarity on revenue — some of the biggest differences between the governor’s plan and the legislature’s plan are already apparent.
Education: Cooper would provide $430 million in state funds as a down payment on his Leandro plan and to cover one-time bonuses for employees in schools, community colleges, and universities after vetoing multiple legislative plans for raises over the past year. Legislators instead would use $440 million in Coronavirus money to provide families with schoolchildren a $325 “Extra Credit” grant for their additional schooling expenses.
Unemployment: Legislators plan to use federal Coronavirus money to raise the payment for every unemployment recipient by $50 per week, which would also boost the maximum payment to $400 per week through the end of the year, preserving more of the unemployment trust fund. Cooper instead would use money from the state’s unemployment trust fund to raise the maximum payment from $350 to $500 per week, making the program more attractive to those who lost higher-paying jobs.
The legislative plan by design would not impose a burden on employers, but the Cooper plan would waive increases that employers would otherwise face, depriving the trust fund of revenue while draining it to cover higher costs. Both the governor and the General Assembly would accept the $300 weekly bonus payments for the unemployed on offer through Pres. Donald Trump’s executive order.
As much as I am grateful for the fiscal discipline by default owing to legislators and the governor not agreeing on a spending plan for FY 2019-20, I look forward to a time when the governor’s budget is again a serious policy document and not just a political wish list. Cooper’s budgets have become increasingly detached from what can be realistically accomplished.
The governor’s delay in submitting a budget proposal is understandable given the economic and federal uncertainty, and the legislature is holding its fire on a budget bill as well. But what Cooper proposed is unserious.
We can only hope the legislature’s plan for the Coronavirus funds to be unveiled this afternoon is more deliberate and that any budget revisions next month would not rely on additional federal largesse.