Policy Position

State Spending Restraint

in Budget, Taxation, and the Economy
Featured Image


North Carolina has a balanced budget amendment, but
it was not intended to create a tax-and-spend state. Rather,
it requires lawmakers to craft budgets that use tax dollars
wisely. For several decades, North Carolina moved away
from fiscal responsibility and created a political culture in
which increasing taxes, with the intention to spend more,
was an acceptable policy.
Polls reveal that a majority of North Carolinians support
a cap on state spending. To date, however, lawmakers have
been unwilling to ask North Carolinians to approve an
amendment to the North Carolina Constitution that would
limit the growth of state government indefinitely.
The Republican leadership in the N.C. General Assembly
have imposed spending caps voluntarily, but without a
constitutional amendment, that restraint is not guaranteed.
A variety of pressures could lead future legislatures to return
to the tax-and-spend patterns of the past. A constitutional
amendment would help to protect North Carolina taxpayers.

Key Facts

  • Had state spending tracked inflation and population
    growth since 1997, as denoted in the figure on the opposite
    page, per capita expenditure would be $2,071
    in 2016. That is 6 percent less than the current level of
  • Over the last 20 years, inflation and population growth
    have been much more steady than General Fund spending.
    The figure opposite shows the consistent, smooth
    growth of the General Fund had spending restrictions
    been in effect. That’s in contrast to the large increases in
    spending during the early 2000s followed by a dramatic
    correction in 2009 that occurred without spending prohibitions
    in place.
  • Budgetary oversight should extend to spending shifted
    outside the General Fund. While the state has limited
    control over federal funds and federally mandated programs,
    the state has total control of the many trust funds
    that are not included in the General Fund. Total state
    spending is approximately $52 billion, while General
    Fund spending is around $22 billion.
  • Over the last four years, spending growth has been close
    to the level of inflation and population growth, but
    through much of the 2000s, spending growth far outpaced
    inflation and population growth.


  1. Add an amendment to the state constitution, limiting
    annual state spending growth to no more
    than the projected rates of inflation and population
    The amendment should allow spending
    growth to exceed the cap only if approved by public
    referendum. Such a spending cap would better align
    the long-term interests of taxpayers to the short-term
    interests of politicians.
  2. The TABOR amendment should mandate that any revenues collected above the annual spending cap be deposited into a rainy day fund or returned to taxpayers.
  3. The amendment should be written to avoid the ratchet down effect. When there is a revenue shortfall, the TABOR should not set a lower limit for spending. In periods of revenue shortfall, the TABOR limit should be held constant until revenues recover and again exceed that limit. The rainy day fund or budget stabilization fund would be used to offset at least part of the revenue shortfall.
  4. The amendment should establish other constitutional constraints on fiscal policy, such as a requirement that any state tax hikes receive supermajority approval from the state legislature.


North Carolina General Fund Budget per Capita 1998-2017

Donate Today

About John Locke Foundation

We are North Carolina’s Most Trusted and Influential Source of Common Sense. The John Locke Foundation was created in 1990 as an independent, nonprofit think tank that would work “for truth, for freedom, and for the future of North Carolina.” The Foundation is named for John Locke (1632-1704), an English philosopher whose writings inspired Thomas Jefferson and the other Founders.

The John Locke Foundation is a 501(c)(3) research institute and is funded solely from voluntary contributions from individuals, corporations, and charitable foundations.