Press Release

House budget ignores structural problems

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RALEIGH – The N.C. House’s proposed $21.2 billion state operations budget spends too much money on unproven ideas, overspends one-time money for long-term expenses, and sets up future legislatures for budgetary problems. That’s the assessment of a John Locke Foundation analyst who’s studied the House plan.

Click here to view and here to listen to Joseph Coletti discussing the N.C. House budget.

“The good news in this plan is that the House avoided the tax increases and shaved some of the spending increases proposed in Gov. Mike Easley’s budget,” said Joseph Coletti, JLF Fiscal Policy Analyst. “But there’s still plenty of bad news in the House plan. State senators could make major improvements to this plan.”

The Senate takes over the budget-writing process now that the House endorsed its budget this morning by a 104-10 vote. “If senators ask what’s wrong with the House plan, they’ll find quite a bit,” Coletti said. “It is the most important policy document the legislature will pass, and it gets nearly every policy wrong. It commits government resources in the wrong places, with the wrong assumptions, and no evaluation of the results.”

The House would increase state spending on government operations by $750 million. The House budget also adds $170 million in capital projects and $550 million in debt that has no voter approval, Coletti said. “Out of the more than $600 million in leftover money available for the House as it started its work, about $60 million would end up in the state’s reserve,” he said. “None of it would return to the taxpayers.”

“Even with that cushion the House overspends, committing $125 million more for ongoing expenses than is available in ongoing revenue streams,” Coletti added. “That means using money that’s available only this year. Any time you use one-time — or non-recurring — funds for recurring expenses, you create problems in the next budget.”

Lawmakers also plan to dole out $43 million more for projects best described as corporate welfare, Coletti said. “Taxpayer money devoted to state incentives and to projects such as the N.C. Research Campus and Biofuels Center amount to bets,” he said. “These bets, along with others placed on biotechnology and nanotechnology, have historically been disappointing attempts to outsmart profit-seeking investors.”

Speaking of placing bets, that’s a good way to describe some of the House’s proposed education spending, Coletti said. “This budget pours $145 million in new appropriations into educational programs, such as dropout prevention grants, even though the effectiveness of the programs has not been evaluated.”

Other House budget items would likely generate unintended negative consequences, Coletti said. “One example is the proposal to spend an extra $10.4 million to expand the state Health Choice program,” he said. “That means more families would lose private health coverage to enroll in a program that provides less access to care.”

“Another example is the $60 million devoted to water conservation and infrastructure, which ignores the need to provide more opportunities for local water providers to set prices in response to changing supply conditions,” he said.

House budget writers also show signs of misplaced priorities, Coletti said. “The House would set aside more than $50 million of the taxpayers’ money to buy unused land, but this budget would spend $35 million less on building and maintaining roads taxpayers actually use.”

Government would literally grow under the House budget plan, Coletti said. “We’re talking about more than extra taxpayer dollars,” he said. “The House would create 329 new government positions. All of these new workers would be added to the state’s payroll, would receive pay increases, and eventually would become eligible for retirement benefits.”

Despite the bad news, the House deserves some credit, Coletti said. “House members didn’t buy into the governor’s idea of adding extra taxes on smokers and drinkers,” he said. “They also rejected the governor’s plan to give public school teachers 7 percent pay raises to chase a mythical goal of reaching the ‘national average.’ And they’ve reduced central administration funding for the Department of Transportation while adding funding to help the State Board of Elections improve audits of politicians’ campaign finance reports.”

The Senate could produce a much better plan, Coletti said. “The House has improved on the governor’s proposals, and the Senate could make even more improvements,” he said. “By refocusing priorities, avoiding overspending, and taking a more cautious approach toward unproven programs, senators could develop a decent budget plan.”

Joseph Coletti’s Spotlight report on the General Assembly’s budget plans, “N.C. House’s FY 2009 Budget: Smaller than the governor’s, but not any better,” is available at the JLF Web site. For more information, please contact Coletti at (919) 828-3876 or [email protected]. To arrange an interview, contact Mitch Kokai at (919) 306-8736 or [email protected].

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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.