JLF budget tool would generate $667 million for teacher raises, surplus

June 17, 2014

Click here to view and here to listen to Sarah Curry discussing this Spotlight report.

RALEIGH — North Carolina state budget writers would have more flexibility to fund teacher pay raises, address Medicaid cost overruns, create jobs, and generate a surplus, if they adopt a budget technique identified in a new John Locke Foundation Spotlight report.

The report identifies savings that would lead to a General Fund budget of $20.6 billion for 2014-15. That would free up $667 million, more than enough money to cover teacher pay raise proposals while leaving the state budget with a surplus.

“The state Senate’s teacher pay plan would cost more than $468 million, meaning lawmakers could fund that plan and still have a surplus of $198 million,” said report author Sarah Curry, JLF Director of Fiscal Policy Studies. “The House’s teacher pay plan would cost $177 million. Legislative budget writers could fund that plan and have a larger surplus — nearly $490 million.”

The technique that generates budget savings in Curry’s report is called “reverse logrolling.” “It flips traditional budget logrolling on its head,” she said. “Logrolling is a budget practice in which negotiators for both legislative chambers — the House and Senate — agree to accept higher spending levels for each chamber’s budget priorities. Negotiators basically say, ‘I’ll accept a spending increase for your project, if you’ll do the same for mine.'”

“This practice often results in a poor outcome for average citizens, as lower-priority or so-called ‘pork-barrel’ items are funded and mediocre legislation enacted,” Curry added.

Budget negotiators should take the opposite approach, Curry said. “Rather than one set of budget negotiators accepting particular programs or higher levels of spending from their counterparts, with the expectation that those counterparts will do the same, legislators should agree to accept the lower spending numbers for each departmental budget,” she said. “After all, a majority in at least one chamber already has decided that the lower spending figure will satisfy citizens’ needs under current budgetary constraints.”

Reverse logrolling makes sense when budget writers are searching for ways to address high-priority items, Curry said. “With lawmakers committed to increased spending for teacher pay and Medicaid, revenue constraints will not support higher spending in other areas of the budget.”

Curry details a department-by-department list of potential savings tied to the reverse logrolling approach.

For example, the total education budget would be $11.281 billion in 2014-15, roughly $19 million less than the Senate plan and $275 million less than the House’s proposal. State Health and Human Services spending would total $5.072 billion using the reverse logrolling technique. That’s almost $33 million less than the House plan and $193 million below the Senate budget.

The Senate proposed an 11.2 percent average pay raise for teachers who agree to give up tenure, officially known as “career status.” The House proposed 5 percent average raises without addressing teacher tenure.

“Reverse logrolling before the incorporation of a teacher pay increase would allow legislators more flexibility when discussing spending priorities,” Curry said. “Legislators would have an opportunity to modify aspects of their respective proposals to include increased teacher pay or assemble desirable components of both plans into one. A reverse logroll also would allow enough money to be set aside in savings and reserves to avoid any unforeseen shortfalls in the next fiscal year.”

“Our analysis shows that, even with a teacher pay increase and the need to cover a Medicaid shortfall, the legislature still would have many options for crafting a budget that continues to make improvements in public education, reform Medicaid, create jobs, and lower unemployment,” Curry said. “If budget conferees use the reverse logroll method and leave their chambers’ pride at the door, then everyone will benefit from the large surplus — taxpayers and state government alike.”

Sarah Curry’s Spotlight report, “The Best of Both Budgets: ‘Reverse Logrolling’ would help legislators produce a sound spending plan,” is available at the JLF website. For more information, please contact Curry at (919) 828-3876 or [email protected]. To arrange an interview, contact Mitch Kokai at (919) 306-8736 or [email protected].