JLF budget tool would free up $383 million for next N.C. budget

June 22, 2015

RALEIGH — North Carolina state budget writers would have more money available for tax reduction, higher per-child tax credits, or additions to state savings reserves, if they adopt a budget technique used in a new John Locke Foundation Spotlight report.

The report identifies savings that would lead to a General Fund budget of $21.46 billion in the new budget year that starts July 1. That would free up nearly $383 million to address top priorities such as pursuing tax reform goals and shoring up state savings reserves.

In contrast, Senate spending priorities would lead to an undesignated surplus of $43 million, while the House plan would generate an undesignated surplus of $158 million.

Looking ahead to 2016-17, the JLF report spells out savings that would lead to a General Fund budget of $21.42 billion. That means $638 million in additional savings, or more than $1 billion in additional budget flexibility for the next two years.

JLF is releasing its report as budget negotiators from the N.C. Senate and House of Representatives begin work on a compromise 2015-17 state budget plan.

“Lawmakers can achieve these additional savings by using a technique called ‘reverse logrolling,'” said report author Sarah Curry, JLF Director of Fiscal Policy Studies. “It flips traditional budget logrolling on its head. Logrolling is a budget practice in which negotiators for both legislative chambers 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 as budget negotiators search for the best ways to address high-priority items, Curry said. “Legislative leaders continue to place a high priority on funding for items such as education, transportation, and public safety,” she said. “They also continue to discuss the best way to deal with issues such as Medicaid reform. Employing a ‘reverse logrolling’ approach would ensure that lawmakers have the resources available to address their most important items.”

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

For example, the total education budget would be $12.048 billion in 2015-16, equal to the Senate plan and $450 million less than the House’s proposal. State Health and Human Services spending would total $5.058 billion using the reverse logrolling technique. That’s $9 million less than the Senate plan and $232 million below the House budget.

The reverse logrolling technique would lead to spending of $2.4 billion for Justice and Public Safety programs. That matches the Senate budget and comes in at $52 million less than the House plan. Spending for Natural and Economic Resources programs would total $311 million using the reverse logrolling technique. That’s slightly less than the Senate budget and $130 million less than the House plan.

Spending for General Government programs — including the governor’s office, General Assembly, several Council of State departments, and agencies such as the State Board of Elections — would total $431 million under the reverse logrolling plan. That’s $26 million less than the House budget and nearly $60 million less than the Senate plan.

Reverse logrolling offers budget negotiators a useful tool for exercising fiscal discipline as they craft a final state budget deal, Curry said. “If budget conferees use the reverse logroll method and leave their chambers’ pride at the door, then everyone will benefit from the state budget surplus — taxpayers and state government alike.”

Sarah Curry’s Spotlight report, “Best from Both Budgets: Applying a ‘Reverse Logrolling’ method to government spending and savings,” 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].