February 23, 2003

RALEIGH — Gov. Mike Easley announced Monday a proposed spending cap for North Carolina that would limit annual budget growth to average changes in the state’s personal income — a plan immediately praised by the head of the John Locke Foundation as a “welcome first step” in restoring the state’s fiscal integrity.

“I think Gov. Easley deserves a lot of credit today for recognizing the core fiscal problem in North Carolina: out-of-control spending,” said John Hood, chairman and president of the Raleigh-based think tank. “Although we have long advocated a Taxpayer Protection Act, which would put a more stringent cap on annual spending growth, the governor’s plan is a welcome first step that would at least keep state government’s share of our hard-earned income from growing any more.”

Hood pointed out that fiscal conservatives have championed spending limits and budget-process reforms in Raleigh since the late-1980s, while most elected officials have opposed such changes by suggesting that they would encroach on the discretion of state lawmakers and governors.

“History has shown that our politicians cannot responsibly manage the taxpayers’ money without the taxpayers’ oversight,” Hood said. “Since North Carolinians have long expressed overwhelming support for an annual limit on budget growth, its passage would be a victory for true representative government and a remedy for periodic budget deficits and tax hikes.”

Opinion polls over the years have found high levels of public support in North Carolina for tax or expenditure limits. In October 2002, the Locke Foundation surveyed 500 likely North Carolina voters and asked their opinion on a spending cap more restrictive than the one Easley proposed on Monday. Some 63 percent of respondents said they favored the idea, with only 15 percent opposed and 23 percent unsure.

Several academic studies have examined the impact of expenditure limits on state spending trends. Hood argued that the available data suggest: 1) a cap linked to inflation and population is more likely to restrain rapid budget growth than the personal-income system Easley has recommended, and that 2) caps that include an immediate refund of unspent dollars to taxpayers are the most likely to induce legislatures to keep tax burdens low.

“There are certainly ways to improve the governor’s proposal,” he concluded, “but at least now, with his plan on the table, we can have a real debate on spending limits in North Carolina.”

For more information on North Carolina fiscal policy and the Taxpayer Protection Act, call the John Locke Foundation at 919-828-3876.