June 16, 2013

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

RALEIGH — North Carolina legislators can maximize their flexibility for tax reform and unanticipated Medicaid spending by using a “reverse logrolling” approach to the final state budget deal. That’s the conclusion of a new John Locke Foundation Spotlight report.

This approach would lead to surpluses of almost $600 million in the new budget year that starts July 1, and almost $1 billion in 2014-15, before taking tax reform into account.

“Traditional logrolling is a tried-and-true tactic in which lawmakers otherwise predisposed not to favor an expenditure or program agree to support it because fellow lawmakers agree to do the same for other items,” said report author Sarah Curry, JLF Director of Fiscal Policy Studies. “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.”

“Reverse logrolling flips this practice on its head,” Curry explained. “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.”

“After all, a majority of voters in at least one chamber already has decided that the expenditure in question will satisfy citizens’ needs under current budgetary constraints,” Curry said.

The report offers a department-by-department listing of potential savings from the reverse logrolling approach. For example, the total education budget would be $11.422 billion in 2013-14, roughly $56 million less than the House plan and $67 million less than the Senate’s proposal. State Health and Human Services spending would total $4.975 billion in the first year of the two-year budget plan, about $8 million less than the Senate plan and $44 million less than the House budget.

The bottom line is a $20.6 billion General Fund budget in 2013-14, and a $20.8 billion General Fund budget the following year, Curry said. “This leaves approximately $594 million in surplus in the first year and more than $940 million in the second year without tax reform adjustments.”

Factoring in the revenue changes linked to competing tax reform proposals, lawmakers would see $851 million in surplus over two years with the Senate plan, and $1.1 billion from the House plan.

Those numbers also incorporate an “ever-growing” Medicaid shortfall, which was expected to reach $330 million by the time the report was finalized. That shortfall had been pegged at $123 million when the governor released his original budget plan.

“Even with significant tax reform changes and a large, unanticipated Medicaid shortfall, the legislature still has many options,” Curry said. “If state budget negotiators use the reverse logrolling method and leave their chamber’s pride at the door, then everyone will benefit from the large surplus, taxpayers and state government alike.”

Sarah Curry’s Spotlight report, “The Best Solution from Both Budgets: ‘Reverse Logrolling’ shows the best option for government spending and tax reform,” 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].