The following will begin the first in a series of online debates in this space, entitled ?Raising the Issue,? that will feature participants from the John Locke Foundation, the North Carolina Justice Center, and other organizations. Click here for more information on the debate series. This online debate will continue until 5 pm today.
As North Carolina enters its fourth-straight year of projected gaps between what politicians want to spend and what taxpayers are paying in, the debate sounds familiar. Some argue that we should raise taxes to protect essential services. Others (and I?d be one) say that spending on truly essential services would be far less than proposed, so tax increases are unnecessary and unwise. Many others argue for mixing some budget savings with some tax hikes.
A key flashpoint is the potential impact on health and human services. If you are going to be a serious advocate for lower spending and lower taxes, you cannot ignore the contribution that HHS spending has made to our current budget imbalance (from FY 1992-93 to FY 2002-03, the overall General Fund budget grew by 80 percent but HHS spending shot up by nearly 160 percent).
So, it is asked, ?are North Carolina?s health and human services programs the right place to find significant savings to balance the state budget?? My answer is yes.
Let me make two initial observations. First, I do believe that as a prudential matter the taxpayers should finance a basic ?safety net? of services for the disabled, abandoned or neglected children, and the truly destitute who would otherwise impose other, substantial costs on taxpayers, the economy, and public order. I am not calling for wholesale elimination of major programs, or even deep cuts. Instead, I believe that state government can discharge its appropriate responsibilities at a lower cost, and indeed that it should not take on additional responsibilities at such a time of fiscal pressure.
Second, debates about funding HHS programs frequently devolve into listing the number of people who currently can?t access services and accusing critics like me of ?not caring? about the disadvantaged. Let?s be clear about this. Eligibility standards for public assistance are notoriously elastic. It used to be that poverty was considered a marker for need, but now many welfare programs are ?targeted? at families with incomes above the poverty line ? in some cases far above the line. Obviously, given how expansive one might want to be about who deserves help, the number of unmet needs can always be made to look huge.
Government is not a charity. It is predicated on force, not persuasion, so the standards for ?needing? other people?s money need to be tightly drawn and prudently enforced.
Benchmarking is valuable here. Most states offer a similar array of public-assistance programs, including Medicaid, cash welfare, housing allowances, and child-care subsidies. How does North Carolina compare in total public-assistance spending with its neighbors? According to the latest census data, for FY 2000, our spending on various welfare programs comes to about 3.2 percent of personal income, ranking us above the national average (3 percent) and above that of most of our neighboring Southeastern states.
With regard to Medicaid, the single-biggest item in the HHS budget, we are even more out of line in the Southeast. In federal fiscal year 2002, North Carolina spent $841 per resident, compared with the regional average of $716, and spent an average of $6,640 per Medicaid enrollee, compared with the regional average of $5,256. Since I have been unable to find evidence that North Carolina?s outcomes differ dramatically from those of our neighbors ? our infant-mortality rates remain a bit worse than the average, as does our rate of uninsurance ? it would seem reasonable to set as a benchmark that we should work to pull our Medicaid expenditures in line with the regional average. While this could not be accomplished in a single year, the savings would eventually range from $350 million to $500 million annually.
No one doubts that balancing the state budget while maintaining or lowering our marginal tax rates will require some tough choices. But in my view, controlling the growth of HHS spending so that it matches that of Virginia, South Carolina, or Georgia isn?t an unreasonable objective, and would contribute significantly to restoring fiscal stability and economic vitality to North Carolina.