Spotlight Report

Best of Both Budgets:

posted on in Education (PreK-12), Spending & Taxes

Logrolling is one of the most venerable, and unfortunate, traditions in government budgeting. It refers to the practice of members or chambers agreeing to support new programs or spending they previously opposed in exchange for items they wanted but others previously opposed. One lawmaker wants a $100,000 grant for a nonprofit, while the other wants a $200,000 increase for a state agency. They agree to support each other’s requests. Writ large, the practice results in millions of dollars in additional spending each year that either the House or Senate declined to include in their initial budget plans.

Some believe that logrolling is an essential part of a functioning legislative process. But in reality, the practice subverts the process. Projects that lack truly widespread support, and in some cases seem persuasive only to a few lawmakers, receive taxpayer funds as part of a “deal” that bestows the same patronage on other, similarly questionable items. Government grows, legislators bring pork barrel back to their home districts, and taxpayers lose.

In the debate over North Carolina’s FY 2000-01 budget, the stakes are particularly large. The House has endorsed compensation increases for General Fund state employees and retirees that exceed Senate totals by about $183 million. Other differences include millions of dollars in education, human resources, housing, commerce, agriculture, and courts funding. While including fewer targeted appropriations (read “pork barrel” items) than usual, the budgets still vary tremendously in how they evaluate current services and plan for future state needs.

Graph of GF operating spending, 1993-94 to 2000-2001 (three options)




An alternative for lawmakers to consider would be “reverse logrolling.” That is, as they reconcile the two budgets, they could choose in areas of difference to accept the lower number proposed, including zero. After all, if one chamber includes a spend ing program in its budget that another chamber leaves out, there is obviously not a consensus behind it. Rather than resolving these disagreements by agreeing to fund such items from both budgets, why not leave them out? The budget process should err on the side of general taxpayers, not those relatively few individuals benefitting from the proposed expenditure.

Applying this rule to the House and Senate budgets for FY 2000-01 would result in an operating budget of $13,554.1 million, nearly $200 million lower than the House’s $13,750.1 million and about $210 million lower than the Senate’s $13,763.1 million. In percentage terms, the operating budget would increase by 3.8 percent, significantly less than currently proposed and close to the Taxpayer Protection Act target of projected inflation and population growth (see above).

Reforming State Employee Benefits

Obviously, the largest savings comes from accepting the Senate’s average 3 percent raise for state employees rather than the House’s 5 percent. But there is ample justification for such a decision. By keeping employee raises to less than 1 percent above projected inflation for FY 2000-01 and deferring creation of a 401(k), the Senate budget frees up $219 million in General Fund dollars for deposit into a reserve account to head off potentially costly shortfalls in the Teachers’ and State Employees’ Comprehensive Major Medical Plan. The House plan, by dedicating far more revenue to employee raises in a tight budget year, reduces the ability of the General Assembly to bring comprehensive reform to state employee benefits next year.

Make no mistake: reforming state employee benefits should be a high priority. Not only does the health plan need significant attention, but most state employees benefit little or not at all from the state’s pension plan because they don’t stay in their jobs long enough. One approach that might address both problems would be to introduce a medical savings account (MSA) option in the health plan. Employees would choose a high-deductible insurance option, with the state depositing most or all of the resulting savings in their MSAs. If employees chose not to spend down their MSA amounts, balances could be transferred to new 401(k) accounts that workers would control and take with them if they left state employment. While requiring some transitional funding (as well as work by North Carolina’s congressional delegation to ensure proper federal regulatory and tax treatment), this reform strategy or something like it will be necessary if the state wants to encourage efficient consumption of medical services and keep the health plan from eating up future revenue growth.

By using “reverse logrolling,” lawmakers could afford to increase state savings, plan for future needs, and keep spending growth at moderate levels without making any significant reductions in current state programs or employment.

John Hood, President


John Hood is president of the John William Pope Foundation, a Raleigh-based grantmaker that supports public policy organizations, educational institutions, arts and cultural programs, and humanitarian relief in North Carolina and beyond. Hood is also chairman of the board at… ...

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