As noted in a previous Spotlight (“Truth or Consequences,” No. 214, April 17, 2002), North Carolina’s fiscal problems did not develop overnight. They are the result of years of poor decisions by state policymakers who failed to recognize the long-term fiscal consequences of their actions. For much of the past two decades, state spending growth has far outpaced the growth of inflation and the state’s population.
It has also exceeded growth in personal income, which means that North Carolina’s tax burden today is significantly higher than it was 10 years ago — despite the allegations of some that today’s budget deficits are the result of insufficient revenue growth.
While excessive spending exists across state government, there are two areas of particular concern. In both higher education and Medicaid, North Carolina spends far more tax dollars than do comparable states, and yet there is no evidence that North
Carolinians are healthier or better-educated.
Furthermore, North Carolina has more public employees than any other state in the
Southeast and more than the national average. Public employee salaries in North Carolina, when adjusted for cost-of-living, are close to regional and national norms.
Any serious attempt to balance the state budget and reduce our excessive tax burden will require significant reduction in state-funded positions and personnel.
Finally, a major problem has been state leaders’ propensity to take on ever-higher burdens of debt. The cost of servicing the debt will approach $400 million next year — representing a tripling of the cost over just 10 years. At this time of fiscal distress, political promises made to fund new debt without tax hikes cannot be kept.
Download the full Spotlight Report here- Changing Course V: An Updated Alternative Budget for North Carolina