by John Hood
Chairman John Locke Foundation
Gov. Jim Hunt promises to provide a capital budget after a state judge makes clear whether North Carolina must pay back $354 million in illegally col lected intangibles taxes during the 1999-00 fiscal year or, as state leaders would prefer, over several subsequent years. While this allows the Hunt administration to avoid making tough decisions — such as scaling back scheduled spending on the repair and renovations or clean water reserve funds, dipping into the state’s Rainy Day Fund, or finding savings elsewhere in the budget — it gives state lawmakers and the public little guidance about the actual condition of the state’s finances.
To put it simply: the governor has yet to present a complete, balanced budget for the 1999-2001 biennium. Little serious discussion or analysis of the state’s fiscal future can occur without such a complete budget presentation.
That having been said, it is worthwhile to examine closely what the governor has proposed, a 5.9 percent increase in operating spending in both FY 1999-00 and FY 2000-0l. Among the major state departments, public schools gain the largest annual increases — a 6.2 percent hike in FY 1999-00 and a 7.4 percent hike in FY 2000-01. This reflects largely the impact of the last two years of the Excellent Schools Act. Some may find it surprising that, despite media attention paid to the governor’s proposed savings of $20 million in Correction (largely through the closure of eight small prisons), the overall budget of the department will actually grow significantly in FY 1999-00. The administration proposes a 6.6 percent increase to just over $900 million.
The proposed operating budget will grow at a slower rate than at any time since 1995. Still, the nearly 6 percent hike represents $728 million in new spending in 1999-00 and is far larger than prudence — and a Taxpayer Protection Act — would allow.
John Hood, President