North Carolina’s state government direct spending grew 18.3% from 2001-2011.  During the same time our state tax collections were down 3.8%.  And North Carolina is required under our constitution to keep a balanced budget.  So how can spending grow (a lot) while revenue is  down?

In the past decade, there’s been a huge increase in federal aid to state governments. Here in North Carolina, federal funds made up about 20 percent of the North Carolina state budget in 1989. In the 2011-12 fiscal year, federal funds make up 36 percent of our state budget.  Also, state spending includes more than general fund expenditures like contributions to the state employees health care and pension funds and highway funding.

The general fund budget is $20.6 Billion but North Carolina’s real budget is over $50 Billion.  So spending is up but tax collections are down – the federal dollars are what make up the difference.  And guess where those federal dollars come from?  Hint: check your wallet.  Bigger government is never free.

These maps from the Tax Foundation tell the story: