by Brian Balfour
Senior Vice President of Research, John Locke Foundation
Yesterday a House Judiciary Committee held discussions about a Taxpayer Bill of Rights (TABOR) amendment to restrain state budget growth.
The committee, however, did not hold a vote on the bill (HB 146), and bill sponsor Dennis Riddell (R-Alamance) “said he hasn’t been promised a vote.”
This bill would create a cap on annual state budget growth based on a formula combining annual populaltion plus inflation growth. Because it involves an amendment to the state’s constitution, a three-fifths vote in both chambers would be needed to place it on the ballot for a vote of the people.
Perhaps the biggest reason to support a TABOR is because it would provide a check on spending growth during good economic times. Without such guardrails, spending growth can explode and bloated spending commitments become unsustainable when economic downturns occur.
For instance, in the three decades between 1979 and 2009, the state budget grew at more than three times the pace of population growth, even after adjusting for inflation. The result from this unchecked spending binge was complete fiscal disaster when the Great Recession hit. Massive shortfalls combined with a meager and neglected Savings Reserve caused panic, teacher layoffs, and “temporary” tax hikes which prolonged North Carolina’s economic pain.
One concern of note that should be addressed if North Carolina were to pass a TABOR is the growing trend of state spending being shifted into various “reserves” and as such not counted as General Fund spending and would not count against a TABOR spending cap. For instance, this year’s Senate’s budget plan includes roughly $5 billion in such transfers to reserves. Some are legitimate like money set aside in the state’s Rainy Day Fund or Disaster Reserve. But other “reserves” may be more questionable, like the NCInnovation “reserve” that would recieve $1.4 billion under the Senate budget, and the $10 million that would go to the “Economic Development Project Reserve.”