Savings Reserve

The North Carolina General Assembly is still finalizing a two-year budget. Budget proposals from the House, Senate, and governor would have varying effects on North Carolina’s fiscal future. Spending restraint, tax cuts, and considerable savings would contribute to more opportunities and bigger paychecks for North Carolina families.

The House budget plan, per previous agreement, would spend about the same total amount as the Senate plan. Differences exist, however, primarily with a less aggressive tax cut plan and more aggressive pay raises to teachers and state employees. Similar to the Senate plan, the House proposal would set aside significant funds in the Savings Reserve and Capital Infrastructure funds.

Recent revenue reports project overcollections in the current fiscal year of $6 billion. This added windfall provides many options to budget writers. The Senate budget plan focuses on tax cuts and significant investments in pay-as-you-go infrastructure projects.

The governor's proposal includes a few spending priorities worth highlighting for further consideration. So it's not all reckless, but Cooper's $4.7 billion bond proposal sure is.

The largest increase in Cooper's proposed state appropriations would be for employee salaries and benefits. Cooper's proposal does not provide price tags for Leandro or Medicaid expansion. Cooper would also eliminate successful and popular Opportunity Scholarships.

Cooper’s 2021-23 biennium budget is more a political statement than a realistic proposal. It would leave state government fiscally fragile and at greater risk of layoffs and tax increases in a future recession.

An uncertain economic time is not good for borrowing. If the state takes out debt and the post-COVID economy turns out to be smaller, then debt capacity will shrink and the debt will end up taking more from other priorities. If the economy recovers quickly, then the state would have more money available for capital anyway.

North Carolina state government continued to have strong finances seven months after the economy first began to slow in March. Budget writers should nevertheless be cautious about adding spending commitments, however.

Gov. Cooper’s risky bet to keep spending like it’s 2019, despite a $1.6 billion loss of revenue between March and the end of June, is reckless and irresponsible with…

Other states have begun to worry about the coronavirus shutdown’s impact on their economies and state government finances. Energy producing states like Colorado and Texas must deal with plummeting…