John Locke Update / Research Brief

Cooper’s bad budget bets

posted on in COVID-19 Series, Fiscal Insight, Spending & Taxes
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Gov. Roy Cooper is either the worst gambler around, or his first term has been a classic example of a hustle.

He placed big, losing bets on his vetoes of budget bills, believing that such actions would compel the Republican leaders of the General Assembly to fold.  They didn’t blink, and Cooper lost.

Maybe Cooper’s hustle has been to make big, mostly symbolic, bets on progressive causes, ignore the costs, and hope to cash in with votes with moral victories. Whether he was trying to bluff with a losing hand or just repeatedly misreading his opponents, Cooper has tallied few wins.

Medicaid expansion, school construction, and teacher raises

Cooper’s three priorities last year were Medicaid expansion, school construction, and teacher raises.  He has lost every big bet he’s placed to achieve these policy goals.

He abandoned Medicaid transformation (for which Mandy Cohen and former Blue Cross CEO Patrick Conway were New York Times business section front-page heroes) in favor of a push for expansion. With transformation, he could have proven to be an advocate for the poor.  If Democrats made legislative gains in November, he could come back for expansion then. Instead, he put it on indefinite hold. Now there’s no money for transformation.  He vetoed a transformation mini-budget that also would have moved the headquarters of the NC Department of Health and Human Services to Granville. Instead, it remains at the Dorthea Dix Hospital site in Raleigh, putting at risk an agreement between the state and the city over the use of the land.

He championed a $4 billion bond package in hopes of spending more money sooner. The legislature would have set aside money for construction rather than assume additional debt.  (If lawmakers had included it as spending, it would have blown past the rate of inflation and population growth.) He could have taken their offer, then later asked lawmakers to bond the rest of it. Now there’s no money for local school construction.

He chose not to accept a proposed pay raise for teachers, putting their well-being on the line to score points against Republicans. He vetoed pay increases for teachers and instructors in community colleges and universities, complaining that they were inadequate. He could have taken the offer, then worked to boost teacher pay in subsequent years. Now there’s no money for raises.

Had Cooper achieved these three goals, it would have depleted the budget and hastened the fiscal strain for taxpayers and state agencies alike.  Given his poor performance with such high-stakes bets, the only way they make sense is as political games, not governing goals.

Clumsy budget and state agency management

In the wake of the economic fallout from COVID-19, North Carolinians should be thankful that Gov. Cooper failed to divert money from the “overfunded” unemployment benefit trust fund to unproven discretionary programs. The Division of Employment Security has been slow to process claims and make payments, but since Cooper did not accomplish his goal, there is still money to pay the benefits owed to unemployed North Carolinians.

On the other hand, his late and limited reductions this fiscal year mean that the state has less money on hand to get through next year.  It is less than a month before the fiscal year starts, and he has yet to offer a budget proposal, and instructions to state agencies for budget savings included no call to return unused funds to the state, i.e., reversions.  To make matters worse, Cooper continues to constrain economic activity through highly restrictive coronavirus mitigation measures, putting small businesses and their employees at risk and leaving them to the inefficient bureaucracy of the Division of Employment Security. He even sacrificed the RNC nominating convention and the economic boost that it would have provided to the Charlotte area.

With no spending plan to offer and no call for reversions, Cooper is taking another risky bet on federal assistance.  Other states have used CARES Act Coronavirus Relief Fund money surreptitiously to fill holes even as they call them COVID-19 related. Cooper’s first proposed using other federal funds if it couldn’t use Relief Fund money.  This would mean adding more debt to the federal government or diverting money from its intended purpose, neither of which is a good idea. Add the potential for a major storm, and it’s clear Cooper expects that deferral will allow him to raise taxes if Democrats regain a legislative majority in November or force a newly-elected Gov. Dan Forest to make deep cuts.

Teachers, school districts, the unemployed, and insurance companies that would have participated in Medicaid managed care all lost on Cooper’s bets with their money.  As governor, it’s clear that Cooper does not know when to hold ’em, when to fold ’em, when to walk away, and when to run.

As Senior Fellow, Joe examines fiscal and tax policy. He previously headed the North Carolina Government Efficiency and Reform initiative within the Office of State Budget and Management, which led to changes in automotive fleet management, natural and… ...

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