John Locke Update / Research Brief

Cooper’s reckless budget, Part 3: Four good ideas and a terrible one

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  • Community colleges’ proposed regional cybersecurity effort could be a model for more regional service provision in education and for local governments
  • Treating some technology needs as recurring expenses and others as capital expenses makes sense, as does the proposed Management Fellowship Program in OSHR
  • Cooper proposes a $4.7 billion bond that would be put to a vote in a low-turnout election even though the state has more than $10 billion available for one-time purposes like capital projects

Note: Part 3 of this series will highlight some good ideas — and a terrible one — from Gov. Roy Cooper’s 2021-23 biennium budget proposal. Part 1 gave an overview of Cooper’s proposed budget. Part 2 examined Cooper’s proposed appropriations more closely.

This series has discussed in detail why Gov. Roy Cooper’s budget proposal is reckless. Nevertheless, 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.

Good Ideas

Regional cybersecurity for community colleges. Cooper’s budget proposal includes plans for the community college system to improve cybersecurity and hire regional cybersecurity officers. This idea is meritorious even just to protect the data and systems of an important function of state government. The regional approach makes it truly noteworthy. The states of Washington and Oregon each have regional Educational Service Districts that provide financial and other support services to school districts, charter schools, and even certain private schools with state approval. This effort by community colleges would be a promising step toward more regional support for cybersecurity, finance, human resources, and other services that need a level of sophistication or scale not possible for smaller colleges, cities, school districts, or counties.

A system for identifying state property. State government owns billions of dollars’ worth of land and facilities. Determining exactly what the state owns and where, however, has not always been easy. Cooper’s budget proposal includes $1.5 million for a real property system in the state Department of Administration, which should help alleviate that problem.

Better approach to technology needs. Cooper’s proposal would let the Office of the State Auditor make software a recurring expense so it can vary subscriptions based on caseload and always have the most current version of software. This approach would be beneficial for much of the technology state government uses. Significant overhauls and transitions from one vendor to another would still need to happen on occasion, and it makes sense to treat those like other capital and infrastructure projects either by incorporating them into the State Capital and Infrastructure Fund, establishing an Information Technology Reserve as proposed by Cooper, or otherwise ensuring that finances match needs. In general, this evolving two-track approach to information technology will be beneficial.

Finding and retaining good people to work for the state. Attracting and keeping good people is a challenge for state government. The federal government has well-established rotational programs, career planning, and other paths to ensure quality candidates can find the right opportunities for them. Cooper’s budget proposal would support the Management Fellowship Program proposed by the Office of State Human Resources, which has potential to do the same for state government.

Debt Service, Capital, and $4.7 Billion Bond

Debt payments from the General Fund are scheduled to reach $688 million in FY 2021-22, down from $718 million in the FY 2019-20 budget. The final $200 million of $2 billion in Connect NC bonds approved by voters in 2016 will go to market in 2021. Legislators have not been entirely averse to debt, but they created the State Capital and Infrastructure Fund in 2017 to pay for more projects without borrowing.

In contrast, Cooper’s proposal would take on $4.7 billion in general obligation bonds (which need approval from voters) and an unspecified amount in limited obligation bonds (which don’t), marking the fourth straight year the governor has sought to increase the state’s debt. The bond would be $400 million larger than his proposed debt package just last year. Cooper has made clear in the past that his rationale for taking on new debt is to spend more money today. His rationale is that lower interest rates make it the ideal time to borrow, but it ignores the reality that it would take years to issue all the bonds and interest rates could be much higher at future sales. Worse still, Cooper would submit bonds to a vote of the people not during a normal election cycle, but in November 2021, when voter turnout would be low because a bond vote would likely be the only thing on the ballot.

Specific projects that Cooper would finance with the bond include $2.5 billion for school construction and renovation in all 115 traditional school districts, with none planned for public charter schools. Cooper’s previous school bond proposals in 2017, 2018, and 2019 were each for $1.9 billion.

Cooper would have the UNC system receive $783 million for its 17 campuses, including $295 million for “health and safety projects” such as the long-planned ECU medical school and new facilities for the nursing school at Chapel Hill. Every one of the 58 community colleges across North Carolina would receive a portion of $500 million in projects. UNC campuses received $980 million and Community Colleges received $350 million from the 2016 Connect NC Bond.

Other “health and safety projects” Cooper would fund through debt financing would include relocating DHHS from Dix Park in Raleigh to Butner and renovating the Department of Environmental Quality’s Reedy Creek Lab, which studies pollutants. (Both of those projects predate Covid and have little to do with pandemic prevention or response.)

Cooper would use the bonds to pay for state and local parks to receive $250 million in upgrades, with the North Carolina Museum of Art’s park getting $20 million. The North Carolina Zoo would receive $70 million for expansions in two sections. Renovation and expansion of the North Carolina History Museum would take $54 million. The bond would also include a $48 million “unforeseen cost reserve.”

Historic sites would receive $45 million to prepare for America’s 250th birthday in 2026. Although the content of exhibits could become political, it is a small victory that the “1619” narrative has not completely displaced July 4, 1776.

Cooper’s budget would also include $106 million to plan and design bond projects in FY 2021-22, $269 million each year for repairs and renovations through state government, and $462 million for “renovation and modernization” projects around the UNC system in FY 2022-23. He would allocate another $174 million in FY 2021-22 to pay for 34 smaller projects, such as $9 million to help the nonprofit organization TROSA add a residential facility for substance abuse in the Triad. Cooper would have still more projects funded by agency receipts and possibly an unspecified limited obligation bond that would not need voter approval.

Conclusion

State government is in good financial shape to start the next biennium and lay the foundation for another decade of fiscal leadership. The governor’s budget would squander this legacy, however. State legislators will need to do better.

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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