Many of us remember the budget debates that occur every year. Does the government spend enough? Are they spending it on the right things? Are taxes going to increase? How does North Carolina compare to neighboring states? All of these questions are answered, but sometimes the whole truth is not shared with the public due to a lack of transparency in the budget process.
A lack of transparency over the years has given government budgets a reputation for being difficult to understand and confusing. North Carolina is no exception. For many, the persistent growth in state spending is not easily visible, as there is an undue focus on the General Fund. When legislators debate a budget and when the media reports the final amounts spent in the agencies, their primary focus is on the General Fund. The state’s highest figure for General Fund expenditure was in 2009 when it reached an inflation-adjusted amount of $22.5 billion. Since that time, General Fund expenditure has been slowly decreasing, while total state expenditure has been increasing. This is because more and more spending has moved outside the General Fund as illustrated below.
Spending is shifted outside the General Fund by actions such as an increase in federal spending, special accounts used as pass-throughs from one agency to another, and many others. Agency growth is a typical strong indicator as to state government spending growth. Within the General Fund, it has been traditional for Education, including K-12 public education, the university system, and the community college system, to be the largest expenditure in North Carolina government. During the Easley administration the state saw another agency spend more than education for the first time; Health and Human Services (HHS) became the largest expenditure in total state government in 2003, and since 2005 the HHS budget has been consistently higher than that of education. Much of the state’s welfare programs are funded through HHS and thus receive a portion of those funds from the federal government, partially explaining the surge in HHS funding outside the General Fund during recent years.
In addition to HHS spending outside the General Fund, both Transportation and the state’s debt service are also outside the General Fund. Transportation spent approximately $4.5 billion in the most recent fiscal year and has grown by 123 percent since 1980. The state’s debt service was relatively stable until spikes occurred in 1997 and 2003 amounting to a spending increase of 193 percent. The lack of transparency for budget items such as transportation and debt service is one of the reasons many legislators and taxpayers are unaware of the large increases in state spending over the last decade. To increase transparency, analysts and media outlets alike need to focus on total budget expenditures rather than just the General Fund.
Various measures of state spending all show a similar and clear pattern of growth in state expenditure over the last few decades. For much of the 1980s and into the early 1990s spending was kept as a relative constant. For much of the late 1990s and 2000s North Carolina has seen large amounts of growth with spending peaking in 2012. Legislators and taxpayers alike need to consider seriously what solutions are needed to fix this growing problem. As the state becomes more dependent on federal funds, and as the size of government continues to grow, the only logical forecast for the state budget is a slow and steady increase.
Some have argued for the implementation of a Taxpayer Bill of Rights to limit spending. Others have argued for different accounting methods to show legislators what is really being spent outside the General Fund. Legislators need to realize that larger government and more spending will only create more problems, not solve them. The solution will not be created overnight, but from all reliable data sources the fact that state spending is increasing cannot be avoided much longer.
