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Every year debates are focused around North Carolina’s government spending.  On one side of the argument, mainly the right, the argument is that spending keeps increasing and state government needs to cut back and use dollars more efficiently.  The other side, generally the left, argues for more government spending and commonly suggests spending isn’t increasing enough to serve the people.  Regardless of political platforms and campaign speeches, the data show spending in North Carolina has increased over the last 30 years.   The last ten years have seen rapid increases in state spending across all categories, a dangerous precedent when the financial stability of America is not at its strongest.

Total State Budget

The total state budget encompasses all government expenditures in North Carolina each year.  This includes the General Fund, federal funding, transportation, debt service, and many others.  The total state budget amount is around $51 Billion, of which almost half is federal funding.  North Carolina has received around 45% of its total budget from the federal government over the last ten years, with the exception of 2010 and 2011 when federal funding reached a historic high 56% of the state’s total budget. 

State government officials need to be wary of allowing such a large part of the state’s expenditures to be dependent upon federal funding.  As the federal government’s debt crisis continues, it is not a stable position for North Carolina to rely on the federal government for such a large percentage of total spending.

Spending trends are showing that North Carolina is in a period of record high government expenditures both per capita and as a percentage of personal income.  Since 1980, state spending has grown more than 150% reaching the highest level per capita of $5,348 per person in 2012.  Adjusting for both inflation and per capita, this chart gives the most accurate representation of the growth in total state spending for North Carolina.

Another measure of government expenditure is a comparison with the state’s personal income.  In economic terms, personal income is the total amount of all income actually received by individuals or households during a specific period of time.  For state spending analysis, personal income levels tend to be good indicators of economic expansion as well as stagnant periods during recessions.  The chart below shows the total state budget as a percentage of North Carolina’s total personal income.  During the booming economic times of the 1990s, total state budget expenditures stayed at an average 10.8% of personal income.  Since 2000, the state has experienced two nationwide recessions, with the most recent affecting personal income and employment the most.

The first recession in 2001 saw little to no increase from previous non-recession years, and the Great Recession from late in 2007 till mid 2009 saw less than 1 percent increase.  As the state has rebounded from the most recent recession, the total state budget as a percentage of personal income has risen sharply to an all time high of 14 percent in 2012.  The data tell us that, in the wake of recessions and economic booms, North Carolina kept state spending under control relative to personal income until a few years ago — again, another indicator that state spending has gotten out of control in recent years and needs to be reined in before the state overextends itself.

Next week I will focus more on specific agency growth and General Fund spending when compared to total state spending.

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