Left-wing groups in North Carolina have recently been circulating a chart projecting sizeable state budget deficits in future years. The chart is accompanied by shrieks of panic and predictions of fiscal crisis.
Their fearmongering is yet another desperate attempt to smear state tax cuts as somehow starving the state budget and being the cause of such shortfalls.
But fear not, these doomsday warnings can be safely ignored.
For starters, this is the same bunch that has for more than a decade been warning about massive budget shortfalls resulting from conservative tax reforms beginning in 2013. The dire warnings began in 2014, continued in 2015, were doubled down on in 2018, and have continued up through last year.
Those warnings, however, proved to be wrong, wrong, wrong, and wrong again.
Here is an overview of the actual results from each year, when comparing projected revenue with actual revenue collections, beginning with FY 2014-15, the first full year the historic 2013 tax reforms were in effect:
FY 2014-15: Surplus of $446.9 million (see pg. 3)
FY 2015-16: Surplus of $430 million (see pg. 3)
FY 2016-17: Surplus of $494.1 million (see pg. 3)
FY 2017-18: Surplus of $431.6 million (see pg. 3)
FY 2018-19: Surplus of $896.6 million (see pg. 3)
FY 2019-20: Shortfall of $1.1 billion, due to Covid shutdowns. Up through Feb. 2020 (right before the shutdowns), however, revenue was on pace for another surplus, $289 million ahead of schedule (see note on pg. 4).
FY 2020-21: Surplus of $2.09 billion (see pg. 4-5)
FY 2021-22: Surplus of $4.8 billion (see pg. 6-7)
FY 2022-23: Surplus of $3.03 billion (see pg. 8)
Backing out the Covid year, that’s more than $12.6 billion in surpluses during a time they were insisting that tax cuts would produce dramatic shortfalls.
With such a terrible track record, why should we believe their fearmongering predictions now?
Bear in mind that when we discuss revenue shortfalls or surpluses, it refers to a comparison of revenue projections made before the start of the fiscal year for budgeting purposes with actual revenues collected during the year.
As you can see, the folks projecting revenue have vastly underestimated the amount of revenue they think will be generated in each year, being off by about $10 billion in the last three years alone.
To be clear, this is not a knock on the people in the state budget office and Fiscal Research division of the General Assembly. They are tasked with the impossible: to predict tax and other revenue generated from North Carolina’s $766 billion economy.
Which brings us back to the chart.
The chart attempts to project for the next eight years not only revenue but General Fund expenditures through fiscal year 2030-31. We’ve already seen how difficult it is for them to project revenue for just one year, imagine how off the numbers are for five, six, and seven years into the future. In the footnotes, the chart’s creators admit that estimates for FY 2025-26 and beyond are “rough projections based on historical patterns.”
Nevertheless, North Carolina progressive groups are touting these projected future shortfalls as gospel.
But you need not worry. As we’ve seen, such projections are impossible to make with any accuracy for one year, let alone eight. And based on how wildly wrong these progressives have been in the past with their predictions of budget shortfalls, we know that their baseless fearmongering can be safely ignored.