John Hood: It’s a good first fiscal step
RALEIGH — When Gov. Pat McCrory released his first state budget plan on the morning of March 20, I happened to be driving to Charlotte for a meeting. Perhaps it was my imagination, but at the precise moment his aides passed out the budget in Raleigh, I think I heard a loud crash as a teetering tower of political hyperbole and conspiracy theories suddenly collapsed.
To hear some tell it, McCrory and his chief budget officer, Art Pope, had been scheming to blow up state government. So when reporters, analysts, and activists got their hands on the governor’s budget, they seemed to be shocked to see a serious, carefully drafted, and persuasively argued plan to rebuild the state’s finances, refurbish its major agencies, and renovate its aging buildings and infrastructure.
After years of weak or negative growth, the state’s General Fund revenues are projected to grow about 4 percent. That’s enough to keep up with basic needs, offer modest pay raises for teachers and state employees, and fill some fiscal holes. But it’s not enough to fund major new spending initiatives – and McCrory didn’t propose any.
The idea that a new governor might be willing to make his reputation on cleaning up the messes left by his predecessors, rather than create new signature messes of his own, may seem novel in political terms. In practical terms, in benefits extended to taxpayers, it is a welcome idea.
Over the next two years, the governor’s plan would shore up the state’s fiscal position by more than $1.4 billion through a combination of enhancing formal cash reserves ($600 million), repairing the state’s physical assets ($367 million), and leaving some General Fund money unspent in case of emergencies ($463 million).
Furthermore, when the McCrory administration comes back in 2014 with a revised budget for the second year of the biennium, the governor and his top aides will have a better sense of what broader changes or programs they want to initiate. These could include infrastructure investment, tax relief, or some combination. Building reserves now means a more stable framework for those policies in the future.
I’m not going to say I like everything in McCrory’s budget plan. It has tens of millions of dollars in targeted subsidies for corporations that I’d rather spend on core public services or return to the private sector in the form of tax cuts. While it puts an end to the annual practice of transferring money from the Highway Trust Fund to the General Fund, I’d go ever further to redirect revenue from gas and car taxes to road construction and maintenance, where it is most needed.
In the main, however, I think McCrory and his budget team pursued a wise strategy of focusing on the state’s balance sheet – its long-term assets and liabilities – rather than just making special interests happy in the short run. The fact that the budget also confounded their critics was just an entertaining coincidence.
John Hood is president of the John Locke Foundation, which has just published “First In Freedom: Transforming Ideas into Consequences for North Carolina.” It is available at JohnLockeStore.com. Representations of fact and opinions are solely those of the author.