The $22.9 billion state budget proposed by the House for the upcoming 2018 fiscal year — and the $23.8 billion budget for the following year — reflects a missed opportunity to embrace smart public investments and prepare for federal uncertainty brought on by cost shifts in Medicaid and food assistance, among other core public program and service cuts proposed at the federal level.
The House budget would continue to move away from historic levels of investment relative to the state’s economic health. The 45-year average of state investments as a share of the economy is 6 percent, which has allowed North Carolina to sustain the foundations of its economy and make transformative investments in early childhood and career training, for example. Under the House’s proposed biennial budget, the level of state investments would remain below that 45-year average: In both years, investments would be held at 5 percent as a share of the economy.
The artificial constraints placed on the level and growth of state appropriations year over year mean that we are falling behind in good times, even as the population continues to grow and the costs of delivering education and health care, in particular, increase significantly faster than the cost of consumer goods and services.
Perhaps most concerning is what the path we are on will lead to: year after year of cuts and no economic boom to celebrate.
This is clear even within the second year of the budget proposed by the House. An additional $1.1 billion in spending is required going from the first to the second year of the biennial budget simply to deliver current level of services to the state’s growing population, according to spending estimates by the General Assembly’s Fiscal Research Division. This increase in baseline spending is a result of growing enrollment in K-12 and higher education, the delivery of Medicaid services, retirement and health plans for public employees, and the teacher pay plan. The House proposed year-over-year growth in its biennial budget of just $879 million, which is concerning as this level of spending falls well short of what’s needed to ensure that current services are maintained.
What does this mean? Either the House does not plan to continue to fully deliver current services to the state’s growing population or it plans to cut other areas of the budget to fund those obligations.
Year after year of tax cuts is making it increasingly challenging for the state to keep up with serving our growing population. Lawmakers need to make better choices for North Carolina.
Alexandra Sirota is the director of the N.C. Budget and Tax Center.