Publisher's note: The author of this post is Brenee Goforth for the John Locke Foundation.
North Carolina state revenues have taken a major hit since the Coronavirus outbreak began. Between March and the end of June, the state has lost $1.6 billion in revenue according to JLF's Joe Coletti in a recent research brief
. Despite the obvious problem this poses for the N.C. budget, Gov. Roy Cooper has been slow to direct government agencies to cut costs. Coletti writes:
- Gov. Cooper's risky bet to keep spending like it's 2019, despite a $1.6 billion loss of revenue between March and the end of June, is reckless and irresponsible with taxpayers' money.
This reckless spending could undo much of the hard work done by the legislature to put the state on solid fiscal footing prior to COVID-19. Coletti writes:
- Since 2011, North Carolina government has budgeted responsibly. Appropriations per person were set to be $30 lower this year, adjusted for inflation, than in 2011. With $1.1 billion in savings, a cash balance of $2.2 billion in February, and a mix of short-term and permanent spending reductions, federal assistance would have put North Carolina in a good position to weather the economic downturn and still have money available in case of another major hurricane.
- Instead, Cooper waited 78 days from his order closing restaurants and bars on St. Patrick's Day until his June 3 memo.
Coletti explains the contents of the memo:
- [In the] budget memo to state agencies, State Budget Director Charles Perusse wrote, "As we estimate revenues, including the FY 2019-20 cash balance, additional federal stimulus support, and monies in the Savings Reserve Account (as a last resort), we anticipate that the state would remain in balance and could support this current budgeted spending level." Perusse anticipates "additional federal stimulus assistance" to get through FY 2020-21 despite an even larger $2.6 billion revenue shortfall.
Rather than rein in spending, the governor is banking on funds from the federal government. Specifically, Coletti writes:
- Cooper plans to spend down the $2.1 billion (as of May 31) cash balance and count on more federal money either through flexibility for money Congress already provided or through another round of federal bailouts to states.
Perhaps federal funding will become available, perhaps not. Regardless, the state of North Carolina should still be reducing expenditures, and - frankly - it should have started weeks ago.
Read Coletti's full brief HERE
. Join Coletti Wednesday evening for a discussion of the state budget HERE