Legislators To Deal With Dueling Taxpayer Bill of Rights Measures | Eastern North Carolina Now

   Publisher's note: The author of this fine report, Dan Way, is an associate editor of the Carolina Journal, John Hood Publisher.

Blust and Stam proposing mechanisms to limit state spending and government growth

    RALEIGH     North Carolina taxpayers would receive a tax relief refund when state revenues exceed 5 percent of budgeted amounts under a state constitutional amendment proposed by Rep. John Blust, R-Guilford.

    If approved by 60 percent of the members of the General Assembly and then by voters in the 2014 general election, House Bill 274, a Taxpayer Bill Of Rights, also would restrict the size of annual budget increases.

    Polling by the Civitas Institute shows TABOR is popular among voters -- it was favored 67 to 18 percent in 2011 and 66-14 percent in 2010.

    Rep. Paul "Skip" Stam, R-Wake, the House speaker pro tem, has introduced competing legislation that provides statutory but not constitutional changes.

    Stam believes that a TABOR amendment is too restrictive, and that his measure would provide necessary budgeting flexibility while controlling state spending growth.

    Blust's bill is designed to eliminate dramatic swings in state budgets by injecting a calculation formula with greater certainty. The goal is to end a 30-year trend of budgets with per capita costs that have far outpaced the cost of living.

    That model would include a mechanism to constrain spending during years when budgets are unexpectedly flush. Extra revenues would be transferred into an Emergency Reserve Trust Fund.

    Any reserve revenues above 5 percent of the General Fund budget at the end of the fiscal year would be refunded to citizens.

    To figure each year's General Fund spending limit, budget writers would determine the three-year average of the sum of the state's population change as determined by the Office of State Budget and Management and the inflation rate according to the Consumer Price Index.

    That resulting number would be the maximum percentage the budget could rise over the previous year's General Fund limit. Additional spending would require a two-thirds supermajority vote in both chambers of the General Assembly.

    Attempts to reach Blust for comment were not successful. Requests for comment from House Majority Leader Edgar Starnes, R-Caldwell, and state Reps. Bryan Holloway, R-Stokes, and Bert Jones, R-Rockingham, the bill's other primary sponsors, were not successful.

    When introducing the same measure in 2011 as House Bill 188, Blust said, "When the General Assembly, or any political body has money available to it to spend, it's gonna get spent. There is just not the discipline." The bill died in committee that year.
North Carolina General Assembly in May, 2012: Above.     photo by Stan Deatherage
    Stam is offering an alternative in House Bill 329, the 2013 Budget Act.

    "I greatly prefer the one I offered. It's much more practical than the TABOR," Stam said.

    One issue would be how to handle budget matters spawned by Washington.

    For example, Stam said, if the federal government decided to shift additional funding responsibilities for programs such as Medicaid to the state level, TABOR states would not be able to comply if their legislatures failed to get a supermajority vote to raise spending at the state level.

    Another problem, he said, is that TABOR "assumes the wisest, smartest, most philosophically attuned people in the world" would use revenue estimates to guess the General Fund spending limits.

    Stam said his bill would require the governor to budget from total state funds collected from the previous fiscal year. That would prevent the governor and legislature from relying on revenue forecasts, which often have been incorrect.

    Under Stam's bill, any increases in the budget would have to be based on the Consumer Price Index or the Gross Domestic Price Deflator, whichever is the lower figure.

    If revenues fell in the prior fiscal year, the General Fund would be determined by a consensus revenue estimate. The governor could prepare a recommended supplemental budget.

    Wade Buchanan, president of the liberal Bell Policy Center in Colorado, where a TABOR has been in effect since 1993, said "it's been a bad experience." Unlike Blust's bill, Colorado's TABOR covers all levels of government, from school boards, cities, and counties to the state legislature.

    "I think the issue for North Carolina is whether this measure of population plus inflation is a prudent and appropriate way to gauge the proper amount of government growth," Buchanan said.

    "Any time you try to put some arbitrary number on what are fairly dynamic sorts of issues and expenditures, and you put that in the Constitution, you're playing with problems," he said. "You have a formula that essentially continually downsizes government."

    Colorado's TABOR also requires a citizen vote to approve any increases either in taxes or the spending limit formula.

    "Not having that voter safety valve is an interesting and disturbing part of this" for North Carolina lawmakers, Buchanan said. "Their hands are going to be tied. They will not be able to exceed that limit in any meaningful way, so you better have the growth rate right."

    Peter Blake, a political columnist for Complete Colorado, a news and media website in Denver, and a longtime legislative columnist at the Rocky Mountain News, said Colorado passed TABOR in large part because it grants voters constitutional authority to decide on tax increases. But the law is under continual assault.

    "The Democrats don't like it," Blake said of TABOR, and the Democrat-dominated Supreme Court consistently rules against TABOR advocates who sue over violations of the law.

    For example, increases were slapped on hunting and fishing licenses, and parks use, and the state then raided those cash funds to pay for higher operational costs by calling them fees, not taxes. A lawsuit challenging the runaround on the law was rejected in court.

    "But the one thing they really don't want to deal with is the right to give people the vote for a tax increase," Blake said. "That's very popular. That's probably the key surviving element of ours."

    Whether there are more pros than cons to a TABOR "sort of depends on your [political] perspective," said Mandy Rafool, senior analyst and tax policy expert at the National Conference of State Legislatures.

    "Florida had one on the ballot this past November but it was pretty soundly defeated," Rafool said.

    She said there was "a big wave" of TABOR activity in the 1970s, 1990s, and mid-2000s.

    "But there hasn't been that much activity since, I think, partly because state government has not been growing, it's been shrinking," Rafool said.