Legislative budget-writers will have to set aside money every year for the state’s rainy day fund, under a bill signed into law on Thursday by Gov. Roy Cooper.
The governor signed the bill while warning against putting too much into savings at the expense of tax breaks for the middle-class, schools and attracting jobs.
Although the General Assembly passed House Bill 7 almost unanimously, the question of how much money to put in the rainy day fund has been a point of disagreement between the Democratic governor and the Republican-controlled legislature.
During his campaign for office last year, Cooper said the $1.5 billion in the fund was excessive. That remark prompted criticism from Republicans, who claimed Cooper would leave the state without enough savings for emergencies such as the flooding and wildfires that hit the state in 2016.
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Cooper’s bill-signing statement on Thursday said his budget proposed to save even more money than what would be built up under HB7, which directs 15 percent of each year’s estimated growth in tax revenue be transferred to savings.
Cooper proposed in his budget earlier this year to add more than $300 million to the rainy day fund, and an additional $100 million for disaster relief.
Rep. Nelson Dollar, a Cary Republican budget-writer who sponsored HB7, told the House in February that the bill was developed with guidelines from The Pew Cheritable Trusts nonpartisan think tank.
As it happens, the Pew trust on Thursday released a report on states’ rainy day funds, finding that seven years after the end of the Great Recession, only 15 states had more of a financial cushion than they did before. North Carolina was not among them.
However, North Carolina was one of seven states whose rainy day funds could cover more days worth of operating costs than at any time since at least 2000 — with 19 days — in the 2016 fiscal year.
The Pew report notes that reserves help states manage uncertainties and forecasting errors, and help prevent severe cuts or tax hikes due to unexpected shortfalls. The study found states drew upon their savings to counter tax revenue that decreased during the recession. Those savings accounts have slowly recovered over the past seven years.