North Carolina’s population is growing and getting older. Roads, bridges, ports and buildings do not maintain themselves. The court system does not have less to do. Teachers and state employees do not expect to work for the same salary year after year. Inflation, though subdued, still occurs.
And yet somehow state spending is shrinking year after year as a share of the state’s economy. Over the last 45 years, state spending has averaged 6.1 percent of the state economy. That share has been shrinking since the recession hit in 2009, and Republicans have continued the restrained spending since taking control of the General Assembly in 2011. An analysis by the nonprofit N.C. Budget and Tax Center shows that state spending will fall to 5.1 percent in 2017 under a state House budget proposal. It will likely fall further since the state Senate is expected to propose even less spending.
In per capita terms, state spending per person in North Carolina, adjusted for inflation, has fallen from a high of $2,522 in 2008 to $2,118 today, a 16 percent decline.
Budget hawks delight in these numbers. They see fat being squeezed from the state budget and the economic activity spurred by lower taxes. But there is nothing targeted about this shrinkage. It constricts productive spending and wasteful spending alike. And restricting natural growth in state spending has a domino effect on private sector contractors and suppliers, just as flat wages for government workers hurt retailers, restaurants, car dealers and others.
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Of course, government spending isn’t intended as economic fuel, though it has that effect. The money is spent to educate children; support universities; care for the poor, elderly and the mentally ill; protect the environment; pave roads, conduct trials; run prisons; and promote the health of the state’s economy and its institutions.
Republicans say they can do all that but do it with less by doing it more efficiently and making, as Gov. Pat McCrory is so fond of saying, “hard choices.” But these efficiencies have the subtlety of a tourniquet. And the hard choices are hardest on those most in need. The well-off end up better off.
Republicans took over when state spending had already been sharply reduced by a deep recession. Instead of restoring spending as the economy recovers, they’re holding it below where it should be given inflation and growth. Within the state budget, North Carolina is stuck in the grip of austerity, not riding a recovery.
The University of North Carolina system funding has been cut by more than 20 percent since 2008. The state has cut thousands of teachers aides and reduced the ability of local governments to hire more teachers and support staff. The state Department of Public Instruction says there are fewer adults in North Carolina’s public schools than there were seven years ago, but there are 43,000 more students. The working poor remain locked out of health insurance without Medicaid expansion, burdening the health care system with their uncovered costs. And the legislature appears unwilling to support the governor’s modest bond request that would pay for improvements in the state’s infrastructure
Republicans are hailing tax revenue that exceeded projections by $400 million as a result of their prudent spending and stimulating tax cuts. But this “surplus” is but a share of the revenue that would have been generated under the previous tax code. And it is likely a one-time surge tied to stock market gains that Senate leaders are using to justify more recurring cuts in the corporate tax and the personal income tax. That way lies Kansas.
Paul A. Volcker, the former Fed chairman, has taken aim at this kind of deceptive and destructive budgeting in which lawmakers shortchange the present, rob the future and claim the budget is balanced and all vital needs are met. He has formed the Volcker Alliance, a foundation that seeks to restore public trust in government at the federal, state and local levels.
Volcker says this neglect of investment and deferral of cost will undermine a state. “It’s like termites eating at a structure,” he told The New York Times last week. “The building hasn’t fallen down yet. But if you get enough termites, the building is going to get pretty rickety.”
That sound you don’t hear amid legislators’ self-congratulations over suppressed spending and tax cuts is the sound of termites. North Carolina is going to get pretty rickety.