Archives: John Hood

The 1995 session of the General Assembly was unique in the history of North Carolina. After years of rapidly increasing state spending, both Gov. Hunt and the legislature expressed an interest in controlling spending growth and cutting taxes. As a result, operating spending grew by only 1.4 percent in FY 1995-96, by far the slowest rate of spending growth in a non-recession year this century.

Gov. Jim Hunt's long-awaited budget recommendations for FY 1999-2001 do not actually present a full balanced budget to state lawmakers. Instead, the plan offers sizable increases in operating spending, particularly for education and corrections, while listing only "options" for dealing with the more problematic capital and nonrecurring sides of the General Fund budget. Of the $400 million in proposed "savings," the vast majority come from correcting the administration's earlier errors in projecting debt service and Medicaid costs.

One of the most common arguments in favor of a state lottery for North Carolina is that the Virginia Lottery attracts as much as $100 million in lottery ticket purchases from North Carolinians. But this revenue loss is exaggerated and dwarfed by the loss of revenue to out-of-state corporations that North Carolina would experience with a lottery. In reality, Virginia receives at most $34 million in state revenues from N.C. residents, while management fees paid out-of-state for operating a N.C. lottery would be at least $36 million.

As one way of closing the state's ever-widening budget gap, Senate leader Marc Basnight has suggested that the state consider requiring retailers to pay sales taxes by electronic fund transfer rather than by check, thus allowing the state to collect additional interest on the money. This would constitute a hidden but costly tax increase on North Carolina businesses hobbling the state's economy as it slips towards a possible recession. Far better ways to close the gap exist.

Education reform in North Carolina has a long history, but has shown mixed results at best. Despite recent improvements in some test scores, the state's public schools still deliver poor-quality services at excessive cost to large segments of the student population. Under the state's new ABC plan, nearly half of all public schools in 1996-97 failed to provide a year's worth of educational progress for a year's schooling. Only 26 percent of N.C. 4th-graders are proficient in reading and 21 percent are proficient in math.

North Carolina's 1999-2001 budget cycle presents state lawmakers and the Hunt administration with a fiscal challenge — planned spending increases exceed predicted revenues by hundreds of millions of dollars. Some lawmakers and the news media have blamed four years of tax cuts and recent court decisions. This is misleading. By far the biggest cause of the problem was excessive spending growth during much of the 1990s. If state leaders had exercised even modest spending restraint, there would be no fiscal challenge awaiting the state this year.

Health and human services has become an important government responsibility, second only to education in terms of budget authorization. The disability services system, which serves North Carolina's mentally and physically disabled, receives approximately 17 percent of the funds of the Department of Health and Human Services (DHHS), for a total of $1.25 billion in fiscal 1996. By N.N. Fullwood, Ph.D.

As state leaders debate yet another proposal for a state lottery this year, they should consider the equity issues raised by using proceeds to fund college scholarships, as done in Georgia and proposed in previous N.C. bills. The family income of freshmen entering a UNC system school averaged $55,000 in 1997, while the median income of UNC-Chapel Hill freshmen was about $75,000.1 By comparison, if a North Carolina lottery follows Virginia's pattern of participation, the median household income of lottery players would be only $29,000.2