RALEIGH – Final state budget negotiations could produce a document that’s more fiscally responsible than either the House or Senate budget plans, according to analysis by a John Locke Foundation budget analyst.
Click here to view and here to listen to Joseph Coletti discussing the N.C. Senate budget.
“We’ve just seen a Senate budget plan that would spend money for an inflatable planetarium and a John Coltrane museum, add $15 million to a Fayetteville park project, and mandate the use of biodegradable bottles for state government with no estimates of costs,” said Joseph Coletti, JLF Fiscal Policy Analyst. “Instead of adding items like these to the final budget package, members of the budget conference committee could improve their final product by omitting the worst ideas that made the grade in just the House or Senate plan.”
That approach would also lead to significant budget savings, Coletti said. “Taking the lesser amount from each budget could save up to $300 million in operating expenses and as much as $250 million in new debt,” he said. “Taxpayers could also save money on interest payments if negotiators agreed to change the structure of debt-funded projects. Lawmakers could realize interest savings by endorsing projects tied to bonds with voter approval, rather than projects that avoid voter input by using certificates of participation.”
Coletti offered his analysis after the N.C. Senate voted 31-14 this morning to approve a $21.4 billion General Fund budget for 2008-2009. The Senate budget includes about $700 million in additional spending, representing a 3.4 percent increase. “The increase is even larger when you focus only on state government operations,” Coletti said. “Operations spending would climb by 3.9 percent, or $800 million, to a total of $21.2 billion.”
Unless the House votes to accept the Senate’s budget, negotiators from the two chambers will try to reach a compromise on a final spending plan for the budget year that starts July 1.
“Despite the bad ideas, senators made some improvements over the budget proposals we’ve seen from Gov. Mike Easley and the House budget writers,” Coletti said. “The Senate plan would limit unnecessary expansion of the Health Choice children’s insurance program. It doesn’t waste money buying open space, and it doesn’t attempt to dictate how local water providers should deliver their services.”
That’s the good news, Coletti said. “The bad news is that senators are even worse offenders than the House when it comes to using certificates of participation rather than bonds for debt-funded projects,” he said. “Non-voter approved debt totals $672 million in the Senate budget. By avoiding public votes on these projects, lawmakers would saddle taxpayers with higher interest payments.”
Senators would also dole out $38 million for targeted industries or firms, and they would rely on $120 million in one-time taxpayer funding to pay for ongoing budget expenses, Coletti said. “Any time you commit more money than you have, you’re setting yourself up for problems in the future.”
Some spending increases would head to programs with no track record of success, Coletti said. “The Senate budget pours more than $100 million in new appropriations into items such as dropout prevention grants, Gov. Easley’s More at Four legacy-building program, and juvenile crime prevention councils — even though there’s no evaluation proving these items to be effective. At least senators accepted an amendment designed to give the More at Four program a more thorough review.”
The Senate plan also does too little to contain Medicaid enrollment growth, eliminates a prudent UNC system spending cut, does little to relieve state road congestion, and provides too little money to meet projections for school bus fuel costs and public school teacher bonuses, Coletti said.
“Plus the Senate budget would make North Carolina government larger,” he said. “Each of the 472 new full-time state employees in the Senate plan would require health insurance, retirement contributions, and other benefits. These are new jobs for such low-priority items as swine farm permitting and compliance and a new oyster sanctuary program.”
Budget negotiators should avoid the temptation to settle differences by caving in to demands for low-priority spending items, Coletti said. “The final state budget document will be stronger once it’s pruned of as many non-essential items as possible.”
Joseph Coletti’s Spotlight report on the N.C. Senate budget, “Budget Progress and Regress: Better budget ideas from N.C. Senate, but a worse budget,” is available at the JLF web site. For more information, please contact Coletti at (919) 828-3876 or jcoletti@johnlocke.org. To arrange an interview, contact Mitch Kokai at (919) 306-8736 or mkokai@johnlocke.org.