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 Saving a Tithe
by Tom Campbell
August 24, 2006
State governments saved about out of every in their budgets in the most recent fiscal year, according to a survey released at the annual meeting of the National Conference of State Legislatures. Twenty-eight states reported end-of-year surpluses larger than had been forecast and most said they put the excess funds in rainy day or other reserve accounts.
North Carolina, flush with a 2-plus billion dollar year-end surplus managed to put only 7 million into the rainy day fund, just slightly more than two percent of our .9 billion budget. After more than four years of deficits there were certainly great financial demands made to our lawmakers, but no more than those in other states.
Some might defend our legislature’s actions by maintaining that our state was hit harder than many during the recession. If true, this is might be because our leadership failed to remember the cyclical nature of our state’s economy.
History reminds us that about every ten years we encounter an economic downturn. You can watch the cycle as we begin most decades in a recessionary period, stabilize, then surge forward in the middle to latter years, only to slow down and stumble by the end of the decade. All the while state spending escalates at double digit rates during the ten year period. The trend is highly repetitious and extremely predictable, but appears to escape the attention of those in leadership.
We could easily avoid the herky-jerky, spend and cut nature of our budget process if we would but put aside funds for the time when the inevitable slowdown will occur. We do no one any favors with the way we appropriate then have to cut budgets in mid-year due to a lack of funds.
Perhaps the oldest illustration of the best course comes from the Bible, when Joseph advised Pharaoh to store up surplus food during the seven fat years so as to make it through the upcoming seven lean years without people suffering from starvation.
There is evidence that other states have learned these lessons and are preparing for that time when the economy turns downward and they will need to draw on reserves. While it would be idyllic to save ten percent of the budget each year, maintaining a tithe of our budget in reserves would send a strong message of fiscal responsibility to our citizens. Why don’t North Carolina’s leaders adopt such a policy, so that we can avoid the inevitable budget crisis that will arise with the next economic downturn?
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