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 Forewarned is Forearmed
by Tom Campbell
June 3, 2010
This isn’t a good time to be the Governor or a legislator in North Carolina. But politicians don’t have the luxury of choosing the times; they must face the realities in which they find themselves and make the most of them.
When the short session of the legislature convened last month officials were told they must find 800 million dollars to balance the budget for the year that begins July 1. Those projections included 500 million dollars in federal Medicaid funds, but Congress has yet to approve this funding, leaving another significant hole if funds aren’t forthcoming. The state’s problems multiply when you consider federal relief dollars are due to end next year, as are the “temporary” sales and income taxes passed in 2009. Without them, North Carolina could experience a “cliff effect” deficit of more than two billion dollars beginning in July 2011, and that estimate was made before the director of the State Health Plan projected the state will need to pump in an additional 400 million dollars due to increased medical costs.
But these problems pale in comparison to what potentially awaits us. North Carolina lost more than 300,000 jobs during the past two years and some economists are saying that at current levels it might be 2012 or even 2013 before state revenues return to pre-recession levels. The weak economy could add as many as 350,000 new enrollments in the next three years to the current 1.5 million recipients. Medicaid currently costs 9.5 billion dollars per year; North Carolina pays more than 2 billion of that amount. In 2014, Health Reforms mandate that every person be covered by a health insurance plan. Reliable sources predict this could add an additional 400,000 North Carolinians to Medicaid rolls, boosting our numbers to as large as 2.2 million. The state has about 16 billion dollars in recurring revenues each year, but demands are skyrocketing.
Forewarned is forearmed, according to the old proverb. State leaders need to begin now to address these coming fiscal needs. To be sure there is no one single fix but there are actions that could help. For starters, our state could finally reform our tax codes. We could insist on a zero-based budget process that would help force state leaders to establish spending priorities and enable us to make intelligent budget decisions. And we are long overdue for government restructuring. North Carolina cannot afford Medicaid in its current form and our leaders must make choices about eligibility and benefits for our program that will help the most who need the most help.
Given the fact that about eighty percent of our state budget is spent on health and human services and education, it is unrealistic to think we can cut our way out of these burgeoning demands. It makes no difference whether Republicans or Democrats are in power, tax increases are ahead for North Carolina. The question is in what form, what amount, and when they will be imposed?
How our leaders respond to these next few months will determine not only the future for our state but also the legacy they leave for their time in office. We do not envy their task but we hope they will meet these challenges with courage and wisdom, taking the correct instead of the most expedient actions. |
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