The Goldilocks question
Published June 11, 2020
By Tom Campbell
Does our state government spend too much, too little or just enough? That was the Goldilocks question I asked myself after reading a post on the Civitas Institute website.
The article began by saying, “Thanks to a decade of wise, conservative fiscal policy, North Carolina state government is better positioned financially to weather the economic fallout from the coronavirus shutdown.” It went on to make comparisons from 2010, the last year Democrats controlled the legislature, until 2019, after eight years of Republican leadership. Here is data they provided: In 2010 the state budget had a shortfall of $3 billion, but before COVID-19 the current budget was on pace for a sixth straight year of budget surpluses, most in excess of $400 million. State debt topped out at $6.5 billion in 2013, having risen by 230 percent since 2001. From 2013 to 2019 debt had declined to $4.2 billion, a 35 percent drop. The state’s Rainy-Day Fund was $150 million in 2010 but grew to $1.2 billion in 2019.
The Civitas article said the state budget grew by 40 percent the last eight years of Democratic control, whereas after Republicans took charge it had grown only 16 percent. Their conclusion was “Comparing North Carolina’s current state budget and fiscal situation with that of a decade ago offers a contrast as stark as night and day. North Carolinians simply cannot afford to return to the reckless spend and tax policies of the past.” It wasn’t surprising that the right-leaning organization came to this conclusion but being the “Doubting Thomas” that I am, I felt I only had part of the story.
Here’s what I learned: In 2010 our state was still in early-stage recovery from The Great Recession of 2008, with a year-end 11.7 percent unemployment rate. Strengthened by a strong economic rebound it was 3.7 percent at the end of 2019. Our 2001 population of 8.2 million grew 15 percent to 9.45 million by 2010. In 2019 it had grown another 11 percent and was 10.49 million. Our 2010 median household income was $61,079 and climbed to $67,815 by 2018. North Carolina’s inflation-adjusted Gross State Product grew at an annual 2.3 percent between 2002-2010 but slowed to 2.0 percent between 2011-2019.
How does this data impact the state budget and finance question? I asked one of North Carolina’s most respected economists, Dr. Mike Walden of NC State University. Walden reports that the growth in North Carolina’s General Fund spending after inflation and population growth was 4 percent between 2002-2010 but declined to -6 percent between 2011-2019.
Here’s my spin: State spending grew too fast the last few years under Democratic leadership, as evidenced by frequent needs to cut state budgets. We can be thankful that Republican leadership implemented budget discipline and we have a $1billion cushion for this current recession, but they slammed on the brakes too hard and have not adequately addressed many needs. Their number one response (in good times and bad) has been to cut taxes. We must insist on fiscal responsibility, but we also must insist on sufficient spending on infrastructure and those needs that help fund growth and serve people.
I leave you with the Goldilocks question. Is state government spending too much, too little or just enough? What specific programs would you recommend be increased, cut or left alone? I look forward to your responses (firstname.lastname@example.org) and next week’s column will put forth some suggestions.