Despite the economic downturn caused by the COVID-19 pandemic, North Carolina’s tax revenues have remained surprisingly robust, which is giving Governor Cooper an excuse to spend unbudgeted funds rather than to conserve them for future needs. The state can ill afford the governor’s spendthrift approach to fiscal management and should be very wary about his agenda.
State economists are projecting North Carolina’s revenues for the budget year ending June 30 will exceed projections by over $4.1 billion and Governor Roy Cooper is ready to spend the surplus to fund an emergency budget supplement he is proposing. But this effort is lacking in a sense of real concern for both the current situation and the future risks.
Earlier this month Governor Cooper outlined a plan allocating COVID-19 federal relief funds along with state revenues to “help North Carolina communities build back as the state turns the corner on the pandemic.” The governor’s Emergency Budget Supplement amounts to $4.9 billion in federal funds and $695 million in state funds with a total investment of just under $5.6 billion
Among the governor’s proposals are $468 million for bonuses to go to educators and school personnel; and $37 million to support small businesses devastated by the governor’s executive orders curtailing or closing their operations.
While it is comforting to see the governor finally show some concern about the impacts his executive orders have had on almost every aspect of life in the state - economic, educational and health - it is very late in the game. Over the past 12 months Governor Cooper has not expressed any concern about the state’s small businesses that have had to curtail or completely shut down in response to his draconian executive orders. Nor has he been aggressive in responding to the educational chaos his last-minute and often confused announcements have created. And of course there is the fact that he vetoed the legislature’s efforts to provide pay raises for teachers and school personnel during last summer’s legislative short session.
Now that the state finances are better than expected, the governor is ready to spread his concern. “We must bring real help to our schools, to small businesses and to people who have lost income and lack health care to ensure our state and entire economy emerge from the pandemic stronger than ever,” Cooper said in a recent news release.
Yes, we do need to address the massive economic, educational and health impacts but Governor Cooper also needs to be concerned with the economic future beyond today’s circumstances. And to do this he should first work with the N.C. Legislature to prioritize expenditures while also setting budget contingencies as the General Assembly plans the next biennial budget.
Any financial decisions related to relief programs need to take into account the possibility that the pandemic, as many scientists and epidemiologists predict, will not be quelled for at least the remainder of this calendar year. There is even concern that the continuing mutations creating new variants of COVID-19 may cause a significant delay in economic recovery worldwide for at least another year.
Despite the overwhelming negative impacts of the pandemic, North Carolina’s financial condition has remained healthy because North Carolina’s General Assembly has been aggressive financially while also being very fiscally conscious, assuring that the state remains financially sound. This fiscal health has resulted in the state being one of only 15 in the nation to receive a triple A bond rating, which means the state’s borrowing power is better than 35 other states. And according to a U.S. News survey, North Carolina is ranked fifth nationally for its long term financial stability.
These rankings and the state’s financial stability are important considerations as the state plans the next biennial budget which, according to state budget offices, should anticipate decreases in revenues for FY 2021-22 and possibly the following year, 2022-23.
With the national debt ballooning to over $27 trillion, which is more than 100% of the country’s total financial output, the time for fiscal caution on the part of the state is now, not when expenses exceed revenues. By then it will require painful financial adjustments that will be more damaging than the current situation.
Considering all of the unexpected shocks our state and nation have experienced since March of last year, and the high probability of many more to come, the Governor should temper his program and seek to work with the legislature to assure not only a healthy state but a healthy economy for the long haul.