Budget Failsafe Means Negotiations Unlikely As Lawmakers Return To Raleigh

By Julie Havlak
Carolina Journal News Service

RALEIGH — For the first time in state history, the governor is introducing a budget proposal in August. The fiscal year is already under way, but North Carolina’s budget is almost two years old.

Gov. Roy Cooper, a Democrat, wants to spend $25 billion on a slew of ambitious priorities — from expanding Medicaid to increasing unemployment benefits to weakening Opportunity Scholarships — almost none of which Republicans are likely to accept.

And they don’t have to.

Lawmakers will return Wednesday, Sept. 2, to take up budget issues. If they can’t pass a spending plan before the end of the fiscal year, June 30, the state government doesn’t grind to a halt. The existing budget rolls over into the new year, thanks to a provision from the 2016 budget plan.

The provision frees lawmakers from any “drop dead” deadline to reach an agreement with Cooper. Some observers blame the law for inflaming partisan divides, but fiscal conservatives credit it for slower spending and better policy outcomes.

North Carolina is one of three states that automatically continue their budgets, and it’s the only state to do so in the past 50 years, said Patrick Gleason, Americans for Tax Reform vice president of state affairs.

“We think it’s a great idea that other states should look at. Shutdown politics and the game of chicken can be used as a strategy to gain higher levels of spending,” Gleason told Carolina Journal. “You essentially negate any shutdown politics.”

North Carolina’s current budget is a legacy of this law. The 2019-20 budget plan became a casualty of the budget stalemate, after Cooper vetoed it over Medicaid expansion, and Republicans failed to override his veto.

That was the first time the 2016 law came into play. Republican lawmakers included the provision in the 2016 budget to defuse the threat of government shutdowns. But the law didn’t affect politics until the Republicans lost their legislative supermajorities in the election of 2018.

Removing the risk of falling off a fiscal cliff had consequences. It may have weakened the urgency that drove legislators to negotiate.

“You don’t have a deadline looming over you that could lead to drastic outcomes and the shutdown of parts of the state,” said Andy Taylor, political science professor at N.C. State University. “There’s less of a compulsion to reach out across the aisle and prevent the apocalypse. That’s not there anymore.”

But this has its advantages, says Joe Coletti, John Locke Foundation senior fellow.

“When you don’t have an all or nothing choice, you end up with lower spending,” Coletti said.

And lawmakers can dodge the “Washington Monument” problem — the government shutdowns that force a bad deal.

“The governor shuts down the most visible, painful parts of state government to force the legislature to capitulate,” Coletti said. “[Now] you just end up with last year’s budget, which is usually less than what either side would have wanted.”

That outcome looks likely this year. The coronavirus pandemic hit state revenue hard, and Republicans favor cautious spending. Cooper’s budget is an ambitious plan that would normally take months to hash out, even with a sympathetic legislature.

The pressure is on Cooper to push a new budget. The existing budget was passed under stronger Republican control, says Chris Cooper, professor of political science at Western Carolina University.

“No new budget equates to a Republican budget,” Cooper said.

North Carolina will have to finish allocating federal funding before it expires at the end of this year. But Cooper’s plan could have more influence as a campaign document than a budget. With the pandemic and only nine weeks until the election, the budget process has become a “bizarre situation,” says Taylor. In normal times, elected officials begin crafting a budget after the election. Now politicians are crafting a budget plan while campaigning, and they aren’t on a strict deadline.

That changes the process.

Under the N.C. Constitution, lawmakers pass a biennial budget covering two fiscal years. In the even-numbered years, they only modify the existing plan.

But over the past two decades, that biennial process collapsed into what is an annual budget process in all but name. The shock of the pandemic and the 2016 law hastened “the era of continuous budgeting,” says Taylor.

“There was a clear calendar, a clear rhythm, everybody knew their role,” Taylor said. “Now there’s no budget season, no rhythm. It’s fiscal policy all the time.”