Opinion: Fund Core Programs Or Save Surplus

By John Hood

RALEIGH — I acknowledge that one politician’s “wasteful spending” may be another politician’s “strategic investment.” Still, I suspect state Sen. Phil Berger got it right when he blamed the slow start of this year’s budget negotiations on lawmakers’ lack of focus on truly state responsibilities.

Berger, president pro tem of the North Carolina Senate, told reporters that House leaders wanted to appropriate not just the $1 billion in revenue surpluses projected for the 2023-24 and 2024-25 fiscal years but as much as $1 billion more from state reserves.

What do they want to fund? Berger offered a one-word answer: “Pork.”

Policymakers and analysts generally define pork-barrel spending as the use of state or federal revenue to fund local projects that primarily benefit residents of the community in question. Furthermore, they typically use to the term to describe earmarking such projects in a state or federal budget rather than setting up, say, a common pool of funds for which localities may apply through a competitive grant process.

In my experience, lawmakers often bristle at the suggestion that there’s something untoward about funding local projects directly in the budgets they enact, rather than appropriating dollars to an executive-branch agency to dispense based on specified criteria. The legislative has the “power of the purse,” they argue, and shouldn’t transfer that responsibility to other entities.

As a practical matter, however, all legislative bodies have, since the invention of legislative bodies, authorized elected or appointed magistrates to make decisions about the expenditure of public funds. They don’t hold public votes on every purchase made, contract awarded, or employee hired.

Where is it reasonable to draw the line? One threshold consideration is, of course, the price tag. It makes sense to reserve legislative deliberation for decisions with large financial consequences (and to submit to voters themselves proposals to assume general-obligation debt). Another reasonable test is scope. Should federal lawmakers really be deciding which state receives highway or education grants? Should state lawmakers really be deciding which localities get money to refurbish athletic facilities or purchase police cars?

With regard to North Carolina’s recent revenue surpluses, I think many lawmakers have come to believe the money is inherently nonrecurring and shouldn’t be used as fiscal capacity either for tax cuts or for ongoing expenses such as public-employee salaries. What’s left, to their way of thinking? Capital projects and other one-time needs, even if primarily local in nature, which they believe ought to be specified in an adjustment to the 2024-25 budget.

I disagree. For starters, I question the premise. A series of “nonrecurring” revenue surpluses begins to look an awful lot like recurring revenue. Moreover, even for truly nonrecurring money, there is another option: improve state government’s balance sheet. Put the money in savings or, alternatively, pay down state debt, which frees up recurring dollars no longer needed for debt service.

North Carolina’s balance sheet is, admittedly, pretty healthy. As of late May, the state has $4.75 billion in its rainy-day fund and billions of dollars more in the General Fund credit balance and other reserves. And the Tax Foundation reports North Carolina has $4,431 in state and local debt per person, ranking us 48th (New York’s per-capita debt load is an eye-popping $19,407).

But according to the latest Pew Charitable Trusts rating of total fiscal balances — including but not limited to rainy-day funds — North Carolina has a lower ratio of savings to spending than the likes of South Carolina, Georgia, Alabama, and Texas.

Second, even if it is the best use of state revenue to fund local projects, we ought to do it through competitive grantmaking. Such decisions ought not be determined by seniority or partisan affiliation. I don’t discount the necessity of horse-trading, of negotiation and compromise, in passing budgets or other legislation. But their subject matter ought to be matters of truly statewide import, not which local government (or private party!) gets funded by taxpayers who may live dozens or hundreds of miles away.

John Hood is a John Locke Foundation board member. His latest books, Mountain Folk and Forest Folk, combine epic fantasy with early American history (FolkloreCycle.com).