Letter to the Editor: Sen. Jim Perry - Remembering Fiscal Responsibility
North Carolina’s 2009 Legislative Session will be remembered for the largest revenue shortfall and budget gap the State has experienced since the 1970s. We often hear comments of “pre recession spending levels” from people who want to return to the days when spending budgets grew by 9% per year. While I can appreciate it felt good for some, that was simply an unsustainable practice reflective of poor financial decision making.
North Carolina was spending almost every dollar it had, and expenses were growing at double digits in many areas. We had less than $150 million in reserve for a budget of $21 billion. If you did that in your personal life, society would call you fiscally irresponsible.
Lawmakers compared what they planned to spend versus what they would actually have, and they discovered a $4.5 Billion shortfall in the budget. Our NC Constitution requires our budget be balanced. Legislative Democrats, who had been in charge for 140 years, had no other options, and they began making cuts.
Over 2,100 state jobs were eliminated, workers were furloughed, pay increases were frozen. The textbook budget was chopped by $168 million, and LEA budgets were reduced by as much as 18%. The reckless financial decisions leading up to 2009 caused the the $2,500 reimbursements for NBPTS applications to stop, they forced 200 literacy coaches to have their positions eliminated, and they closed 7 prisons. People’s lives were turned upside down because we did not have sustainable budgeting practices. Some of the same lawmakers who made those bad decisions still serve in the General Assembly, and are offering budget advice today.
The State of North Carolina has a Debt Affordability Advisory Committee. This committee approved a study that, for the first time, calculated unfunded liabilities in the State Health Plan and State Pension system into debt capacity earlier this year. This means, for the first time in state history, someone said: “Hey, we already owe this money and we are going to have to pay it in the future. It is going to reduce our cash flow, so we think we need to count it as a debt when we are determining what we can afford.” I know, that is a really novel concept, right?
Earlier this year, the Governor proposed to borrow an additional $6 billion dollars to fund things he wants to give to his supporters. The debt commission indicated that was a bad idea. In layman’s terms, the accounting indicated we could only borrow about 1/3 of that amount, at best, and be on solid financial footing. When you finance with bonds, you are basically borrowing on the credit card of the taxpayers. The proposed bond would have required taxpayers pay about $2.4 billion of interest payments, on top of paying back the $6 billion.
While it is true that a bond “guarantees funding for projects,“ it is also true that it guarantees that we were obligated for payments. Why does that matter? Because history has taught us we will absolutely have another recession. If we are locked into a bond payment, that expense can not be cut. Our Constitution requires we have a balanced budget, so we would be forced to cut other painful areas impacting our state employees, teachers, university employees, community colleges, et cetera. Have we forgotten the past?Do we want to do the same things again and expect different results? The State Capital Infrastructure Fund (SCIF) is the fiscally responsible alternative.
I have heard the Governor’s most recent budget proposal described as “giving” counties more money. Admittedly, it hurts my heart when I hear that inaccurate explanation. The lack of financial knowledge make me cringe, and reminds me of our need for more financial education for our young people. You can’t take my credit card, pay for our dinner, and say that you gave me anything. All you gave me was an obligation that I have to pay in the future, and you stuck me with the bill in order to eat what you wanted.
I can promise you that everyone dependent on the State Health Plan and our State Pension does not want us to live this way. I can also assure you the same is true for the vast majority of taxpayers. Very few people understand complex finance and accounting but we all know it is “better to live within your means.” North Carolina taxpayers do not want someone maxing out their credit cards and leaving them to pay the bills. The budget agreement reached by the NC Senate and the NC House represents a sustainable, fiscally responsible path for the people we serve.
Senator Jim Perry
NC Senate District 7
Wayne and Lenoir County
