State Government Spending

State Government Spending

By Rob Schofield

Here’s a new idea for raising some badly needed revenue to support North Carolina’s under-funded human services, public education and environmental protection infrastructures: the “Politician/Commentator Myth Tax.”

Each time a self-righteous, blowhard talk show host or pontificating elected official blathers on about a topic about which he or she readily demonstrates him or herself to know little or nothing, there is a $25 fee. If, in so doing, the person in question relies upon or helps propagate a “policy urban myth” the fee is doubled. Use multiple myths in the same speech or commentary and the fee doubles again. With the General Assembly scheduled to reconvene in a matter of days, such a program seems eminently capable of putting a significant dent in the state’s expected budget shortfall before spring is out.

Last week we identified a potential contributor to the Myth Tax Fund in Rep. David Lewis who ascribed 40% of the cost of Medicaid to medical malpractice lawsuits. This week’s mythmaker is State Senator and potential gubernatorial candidate, Fred Smith of Johnston County.

In an opinion piece submitted by Smith that ran in the January 16 edition of the Smithfield Herald, the senator dredged up the hoary anti-government gripe that “state spending continues to be out of control….” According to Smith:

“The failure of the Democratic legislature and Governor Easley to prioritize and control spending has resulted in millions of dollars of inefficient expenditures — instead of worthwhile investments like educating our children or building and maintaining roads. Ultimately, this careless, undisciplined spending has also forced North Carolina to impose on its citizens the highest tax burden in the Southeast. Meanwhile, the local tax burden is also increasing. Irresponsible year-after-year increases in spending strain family budgets, stifle private-sector growth and damage the ability of small businesses and entrepreneurs to create new jobs.”

Setting the Record Straight

The fact is, after an initial bump in the late 1990’s (do Hurricanes Fran and Floyd ring any bells?), North Carolina state spending per capita has actually been slightly down since the start of the decade – even with last year’s effort to provide some “catch up” pay raises to teachers and state employees.

Here are the inflation-adjusted numbers for state per capita appropriations to the General Fund budget according to the N.C. Budget and Tax Center:

1996-’97:  $1783

2000-’01:  $2134 

2006-’07:  $2095

In other words, during a decade in which North Carolina was forced to grapple with skyrocketing growth in the cost of health care, a massive influx of school age children, an exploding prison population, and repeated federal cost shifts in which Congress dumped responsibility for essential services onto state government, state leaders managed to keep most basic state services alive and kicking for an extra 300 bucks per person – or about 82 cents a day.

During roughly this same period (1995 to 2005), the state’s total personal income (one of the best measures of the size of the economy) grew from $156 billion to $269 billion. When adjusted for inflation this represents an increase of more than 34% — well above the rate of growth in state spending. Indeed, it is precisely such numbers that lead many analysts to conclude that North Carolina is spending much less than it can and should to address the state’s large unmet need for essential services.

Ah, but what of North Carolina’s terrible and overwhelming tax “burden” that Smith castigates with that dreaded moniker: “highest in the Southeast.” Well, first of all, unless Florida and Virginia have moved somewhere else, Smith is simply wrong. North Carolina’s total per capita tax rate of $2929 is lower than 30 other states, including Virginia. Twenty-nine states, including Florida, have higher tax rates when it comes to taxes as a percentage of income.

More to the point, however, who cares about the rest of the “Southeast”? Is that North Carolina’s goal – to compete with Alabama, Mississippi and Louisiana? As news report after news report has pointed out, North Carolina has long since won that battle when it comes to such things as education, growth and attracting new businesses. North Carolina’s real competitive challenge in the 21st century lies not in continuing to drub its poorer neighbors, but in raising the quality of life of all of its citizens to match that enjoyed by the inhabitants of wealthier states and nations around the country and the world.

If Senator Smith takes the time to explore the factors that go into making up that challenge, he’ll quickly discover that “out of control spending” is not on the list.


About the author

Rob Schofield, Director of NC Policy Watch, has three decades of experience as a lawyer, lobbyist, writer and commentator. At Policy Watch, Rob writes and edits daily online commentaries and handles numerous public speaking and electronic media appearances. He also delivers a radio commentary that’s broadcast weekdays on WRAL-FM and WCHL and hosts News and Views, a weekly radio news magazine that airs on multiple stations across North Carolina.
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