The troubling truth behind NC’s vaunted “surpluses”

By: - April 7, 2020 5:30 am
Image: Adobe Stock

It’s certainly nice that North Carolina entered the COVID-19 health pandemic with some cash in the bank. The combination of the legislature’s cheapskate spending priorities and the ongoing impasse between Gov. Roy Cooper and GOP legislative leaders has left the state with as much as $3 billion available to help plug the gaping new budget holes that will quickly emerge as recession grips the economy.

In addition, the Unemployment Insurance Trust Fund will enter a period of what figures to be unprecedented demand with an extra few billion on hand as well.

Both surpluses will be depleted in short order, but there’s no denying that it’s better to be in the black than the red at the onset of tough times.

Here, however, is another fact about the current state fiscal situation that there is no denying: Republican lawmakers and their allies in the right-wing think tanks (i.e. the principal authors of that situation) deserve little-to-none of the praise they are seeking for where things stand.

Yes, North Carolina has accumulated some budget surpluses during a decade that featured significant economic growth here and across the nation. That’s what happens when you spend less than you take in.

But, as many a Charles Dickens character could have explained, there is more than one way to accumulate a “surplus.” A starvation diet can also do the trick.

That, in effect, is how North Carolina got to where it’s at. It has accumulated surpluses by failing to provide the state’s residents with the barest of essentials; by failing to adequately fund the core services and structures necessary to nurture a middle-class society, even as it was slashing tax rates on wealthy individuals and profitable corporations.

The list of these penny-wise and pound-foolish policy choices is as long as your arm:

  • the failure to adequately fund our public schools and early childhood education – a failure that court-appointed experts recently reported will take billions of dollars to begin to remedy;
  • the failure to adequately support healthcare and public health – a situation that has led to the tragic twin phenomena of hundreds of thousands of people lacking health insurance and hospitals literally begging for resources in the current crisis;
  • the failure to fund environmental protection efforts during a moment in which dangerous threats to ecosystems and human well-being have been rapidly multiplying;
  • the decision to eviscerate the unemployment insurance system to the point that it ranks as the nation’s least generous and covers less than one-in-10 unemployed workers; and
  • the failure to adequately fund our civil and criminal justice systems – a failure that is now coming home to roost, perhaps most notably, in our dangerously understaffed and under-resourced prisons and jails.

And, of course, the even larger point to be made here is that there is no magic connection between miserly spending policies and surpluses. North Carolina could also have easily accumulated sizable surpluses and gone a long way toward addressing many of its unmet needs with  a balanced approach that simply left tax rates on wealthy individuals and profitable corporations where they were at the beginning of the decade – a time at which it was already ranked among the most “business-friendly” states in the union.

What’s more, had the state really moved aggressively over the last decade to tackle the economic challenges it faced by investing in the structures necessary to build a more resilient, middle class 21st Century economy (things like education, workforce development, transportation and other infrastructure), many North Carolinians would be vastly better positioned to weather the current crisis.

As economist Patrick McHugh of the N.C. Budget & Tax Center reported recently:

After a decade of job growth being concentrated in low-wage service jobs, over one-quarter of all private sector jobs in North Carolina are now in leisure, hospitality and retail. Sadly, these are precisely the workers who can least afford to lose income and often don’t have employer-provided health care, paid sick leave or other benefits that would soften the blow.”

And then, of course, there is the other giant elephant in the room: the failure to expand Medicaid. Had Republican legislative leaders and then-Gov. Pat McCrory opted to take the sweetheart deal included in the Affordable Care Act instead of stubbornly elevating ideology over common sense, thousands of lives could have been saved and tens of billions in federal dollars and thousands of good jobs injected into the economy.

The bottom line: North Carolina’s much-vaunted surpluses are fine, but they’re not all they’ve been cracked up to be. Not only are they likely to evaporate quickly, they are chiefly the result of sacrifices made by the populations that could least afford them. This hard reality will only worsen the pain and suffering that will be felt in the weeks and months ahead.

Our stories may be republished online or in print under Creative Commons license CC BY-NC-ND 4.0. We ask that you edit only for style or to shorten, provide proper attribution and link to our web site. Please see our republishing guidelines for use of photos and graphics.

Rob Schofield
Rob Schofield

Editor Rob Schofield oversees day-to-day newsroom operations, authors regular commentaries, and hosts a weekly radio show/podcast.