CIVITAS: ‘Cut to the bone’? State Budget has has grown FOUR TIMES as fast as population since 1989

RALEIGH – Over the better part of the last decade, the North Carolina General Assembly has ushered in tax reforms, regulatory reforms, and budgeting in ways that resulted in annual tax revenue surpluses year after year. That’s a good thing, especially considering that natural disasters like Hurricane Matthew or Florence, or mandated disasters like the Pandemic Panic, often require leaning on reserves.

Yet, as much as the fiscal policies of Republican majorities in the 2010s have been relatively conservative compared to years prior, spending has still been increasing. And faster than rates of population growth, by a significant pace, according to analysis by Brian Balfour. State government only seems to get bigger, no matter who is at the helm.

From Civitas Institute:

“Over the last thirty years, North Carolina’s state budget grew at a rate more than four times the state’s rate of population growth.

Progressives like to selectively cherry-pick the high-water spending mark of 2009 to use as a baseline comparison to current spending levels to make the case that somehow the state budget has been ‘cut to the bone.’

A reminder of long-term spending trends, however, provides a more complete picture.

As shown in the chart below, the state’s General Fund budget grew by a whopping 265 percent from 1989 to 2019. At the same time, the state’s population grew by 62 percent, less than one-fourth the rate of the state budget.

In nominal dollar terms, the state budget grew from $6.6 billion in 1989 to $23.9 billion last year.

After adjusting for inflation, state spending more than doubled during that time, while inflation-adjusted per capita spending grew by 27 percent.

In other words, the amount of real state budget spending per person in North Carolina has grown by more than a fourth since 1989.

In just one generation, North Carolina’s state budget spending, when viewed on a per capita inflation-adjusted basis, has expanded by a full fourth of its previous size.

Moreover, when we look at the long-term trend, it becomes readily apparent how misleading it is for progressives to use 2009 as a baseline comparison. The build up to 2009’s Great Recession was a major outlier even among the already unsustainable trend of state spending growth.

From 2003 to 2009, the state budget exploded by an astounding 49 percent. The rise marked a 29 percent hike even after adjusting for inflation. The recession popped this massive state spending bubble, and new leadership sent to Raleigh by voters in 2010 established a more restrained budget growth path ever since.

When progressives point to 2009 as a baseline comparison, however, they never mention just how extreme the build up in spending was in the several years prior. Attempting to re-inflate the state budget bubble would require crushing tax hikes that would stifle economic growth and put countless  North Carolinians out of work. Low-skilled, low-income households would unquestionably be hardest hit.

(Sources: General Fund appropriations for FYE 1989 through 2007 from the 2006 Post-Legislative summary produced by Fiscal Research, subsequent appropriation numbers taken from each year’s budget bill, population estimates for July that begins each fiscal year from the Office of State Budget and Management, and GDP deflator levels taken from the Federal Reserve Bank of St. Louis, adjusted to 2012 dollars)

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