RALEIGH – The classic spy show Mission: Impossible was exciting, excellent – and misnamed.
At the beginning of each episode, the Jim Phelps character played by Peter Graves would receive a recording that laid out a seemingly impossible mission. After the tape famously self-destructed within five seconds, Phelps and his team would then show that the mission wasn’t impossible at all. Just really challenging.
Admittedly, the title Mission: Really Challenging would have lacked a certain pizzazz. But it’s not a bad label to attach to the task of closing North Carolina’s big budget deficit next year without raising the state’s already onerous tax rates.
Outgoing legislative leaders and their allies within media and lobbying circles would clearly prefer the term “impossible.” They want to convince the public, who went the polls this fall to cast a vote for fiscal conservatism, that North Carolina’s fiscal challenges can’t be met without raising taxes.
Their claim is false. And since it rests on the assumption that North Carolinians possess too much of their own income, it’s a pretty hard sell.
Here’s the situation at a glance. After two years of stumbling through fiscal problems with federal bailouts and temporary taxes, North Carolina’s state government has around $20.6 billion worth of spending vs. about $17.4 billion in expected state revenue. There’s some quibbling about the precise figures, but essentially the state has a projected deficit in 2011-12 of around 16 percent.
Closing it will be exceedingly difficult. It will require reductions in every agency and department, from education to health care to public safety. It will require the elimination of thousands of employee positions (though not all by layoffs). It will require setting firm priorities and standing up to powerful spending lobbies.
But impossible? Hardly. The gap between North Carolina’s projected budget and revenue is nearly the same as the gap between the current cost of North Carolina’s government and that of Tennessee, South Carolina, Kentucky, South Dakota, Montana, Arizona, and New Mexico. While these states certainly don’t possess perfectly managed governments, and many face fiscal problems of their own this year, it is contrary to reality to suggest that North Carolina can’t deliver core government services with a proportionally smaller budget.
How might Gov. Beverly Perdue and the incoming Republican legislature accomplish this challenging task? Here are the broad outlines of a feasible plan to close the deficit:
• Save around $1.7 billion in the state’s education budget by reducing non-teaching positions in public schools by about 30 percent, rolling back recent class-size reductions, and focusing state higher-education funding on undergraduate instruction while raising tuition and private fundraising.
• Save about $800 million in health and human services by reducing Medicaid services and eligibility, reforming other entitlement and public-assistance programs, and focusing day-care subsidies only on special preschool interventions for our poorest children.
• Save around $100 million across the state’s range of justice and public safety programs, including changes in inmate health care, regulations, and sentences for nonviolent offenders.
• Save approximately $300 million by major reductions in the rest of state government, including an end to business subsidies, increased user fees for non-core public services, reductions in the state workforce, and a state agency reorganization that eliminates redundancies and improves accountability to the public.
• Close the remaining gap by selling state-owned assets and reclaiming revenues due to the state but currently routed elsewhere, such as the tobacco settlement money going to nonprofits and overhead receipts from research grants won through the use of taxpayer-funded university labs and facilities.
These fiscal measures will be difficult and painful, to be sure. But they simply reflect the application to government of the economic realities that North Carolina households and business have been grappling with for years now. If past governors and legislatures had listened to fiscal conservatives in the past, when we argued that 7 percent to 10 percent annual spending hikes were unsustainable and irresponsible, the state wouldn’t face such a yawning deficit.
But they didn’t, so now the mission is to clean up their mess. It’s challenging, not impossible.
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Hood is president of the John Locke Foundation and publisher of CarolinaJournal.com.
By John Hood
November 19, 2010
