On Tuesday morning state Rep. Paul Stam and state Senator Phil Berger held their weekly press briefing at the capitol. Not surprisingly they focused on the budget debate.
After challenging the governor to two weeks of debates around the state (an invitation the governor’s office has already declined), Rep. Stam went on to once again deny that the state’s books are in a state of crisis. He did this by comparing last year’s estimated general fund expenditures ($20.3 billion by his count) with next year’s baseline revenue availability ($19.2 including stimulus dollars), thereby declaring a budget gap of only $1.2 billion. These numbers are not necessarily inaccurate but they are as misleading as a diet pill infomercial. Here are 4 reasons why:
1. The Stam-n-Berger “methodology” includes the revenue from transferring .25 cent of local sales tax to the state as part of the Medicaid swap in the state’s baseline revenue forecast but then they neglects to mention that this new revenue comes with an even larger spending mandate. So add at least $270 million to the Stam-n-Berger shortfall to account for this mistake.
2. There is also no recognition of the 6-month state health plan patch of roughly $250 million that was paid out of reserves in 2008-09 that must be paid out of general fund tax revenues in 2009-10. So add another $132 million (required 2009-10 expansion) to the Stam-n-Berger budget shortfall to account for this omission.
3. There is no acknowledgement that the budget for 2008-09 was cut by a billion dollars (and that’s after accounting for stimulus funds) and that those cuts have already taken their toll on state government via hiring freezes, state employee pay cuts, and cuts to programs like the home and community care block grant program just to name a few examples.
4. Finally, there is no recognition of what is known as the “continuation budget” or “current services” budget – the budget that the agency administrators craft that details what funding they will need to operate their agencies at current levels. This budget accounts for the real world – the world in which there are such things as health care inflation, population growth, enrollment growth in health insurance programs and community colleges and more and more prisoners that must be “housed.” Ignoring these real world pressures is like pretending that North Carolina is in suspended animation. The gap between this real world budget (i.e. the continuation budget) and the baseline revenue forecast remains $4.5 billion of which $1.4 billion can be covered by stimulus dollars leaving budget gap of over $3 billion.
Unfortunately, the Stam-n-Berger definition of a budget shortfall crept into this mainstream newspaper article as if it were legitimate. If reporters opt to use the Stam-n-Berger shortfall estimates they should at least attempt to explain the difference between the competing definitions.
One last thing. Stam-n-Berger reiterated their preference for the level of spending contained in the continuing resolution but once again failed to recognize that the baseline revenue forecast even after adding in stimulus dollars still falls several hundred million dollars short of being able to support that spending level!