North Carolina legislators are considering a bill that would distribute dollars to some taxpayers from a revenue surplus coming in over conservative projections, due to the stock market gains of a few. This flawed strategy would distribute to individuals small amounts of funds that would instead have a much larger impact if applied to one of the many needs in our state, such as ensuring our communities are resilient in the face of the next natural disaster or economic downturn.
The state’s savings reserve, often called the Rainy Day Fund, should be the obvious vehicle to hold these dollars for the greatest good of North Carolina. In June, the balance reported by the State Controller’s office totaled approximately $1.2 billion, down over 30 percent from the prior year and well below what could be needed in the near-term.
First, with the successive hurricanes Matthew and Florence, efforts to build up the state’s savings has met with the ongoing pressures created by underinvestment in the infrastructure —planning and affordable housing, particularly — which results in higher rebuilding costs. North Carolina’s hurricane season is well underway, with the damage of Hurricane Dorian still being assessed.
Last week’s Hurricane Dorian is likely to be just the first of several this year, climate experts have predicted. With ongoing efforts to recover from Hurricane Matthew in 2016 and Hurricane Florence last year, our legislators should be looking to increase the amount we’re saving as a state, not looking to threaten our state’s financial solvency through one-time redistributions.
Second, during the Great Recession, the state cut funding for basic services, including public schools, in order to make up for the $2.5 billion budget shortfall, in order to balance the state budget. That is precisely the purpose of building a strong Rainy Day Fund – to prevent a budget shortfall that would result in a cut in services by having funds available during recessions or other unexpected events that cause a decline in revenue.
With some economists predicting that a U.S. recession is imminent, it would be the fiscally responsible thing to build up our state’s dwindling savings rather than advance this gimmick of a bill.
What’s more is that our state is operating on a continuation budget, which means no funds have been appropriated to the Rainy Day Fund for the fiscal year currently underway. Instead our General Assembly has chosen to pass smaller, piecemeal budget bills so they can avoid coming to the table to discuss what public investments are needed to build thriving communities.
Lawmakers’ decisions about where to allocate tax dollars have tangible effects on our state. Similarly, decisions about where not to allocate funds — like preparing for the next devastating manifestation of climate change, or the next economic downturn — have long-term effects for all of us whose well-being is on the line.
Suzy Khachaturyan is a Policy Analyst at the Budget and Tax Center, a project of the North Carolina Justice Center.