Featured image for article

How Fiscal Restraint Protected NC Government from Layoffs

For almost a decade, North Carolina has benefited from the fiscal conservatism of our General Assembly. This conservatism has allowed North Carolina to avoid many of the tough decisions other states have had to make during the COVID-19 economic downturn, like increased borrowing and government layoffs. In his research brief this week, the John Locke Foundation’s Joe Coletti writes:

Since 2011, the North Carolina General Assembly has restrained spending (consumption) and used a portion of the excess revenue to build up savings that could be used for unexpected expenses, such as Hurricanes Matthew in 2016 and Florence in 2018 or this year’s Great Suppression. In contrast, Gov. Roy Cooper has proposed spending much more each year than the legislature, diverting money from the unemployment insurance trust fund, taking on $5 billion in new debt, and spending the entire $1.5 billion fund balance this fiscal year. Each of Cooper’s recommendations would make future tax hikes or spending cuts all but inevitable even with similar economic growth.

While North Carolina has largely avoided these negative outcomes, the federal government continues to increase the booming deficit. Coletti writes:

Population growth, investment, and total factor productivity have not increased fast enough to generate sufficient tax revenue to pay back past deficits and new government spending demands, so this year’s $3 trillion explosion of spending to cover COVID-related costs has been piled on top of another $1 trillion in deficit spending just to cover ordinary expenses.

If more elected officials who share Cooper’s spending philosophy come into office in the next election, North Carolina could expose itself to increased debt, taxes, and government layoffs in the future. Thankfully, North Carolina could prevent these outcomes through legislation. Coletti writes:

Responsible budgeting with plenty of margin between revenue and spending since 2011 made it possible for all state employees to keep their jobs without having taxes increased on families and businesses. A constitutional tax and expenditure limit would help ensure state employees’ jobs in the next recession.

Read Coletti’s full brief here. Learn more about a tax and expenditure limit (TEL) in Coletti’s report, “Big Government, Big Price Tag: More Spending = Higher Taxes For North Carolinians,” here.

Brenee Goforth / Marketing and Communications Associate

Reader Comments