State Government

Has State Spending Really Declined?
Gov. Mike Easley and the General Assembly have dealt repeatedly with tax revenue shortfalls over the past two years, and stories about state budget cuts have dominated the newspapers. But much of this information has been incomplete or conveyed piecemeal. Can we really know how close to the bone state government has been cut? Has spending been cut at all?

We have some of those answers, but first, ask yourself this question: What’s your understanding of how much the state operating budget, excluding transportation, has decreased or increased since fiscal 2000-01, when the economic downturn began? Once you’ve got that number in mind, read on to learn the facts.

Let’s compare state spending as it stood in fiscal 2000-01 with the budget proposal submitted by the governor to the General Assembly this spring. The House and Senate each have adopted their own budgets since then, and conferees were trying to resolve differences between their separate plans. But in the overall scheme of things, the differences between their budgets and the plan proposed by the governor are relatively minor — a difference of $200 million or so out of $15 billion. That being the case, we’ll use the governor’s budget for fiscal 2003-04 as the point of comparison with actual spending in fiscal 2000-01. This analysis shows that over that three-year period:

Overall state spending is up 8 percent. The state’s operating budget in 2003-‘04 would be $15 billion under Easley’s plan compared to $13.82 billion in 2000-’01.

Budgets for most big state agencies are down 8 percent. Budgets for large state agencies like the departments of Administration, Environment and Natural Resources and Commerce, would drop from $712 million in fiscal 2000 to $653 million in the year beginning July 1.

But spending by the biggest agency is up 24 percent. Spending by the Department of Health and Human Services, which administers the Medicaid program, was $2.95 billion in fiscal 2000 compared to $3.7 billion in the governor’s budget proposal. Interestingly, while HHS spending has soared, the number of General Fund-supported employees in the department has fallen from 9,649 to 8,902, a 7.7 percent decline.

Total state government jobs are up 1.7 percent. There were 226,462 General Fund-supported positions in state government in fiscal 2000. That number would grow to 230,283 next fiscal year.

Excluding education, however, state jobs are down 4.5 percent. Excluding the public schools, community colleges and state universities, General Fund-supported positions dropped from 46,383 to 44,280.

Many agencies have had job cuts of 10 percent or more. Juvenile Justice, Crime Control and Public Safety, Labor, Agriculture, State Budget and Management, Secretary of State, and the Governor’s Office would have personnel reductions of more than 10 percent over the three-year period. Excluding the Department of Public Instruction, only the General Assembly, the Department of Insurance and the Administrative Office of the Courts would experience an increase in staffing over the three years of 6.4 percent, 5.2 percent and 0.1 percent, respectively.

Spending on education has grown by 5 percent. The operating budget for education has grown from $8.24 billion in fiscal 2000 to $8.65 billion in the governor’s budget for next year.

State jobs in education are up 3 percent. There were 180,000 state jobs in education in fiscal 2000 and about 186,000 proposed in the governor’s budget for next year. However, the administrative arms of public instruction and community colleges would be reduced by a combined 11.4 percent during that period.

From those numbers, it’s clear that the state government spending spree of the recent past has stopped. For example, in the modern history of North Carolina you can probably count on one hand the number of times major state agencies had smaller budgets and fewer employees that they did three years earlier, as will be the case next fiscal year. But whether the slowdown and the cuts have gotten to the bone probably depends on where you’re sitting.

Were your perceptions about the budget on target? The correct answers to the questions are:

1. D. Since the economic downturn began in fiscal 2000-’01, the operating budget of state government, excluding transportation, has increased 8 percent.

2. A. Excluding education, the number of jobs in state government has decreased 4.5 percent.

3. B. Mainly because of exploding costs of the Medicaid program, over the past three years the budget for the Department of Health and Human Services has increased 24 percent.

We would like to hear how you feel about state spending and budget cuts. We’re conducting a poll on the subject at the NC BEST web site. Take a few seconds to make your voice heard by clicking on nccbi.org/ncbest. NCBEST is the education and research arm of NCCBI.

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