By Elaine Mejia
Word of North Carolina’s so-called “runaway spending” in recent years is often accepted as “fact” during public discourse on the state budget.
A closer look at budget growth since 1990-91 shows such claims are not grounded in sound fiscal analysis.
The problem with the spending-spree allegation is that it simply compares year-to-year growth in total appropriations without adjusting for inflation and population growth.
With such adjustments, state general-fund appropriations — as a share of the state’s total personal income — have decreased since the beginning of the 1990’s from 7.05 percent to 6.17 percent, and per-capita spending, excluding Medicaid, has decreased by $80.
If one includes Medicaid in the calculations, per-capita general-fund appropriations are $82 higher than at the beginning of the 1990’s.
In other words, the real growth in state spending per resident can be completely accounted for in the growth in this one program.
Unfortunately, cutting Medicaid is not a realistic solution to the current crisis as most of the precipitous growth in the program can be traced to the rising cost of caring for seniors and persons with disabilities.
In fact, 82 percent of the expected growth through 2004 will be spent caring for these two expensive populations.
When this fact is combined with the soaring cost of prescription drugs, it becomes clear that most growth is not the result of excessive generosity by the state, but demographic and inflationary pressures beyond its control.
While the state should continue to look for cost-savings, these hard economic times are not the time to take health coverage away from low-income seniors, the disabled or struggling families.
As North Carolina lawmakers grapple with the current fiscal crisis and contemplate several more years of structural budget deficits, it is important that they gain a clearer understanding of whether or not there is room for more spending by state government.
For too long, some lawmakers and others have accepted the proposition that the state budget has been out of control.
This assumption is unfounded, and it is undermining attempts at meaningful discussions about how North Carolina should chart a course for the future.
Elaine Mejia is senior fiscal policy analyst for the N.C. Budget and Tax Center in Raleigh.