Prosperity Watch Issue 38, No. 2: State spending would decline for six straight years as a share of the economy under budget proposals

State investments are essential building blocks of long-term economic growth, yet over the past five years, we’ve seen North Carolina state spending actually decline as a share of the economy. State budgets typically allow spending to grow as population grows and the economy changes. This ensures that state investments keep up with the changing needs of the state’s residents—building enough schools and purchasing enough textbooks to meet an increasing population of school children; providing adequate medical care and residential services to North Carolina’s growing number of seniors; and making sure that community college funding keeps up with the needs of unemployed workers to receive job training.

Unfortunately, state budgets enacted since the 2010 fiscal year have increasingly failed to keep up with these needs. As seen in the following chart, state spending as a share of the economy—measured by state personal income—has consistently fallen year after year in the past few years. And recent budgets proposed by the Governor, Senate, and House for next year would only make this trend worse.  State spending in the Senate-proposed plan, for example, is just 5.24 percent of state personal income in 2015, compared to the 6.1 percent average over the past 45 years.  

Perhaps most troubling, the Senate budget would cap off the only period since 1971 in which state spending declined as a share of the economy for six straight years while the economy itself grew. These long-term disinvestments have translated into significant unmet needs for our state’s growing population—a shortage of K-12 textbooks, school nurses, and community services for older adults. And if lawmakers continue on the course set by the passage of last year’s deep tax cuts for wealthy individuals and profitable corporations, there just won’t be enough revenue left over to repair these critical investments.

Now is the time for lawmakers to reverse course and reinvest in the schools, roads, hospitals, public safety, and job training programs that are the building blocks for growing an economy that benefits all North Carolinians. The state should not attempt to address the ravages of the greatest economic downtown in 75 years with state investments at historic lows.

 

 

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