Governor’s Four-Months-Late Budget Proposal Adopts Bev Perdue ‘Spend Now, Pray Later’ Strategy
Cooper ups spending by over half-billion dollars despite warnings from nonpartisan experts
The ‘spend now, pray later’ budget strategy caused teacher layoffs and salary cuts when the last Dem governor tried it
Raleigh, N.C. — Despite warnings from the state’s nonpartisan fiscal experts, Gov. Roy Cooper’s four-months-late budget proposal increases spending by over half a billion dollars.
In a joint statement, Senate budget writers Sens. Harry Brown (R-Onslow), Kathy Harrington (R-Gaston), and Brent Jackson (R-Sampson) said, “This ‘spend now, pray later’ budget strategy resulted in teacher salary cuts and layoffs when the last Democratic governor tried it. The Governor is ignoring warnings from nonpartisan budget experts so he can produce a four-months-late budget proposal that reads more like a prop from an episode of ‘Veep.’”
Yesterday, the state’s nonpartisan fiscal experts shared a lengthy analysis with lawmakers about an unexpected and highly unstable tax “over collection” of $457 million.
According to the state’s nonpartisan budget staff, “Most of the over collection was due to a lower-than-expected shift in income tax payments due to the movement of the payment deadline from April 15 to July 15…This amount would not be recurring and it may put negative pressure on the 2020–21 [revenue] forecast.”
In other words, the state’s nonpartisan fiscal experts expected more people to pay their taxes after April 15 this year because the tax deadline was extended by three months. But fewer people ended up paying later, which means the state collected some money last year that economists predicted would actually come in this year.
This does not mean the state has more money to spend. It means the state likely took in some money last year that it won’t take in this year.
But Gov. Cooper’s four-months-late budget proposal spends every single penny of the $457 million despite clear warnings from the state’s nonpartisan fiscal experts.
Sen. Warren Daniel (R-Burke) said, “When my small business’s accountant tells me some money on the balance sheet might disappear next month, I don’t run out and spend it. Gov. Cooper’s ‘spend now, pray later’ proposal could very well result in teacher layoffs next year. That’s exactly what happened to former Democratic Gov. Bev Perdue.”
Read the full report the state’s nonpartisan fiscal experts shared with legislators below:
“We wanted to make you aware that the State over-collected on its projected revenue undercollections at the end of FY 2019–20. In other words, even though revenues were down in FY 2019–20, the State collected more than was projected relative to the May 2020 Revenue Forecast. Without a revised consensus revenue forecast, the overcollections have added $457 million to the estimated FY 2020–21 year-end unappropriated balance.
“Obviously, the $457 million estimate is a substantial increase over the June 2020 estimated unappropriated balance. However, we believe that there are multiple considerations to contemplate about this revision:
“Tax Shift — Barry Boardman has estimated that most of the FY 2019–20 over collections was due to a lower than expected shift in income tax payments due to the movement of the payment deadline from April 15th to July 15th. As we understand it, this amount would not be recurring and it may put negative pressure on the FY 2020–21 forecast. The FY 2020–21 forecast included approximately $1 billion in one-time revenue due to this shift.
“Structural Budget Challenges — Most of the items funded in this session’s appropriations bills funded recurring program needs on a one-time basis, primarily from fund balances or the CRF. Any additional appropriations from a one-time source for recurring types of programs would exacerbate what we believe to be a $2-$3 billion structural imbalance.
“Overall Revenue Uncertainty — As Barry explained last week, “we are still facing significant economic uncertainty along with new uncertainty about federal policy and the Fiscal Research Division does not expect to have the information necessary to issue a revised, line-item forecast until late September.” The $457 million estimated unappropriated balance is predicated on the accuracy of the revenue forecast in a time of unprecedented economic tumult. We would advise to treat this estimate with caution, considering these unusual circumstances.”