SCOTT MOONEYHAM: Fiscal Facts and Federal Stimulus Money
The words seemed incredible.
"Even $3.7 billion won't be enough," the story from The Associated Press proclaimed.
The figure is North Carolina's take of federal stimulus money which will have a direct impact on the state's general operating budget.
In all, North Carolina is expected to receive $6.1 billion from the federal plan. Some of that money, though, will go to build roads or flow to purposes which don't have anything to do with the day-to-day operation of state government.
The money which will go to helping keep schools and prisons operating, that $3.7 billion, will come over three years, including the current fiscal year.
Not that the money will be divided evenly in those three years, but if it were, the amount would come to $1.23 billion.
That's not an insubstantial sum of money even in the world of government budgets, with their multiple zeros.
In fact, let's think about it this way for a moment: On the state's $21.4 billion budget, the figure represents more than 5 percent. Earlier this year, talk was that state government was facing a budget shortfall of $2 billion, or about 10 percent.
That 10 percent drop in projected revenues was expected to continue into the next budget year, and would be compounded by some growing spending requirements -- university and community college enrollment, teacher bonuses, health care costs.
Past experience shows that a 10-percent drop in projected tax collections can be pretty brutal, requiring that state services contract and leading to layoffs in government. But for state government in North Carolina, a 5-percent shortfall is pretty manageable. There's enough fat built into the budget to cut out 5 percent without noticing a significant drop in government services.
And when you throw in that $1.23 billion of federal aid, the shortfall -- based on the talk of a $2 billion drop in tax collections -- comes to 5 percent or less. It's easily manageable.
These figures and presumptions are why all the "woe is me" talk coming from Gov. Beverly Perdue and the legislature earlier this year should have been taken with a grain of salt.
At least, then the talk should have been taken that way. Maybe not now.
Remember, our figures were based on assumptions that tax collections would come in $2 billion below collections.
Some signs point to that figure being optimistic.
The Perdue administration is now saying that a $3.6 billion gap is possible between expected tax revenues and spending demands for the next fiscal year. Local government officials say a drop in sales tax collections is accelerating. And increasing layoffs mean that personal income tax collections -- the biggest area of tax collections -- may be far worse than anticipated.
During tough economic times, it's always advantageous for elected officials to engage in a little poor-mouthing. It gives them leeway to make cuts that could prove unpopular. It makes them look good when the budget is balanced.
Reality, though, may be catching up to any poor-mouthing.
Scott Mooneyham writes for Capitol Press Association. Contact him at email@example.com
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