No One Is Minding The Store

Those elected by the people to serve in government are entrusted with an enormous power – the power to levy taxes upon the people they represent. This enormous power confers a corresponding duty to carefully scrutinize every aspect of government and to arrange the functions of government so that the minimum amount absolutely necessary is taken from the taxpayers who earn the money to begin with.

John Marshall, former Chief Justice of the Supreme Court, once wrote in an opinion of the court that “The power to tax is the power to destroy.” Taxation destroys by undermining the initiative, incentive, and motivation to work, save and invest – the essential elements to continued economic prosperity. It is a fundamental law of economics that when something is taxed, less of that thing is produced. It is the destructive nature of taxation that requires its extremely judicious use.

The budgets that have passed both houses of the legislature and are now being reconciled by a conference committee spend around 14 and a half billion dollars and left almost nothing in fund balances and reserves as the bond rating agencies desire. Now the call is going out to take even more dollars from taxpayers to replenish reserves. It is critical to focus on exactly where every one of those dollars comes from. Each day, millions of North Carolinians provide hours of hard work to earn the money they need for food, shelter, clothing, transportation, and the many other necessities for their families. Then along comes the state and tells these citizens that state government has a superior right, off the top, to a portion of the money they earn. If the citizens do not timely pay, the state has the power to garnish their wages, seize their bank accounts and other property and place liens on their houses. Undoubtedly, there are functions of government that are necessary for the common good that would not be provided by the private sector in the absence of government. But taxpayers should never be asked to pay more from their own fund balances until each dollar already taken from taxpayers is providing a full dollar’s worth of value in some vital government function.

State bureaucrats, who are full-time, have a much superior knowledge about the detailed operations and the funds expended by the government agencies than the elected representatives, who occupy what are essentially part-time positions. Agency heads and other state personnel need to be closely scrutinized when budgets are being formulated. The bureaucrats have a built in bias toward increased spending and against spending restraint. Most bureaucrats are much more likely to get ahead personally in an environment of rapidly rising spending than one of slowly rising spending or spending reductions. Every area government gets involved in develops a built-in constituency demanding ever more resources. The elected representatives are the people’s only check on this built-in bias toward ever higher spending.

Most people would be surprised to know how little scrutiny the legislature actually gives the budget it passes. A detailed line-item budget is never even reviewed. The state budget is essentially on autopilot. The following language is contained in every budget: “The beginning appropriations for the fiscal year for the various departments, institutions, and other spending agencies of the state is referenced in this document as the recurring baseline budget.” Unless the governor or the legislature make specific changes, the “recurring baseline budget” will automatically grow year after year. The budget bill that passes the legislature each year contains only the specific changes made by the legislature to the recurring baseline budget.

The House budget is primarily the work of the four co-chairs of the House Appropriations Committee in close consultation with the Speaker of the House and the House Majority Leader. The budget is put together in almost total secrecy and the rules are stacked in such a way that the other 114 members of the House have no real chance to materially change the budget once it is presented. The budget process in the Senate is even more closed and truncated.

The following was written about the budget in a very liberal publication, The Left Legislative Review. “The House balanced the budget with a series of accounting tricks, fund shifts, aggressive tax collection plans, and in essence borrowing money from next year. House leaders are counting on collecting at least $50 million in unpaid taxes, $117 million in accelerated tax payments, delaying issuing some bonds until early next year, and borrowing more money than the Senate from the Hurricane Floyd relief fund, and using one-time windfalls to fund ongoing programs. After the House budget passed, the Senate leaders called the House plan fuzzy math and a menu for disaster.”

In February, the governor had to declare a state of emergency, freeze certain spending and hiring, cut off promised funds due to counties and cities, and divert money from the state employees retirement fund in order to make up a deficit of 850 million dollars in last year’s budget. However, the very same people who authored the failed 2000-2001budget were left in charge of the new budget for fiscal year 2001-2002. In light of lasts year’s budget disaster, accounting tricks, fund shifts and fuzzy math are simply not good enough! When the last budget failed so miserably, a great deal extra work and caution should be in order in preparing this year’s budget.

No one is really minding the store when it comes to the flimsy and rather cursory way that a supposedly representative body enacts budgets that spend billions of dollars taken from taxpayers. In this type environment, raising taxes is not, as some have said, “the right thing to do.” The average American now works until July 7 to earn enough to pay taxes and the cost of government regulation (which is in essence a tax). How much further do the advocates of higher and higher taxes propose to push taxpayers – until August? How much is enough? This is a question which begs for an answer.