NC Expects A $552 Million Budget Surplus. Here's One Way That Money May Be Used

Feb 10, 2017

North Carolina is one of just four states expecting to see a budget surplus this year. And it is a significant figure. The non-partisan state Fiscal Research Division projects 552 million extra dollars will flow into North Carolina’s coffers.

The budget debates are still months away. But one proposal for some of that extra money is up for a vote next week.

Republican Nelson Dollar is something of a budget guru for the North Carolina House. He’s the top budget writer, negotiator and chairman of the Appropriation committee.

But when it came time for House Bill 7 to go through that committee, Dollar let this man pitch the bill. "Thank you, chairman and for the record my name is Steve Bailey and I’m a senior associate with the Pew Charitable Trusts."

Pew is a non-partisan think tank. And Bailey’s focus is all about finding best practices when it comes to state budgets. In particular how much and when states should save. "And I’m here today because House Bill 7 contains not just one but four best practices identified by our research. First, it creates a savings deposit rule tied to revenue growth."

HB 7 would mandate 15 percent of all surpluses be placed in North Carolina’s rainy day fund. This year that would mean $82.8 million.

Second, the bill would establish just when the rainy day fund could be used. Something that now is simply up to legislators. "Currently North Carolina is one of only six states that does not have any conditions for when the rainy day fund can be used," explained Bailey, "in other words there is no definition for what constitutes rain for your rainy day fund."

If passed, the rainy day fund could be used to cover budget shortfalls, to cover costs imposed by a court or administrative order. And to provide relief and assistance in an emergency like a natural disaster.

The third best practice? "It provides an evidence based savings target, so how big the fund can grow."

And finally, "It provides a mechanism to re-evaluate the rules governing the fund in two years."

House Bill 7 flew through committee. And is expected to be debated by the House on Tuesday. And there will be debate.

One thing not covered by Pew’s presentation, are there long term cost of saving versus spending on hot button issues, like teacher pay and roads.

CORRECTION: House Bill 7 would require 15% of revenue growth be put into savings, not 15% of the surplus. This would mean $78.1 million put in the rainy day fund this year, not $82.8 million. We regret the error.