Cooper wrong, McCrory right on rainy day fund
By John Hood
Tuesday, October 18, 2016
RALEIGH — The aftermath of Hurricane Matthew is devastating. The images are heartbreaking. The numbers are overwhelming. Dozens of lives lost. Hundreds of serious injuries. Thousands of people displaced into shelters. Tens of thousands still without basic utilities. Hundreds of thousands still recovering from costly disruptions of their businesses, schools, and everyday lives.
North Carolinians are resilient. We will comfort the mourning, help the needy, and rebuild the economic, social, and governmental institutions that make North Carolina a special and wonderful place.
State government will have a critical role to play. For example, it is fully or partially responsible for public assets valued in the many billions of dollars — roads, bridges, classrooms, and other facilities. Across dozens of eastern counties, much of this infrastructure will have to be repaired or replaced.
Fortunately, the state has some $1.6 billion in disaster-relief and rainy-day funds set aside for just such an emergency. This is no lucky break. It is the result of prudent leaders making difficult decisions over the past three years that earned them no political favors. In fact, Gov. Pat McCrory and the Republican-led legislature received mostly scorn from liberal politicians, newspapers, and special-interest groups for saving North Carolina’s higher-than-expected revenues instead of bestowing virtually all of them on spending lobbies of various kinds.
The Democrat who wants to replace Gov. McCrory, Roy Cooper, has been one of those critics. Just a few weeks ago, he blasted McCrory for “building up the rainy day fund in excess of what’s necessary for the state,” and for letting the money “just be sitting there” rather than spending it. Cooper’s allies and surrogates have said the same thing for months.
These Democrats miscalculated, both fiscally and politically. Now, with an ever-escalating price tag for cleaning up after Hurricane Matthew, they’ve tried to distract attention from their poor judgment by demanding that McCrory and legislative leaders immediately call a special session — in order to appropriate the very rainy-day funds that they said were excessive before the storm hit!
It was a shameless political stunt, staged even as flood waters were still rising in Kinston, Lumberton, and other communities. Of course the General Assembly will need to act. But lawmakers need a thorough damage assessment and spending plan first. And many senators and representatives from eastern North Carolina are otherwise occupied. When Hurricane Floyd did its worst in September 1999, then Democratic Gov. Jim Hunt and a Democratically controlled legislature waited until December to hold their special session. Are we to believe they didn’t care about the suffering of North Carolinians and the state’s infrastructure needs?
Speaking of that event, the Floyd reconstruction illustrates precisely why North Carolina needs the large rainy-day fund that Roy Cooper and other Democrats foolishly opposed. While Gov. Hunt and state lawmakers did come up with a large amount of money, about $840 million, to fund recovery efforts, they had to cobble it together from several different sources, including reverted funds from the operating budget. As a result, the state had inadequate reserves in 2000-01 when a recession bit into state tax revenues, creating budget deficits. How did North Carolina Democrats respond? In large part by raising sales taxes. (It’s what they do.)
Given historical patterns, it is highly likely that America’s economy will dip into at least a modest recession in the next couple of years. Because Pat McCrory and legislative leaders have wisely built up $1.6 billion in rainy-day reserves — plus another $400 million in reserves specially earmarked for Medicaid — the state will be able to finance its responsibilities for Hurricane Matthew recovery while also funding schools, prisons, and other basic services if a national recession materializes.
Politically, the easier call for McCrory during the budget surpluses of the past three years would have been to spend the extra revenue. That’s what Roy Cooper has said he would have done as governor. It would have gotten effusive praise from liberal newspapers and special-interest groups. And as we now know, it would have been the wrong decision.
John Hood is chairman of the John Locke Foundation.