A thriving economy gives North Carolina options

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I gather from my social-media feeds and hate mail that North Carolinians are supposed to be infuriated at the way things are going in our state. I have my frustrations with certain politicians, to be sure, but I’m not infuriated. Nor am I alone.

North Carolina continues to boast a thriving economy, prudently managed finances, and many popular places to move to for jobs, incomes and quality of life. The growth isn’t equally distributed, of course. It never has been. But compared to its peers, North Carolina is doing rather well.

Consider the latest job-market data from the U.S. Bureau of Labor Statistics. North Carolina employers added about 94,000 net new jobs in 2019, up 2.1 percent from the previous year. That growth rate exceeds national (1.4 percent) and Southeastern (1.6 percent) averages. Indeed, our state had the ninth-fastest rate of job creation in the nation last year.

Comparisons like these can vary over time. Did 2019 just happen to be a good year? If we look at a longer-term trend, the outcome is still positive. Since 2013, North Carolina employers have added about 500,000 net new jobs, a 12.2 percent increase in overall employment. That rate exceeds the nation’s (10.9 percent) and the region’s (11.7 percent).

Our region, the Southeast, includes lots of other fast-growing states (most of which are also governed by fiscally conservative legislatures, by the way). Nevertheless, if North Carolina had simply added employment at the average regional rate since 2013, we would have ended up with 18,000 fewer jobs by the end of 2019. If we had only matched the national rate, the job count would be 52,000 lower.

We mainly desire a strong economy because of the benefits it confers on private individuals and households. But if you want your government to deliver necessary public services at an economical price while saving against a rainy day and otherwise leaving you alone, a flourishing economy is highly preferred to a floundering one.

According to the latest figures from the state controller’s office, revenues to the state’s General Fund for the first six months of the 2019-20 fiscal year are up $471 million over the same period of the previous year. General Fund spending is up, too, by $317 million (the lack of a final budget agreement between Gov. Roy Cooper and the General Assembly doesn’t mean expenditure levels were entirely frozen).

On a cash basis, the General Fund budget has run a $542 million surplus halfway through the fiscal year. Keep in mind that revenues and expenditures don’t distribute evenly across all 12 months, however. The April revenue numbers, reflecting prior-year tax payments, tend to have an outsized effect on state finances, for example.

Still, it would be fair to say that North Carolina’s financial picture was solid as we began 2020. The state has $1.2 billion in its rainy-day reserve plus hundreds of millions in various other reserve accounts. It also has a whopping $2.15 billion unreserved credit balance in the General Fund.

If there is a budget deal, that balance will fall – and that will be fine. The budget passed by the legislature contained valuable construction projects and welcome pay raises for public employees. The point is that, failing some unforeseen disaster, North Carolina will have sufficient revenues to address the state’s immediate needs while continuing to accumulate reserves to shield taxpayers against the downside risk of a future recession.

Conservatives may see these figures and conclude some additional tax relief would be a good idea. Progressives may see this figures and conclude there would be no financial risk if North Carolina expanded Medicaid and other entitlement programs.

I agree with the former and disagree with the latter, no doubt shocking no one. However you think state policymakers should respond to the current moment, I think you should take seriously the idea that North Carolinians who reject apocalyptic rhetoric from both parties are being quite sensible. They can see things are good and getting better.

John Hood is chairman of the John Locke Foundation. Follow him @JohnHoodNC.

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