Harlan Boyles warned of cuts to schools, higher ed

While looking for some old clips on the long-running war of words between Charlotte and Raleigh, I came across a short piece I once wrote about State Treasurer Harlan Boyles. 

A moderately conservative Democrat of the old school, Boyles worried in 1998 about the ultimate impact of cutting taxes and raising spending on state programs, as the legislature was doing that year.  Democrats held the Senate, Republicans the House, and Boyles thought the conflicting ideas each chamber was pushing might one day lead to big problems for public schools, community colleges and the university system.  The House wanted to cut taxes sharply and the Senate wanted to raise spending sharply, even though leaders of each knew there would one day be a reckoning.

Boyles said it reminded him of "voodoo" economics" that President George H.W. Bush had warned about. "My premise is not to debate the purpose for the money, but to raise the question how we could anticipate its repayment without signaling a very large tax increase, or large reductions in state programs as they now exist. If it's the latter, the programs most likely to be affected in the future] are public education, the community college system and higher education."

His words were prescient, though it has taken 13 years to bring us to the point where there's a $3.7 billion state budget shortfall and public schools and higher education both are anticipating huge cuts in state appropriations.

Boyles was a careful man, and a smart one. And he was right.  Here's the text of that 1998 column:

HOW WILL WE PAY OFF THE STATE'S DEBT DOWN THE ROAD?

 It took state Treasurer Harlan Boyles only an instant when I asked him if the N.C. General Assembly's current boost-spending and cut-taxes fervor reminded him of what George Bush once said about Ronald Reagan's economic proposals.
"Voodoo, " said Boyles. "This is fiscal policy that is totally uncharacteristic of North Carolina."

Boyles is concerned by this mindless obsession on the part of the General Assembly to (a) cut taxes in the House, and the consequences be damned, and (b) raise spending on critically needed state programs in the Senate, and the consequences be damned. And both chambers have already approved a huge new bond issue that would increase the state's indebtedness significantly.

"I find it extremely difficult to explain how we can be so aggressive in reducing taxes, and at the same time so aggressive in increasing our indebtedness, because the two do not mesh, " he said.

Boyles has been keeping track of income and the outgo for a long time. When he came to state government in the early 1950s, the state budget was about $500 million. It did not exceed $1 billion until the administration of Gov. Terry Sanford in the 1960s, and didn't hit $10 billion until the first administration of Gov. Jim Hunt.

The last biennial budget, for 1995-97, topped $37 billion. If the current General Assembly ever finishes its business and comes to an agreement on a supplementary state budget, the biennial budget from all sources (general fund, highway funds, federal funds and institutional receipts such as tuition) will top $41 billion - a $4 billion increase in just two years.

Not only that, but the state's indebtedness is zooming, too. Prior to 1993, state indebtedness from bond issues was $750 million. Since 1993, the legislature has approved and the voters have passed another $3.5 billion in bond issues. If the $1 billion clean water bond issue passes, total debt will exceed $5 billion - and the annual debt service would approach $500 million. It makes Boyles' head swim to note that's twice as much money, at least in raw dollars if not adjusted for inflation, as the annual budget when he went to work for the state.

Boyles isn't arguing that there aren't critical needs, or that the public doesn't deserve a tax cut. "My premise is not to debate the purpose for the money, but to raise the question how we could anticipate its repayment without signaling a very large tax increase, or large reductions in state programs as they now exist, " says Boyles. "If it's the latter, the programs most likely to be affected in the future] are public education, the community college system and higher education."

Every member of the N.C. General Assembly knows this. If voodoo economics does for North Carolina what it did for the federal budget deficit, we're in for a bumpy ride. But only a few are willing to stand up and squawk about it.

Among them is Rep. Jim Black, D-Mecklenburg, who calls the cut-taxes-at-any-cost drive the most irresponsible thing he's seen.

And there's Senate President Pro Tem Marc Basnight, D-Dare, who has warned that an economic downturn will cause the legislature huge problems, akin to those of the 1990-91 legislature that faced a $1.2 billion shortfall. "With all certainty, there's going to be a downturn, and that's . . . where we'll look back and say this was a poor decision, " he says

Everybody loves tax cuts. Me too. But is it wise to keep on cutting state taxes - over $1 billion by the year 2001 - at a time when the state is trying, for instance, to bring its school system up to the the national average in teacher pay and student achievement? Can that be done by cutting future state revenue that will be needed to finance it all?

The House doesn't seem to have a problem with this contradiction. Speaker Harold Brubaker, who has pushed for repeal of the state inheritance tax because it's part of "the American Dream" to be able to pass what you've earned on to your heir without losing a chunk of it in taxation, has kept the legislature in session overlong to force the Senate to agree.

He's winning. The Senate, pushing hard for funding of Gov. Hunt's Smart Start initiative, blinked. Basnight says he didn't like it one bit, but did so to move the budget discussion along in the state's longest and least productive General Assembly session in memory. "Somebody has got to be the one to concede, " he told The News & Observer. "I hate to be the one to do it."

So the story of the 1998 General Assembly is likely to be this: It was the legislature that set the stage for huge upheavals the next time there's an economic downturn - and maybe even sooner.

Not long ago, state Sen. Tony Rand said he was reminded of what Oliver Cromwell said about the Rump Parliament in the 17th century: "You have sat too long here for any good you have been doing lately . . . Depart, I say, and let us have done with you. In the name of God, go!"

J