Surplus? What Surplus?

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The New Math Strikes Again

Suppose you're behind on the rent, the utilities are about to be turned off for non-payment and the pantry is empty but you have $10 in your pocket. Do you have a surplus? Apparently the Easley administration would say that you do and the press would print what they were told.

According to an Associated Press article in the May 11th News and Observer, "The first annual budget surplus since 1999 will make the budget process less difficult compared to recent years." The Charlotte Observer mentioned the surplus in two articles on May 11th and in three articles on May 10th. The public was told, very emphatically, that times are better. Must be an election year.

As a matter of fact, the state has raided the employee pension fund and taken money from local governments, made no provision to fund enrollment growth in the colleges and universities or even to pay the promised ABC bonuses for public school teachers and is facing a huge unfunded liability for retiree medical benefits.

We're not rolling in dough; in fact we're seriously in debt and next year looks even worse. But this is an election year, so the party in power needs to spend money and whether they actually have anything to spend is irrelevant.

Recently someone asked me if I was running for Governess. I said that sounded right because I was sure that state government could use some adult supervision.

Tax Hikes Planned for Next Year - After the Election

Sometimes I can't decide whether our state's current leaders are mathematically impaired and don't understand what they're doing or brilliant politicians who don't care how much damage they cause so long as it is after the next election. From the standpoint of the harm they do, the answer really doesn't matter.

The budget being planned grows spending roughly a billion dollars AND uses roughly a billion dollars in one time funds to cover that cost. Since we all know that "temporary" taxes scheduled to expire next year are being used to grow government, it is fairly obvious that the powers that be don't view those taxes as temporary. But the vote to make them permanent won't fall until after the election, so they figure no one will notice. A vote for the current house budget is a vote to raise taxes next year.

If anyone ever doubted the ability of the current leadership to control the press and the legislative staff, the current session illustrates quite clearly how easy it is to distract most people from financial reality by controlling the flow of information. This is supposedly an easy budget in a year with a surplus. Wrong!

The state has been piling on debt and encouraging municipalities to do likewise. Basic maintenance functions, like road maintenance, have been ignored in favor of handing out cash to friends of those doing the handing and building glitzy new projects financed with debt. Anyone who really cares about children should worry about the bills our current leadership is running up that they'll have to pay. It won't be pretty.

Warning to All Teachers, Taxpayers, And State Employees or Retirees - What You Don't Know Can Hurt You!!!

The state has not set aside the funds required to pay the medical bills of retirees and has no current plan beyond hoping to pay the bills when they come due. When asked about this, Paul Sebo, operations manager for the state employees' health plan, said the state will have to find money to cover the health expenses and admitted that key lawmakers know about the problem.

Unfortunately, those key lawmakers have failed to share that knowledge with most other legislators or the people most affected, the taxpayers and the state employees. Taxpayers are affected because the cost of addressing this problem gets bigger the longer it is ignored. Employees are affected because the unstated plan to deal with the problem may well be to cut retiree health benefits. This could be the hidden reason for the constant pressure to have state employees pay part of their health care costs.

While attention is being focused on the size of this year's raise, prior to my press conference there was clearly no intention to address the long term funding of medical benefits for retirees in this year's budget. As Sebo said, …it's not something that will impact the budget today, tomorrow or the next day." Unfortunately, the longer the problem is ignored, the bigger it becomes.

The State has promised retirees both a pension check and payment of their medical bills, but while the state has put funds aside to pay for the pension, the medical promise has largely been ignored. Funds that should have been set aside to meet that promise have been used for other things, some worthwhile, but most if not all clearly a lower priority than keeping the promises made to our employees.

The state did start back in the eighties to save funds to meet its medical care promise, but the raids on that fund have been far more serious than the raid on the pension fund (that I tried to stop - see the Raleigh Report of October 28, 2002).

Governor Easley and his friends who control the legislature have ignored the problem while the debt has grown to the point that one Democrat Senator estimates it totals $14 Billion. Fiscal research estimated the debt as of 2002 as $12 billion, so he's probably about right as to today's total.

The current general fund budget is roughly $15 billion. According to fiscal research, it would take $1.5 billion annually to amortize even a $12 billion dollar debt owed for retiree medical benefits over 30 years. It is hard to believe that the legislature will be able to use 10% of the general fund for that purpose, which leads one to question what the current leaders plan to do.

As of last year, the fund for retiree medical was completely depleted and the general fund was tapped to pay retiree health care premiums through June 30, 2005. While other states may face similar problems, mismanagement in California does not excuse mismanagement in North Carolina.

That's why I filed S1366, calling for using the rest of the Golden Leaf funds to start addressing the problem. It isn't a complete solution, but at least it is a start in the right direction.


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