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They Must Think We're Stupid 

The real reason our state is broke

State leaders want you to believe that it's not their fault. They want you to believe that the hurricane, the national economy, lower-than-projected tax revenues, even the terrorists are to blame for the so-called state budget crisis. And the only reason they've gotten away with spreading this kind of manure is that the media in this state is too lazy to get off their fat rears and figure out what's really going on in Raleigh, much less actually report it. So far, the public relations smokescreen has worked.

But the truth is that the $1.2 billion state budget shortfall, and the fact that North Carolina stands to lose its triple-A bond rating -- Moody's Investor's Service has put the state on a negative credit watch last week -- has almost nothing to do with any unforeseen disaster viciously foisted upon our unsuspecting state leaders.

It was caused by grossly irresponsible, out-of-control spending over the last decade, and by poor planning for what would happen when the bills finally hit the fan.

While our competitors with healthier economies, states like Virginia, South Carolina, Georgia, Florida and Texas, are rapidly emerging from the economic downturn of the last few months, North Carolina, now the highest-taxed state in the region according to the Washington-based Tax Foundation has spiraled into an economic tailspin.

For years, the rate of growth of the state budget has escalated beyond the rate of inflation, population growth and the growth of personal income of those who live here. This trend is so well-documented that the lower-than-expected tax revenues state leaders blamed for this crisis last year should have been, well, expected.

Let's take the last five years, for instance. The 1996 and 1997 sessions kicked off a shift toward targeted tax breaks for corporations. At the same time, legislators voted to shave a penny off the state sales tax on food and further expanded corporate tax incentives. That would have worked OK if, while they were deliberately cutting the amount of money they took in, they had also cut spending. But in 1997, state spending shot up nearly 10 percent.

Then, in 1998, state lawmakers repealed the final two cents of the state sales tax on food, trashed the inheritance tax and exempted schools from the sales tax. That too would have worked OK if they had cut spending to compensate for it. Instead, the budget grew by 9.5 percent in operating spending and 13 percent in total spending. With debt from hundreds of millions of dollars in state bonds racking up, lawmakers essentially gambled that the economy would remain strong enough to handle the debt, spending increases of twice the rate of inflation and sizable tax cuts. By 1999, with the 2000 election season upon them, legislators temporarily managed to plug the holes in their sinking ship by shifting funds among different revenue streams and pushing much of the impending budget crisis into the next fiscal year. But it couldn't indefinitely cover up the $800 million hole created by overspending, poor planning and a court ruling that the state must refund illegally collected income and intangibles taxes.

Consider this. Had state spending grown at the same rate as personal income growth between 1993 and 2001, the FY 2000-2001 budget would have been $1.04 billion lower, more than offsetting the budget deficit we now face.

But reality is rarely ever politically convenient. To their credit, newspapers across the state began reporting on projected operating and revenue deficits by 2000. But even with news of those deficits in print before them, even with a barely disguised $800 million hole staring them in the face, the legislators kept spending, increasing their general operating budget by 12 percent between 1999 and 2001. Now North Carolina Governor Mike Easley is taking the drastic measure of withholding -- some say illegally -- $200 million in revenues that rightfully belong to North Carolina cities and towns. The Charlotte-Mecklenburg price tag is about $40 million.

Make no mistake about it. They knew, they knew, they knew, but they kept spending anyway. Though the two political parties will no doubt make their usual show of blaming each other for these problems during elections later this year, both Republican and Democratic legislators from this county and the 99 others in this state who have occupied their seats over the last four to six years are to blame, and revisionist campaigning shouldn't change that.

These people may have bought themselves re-election with the favors and pet projects they purchased with our money, but they paid for them with North Carolina's competitive edge. Our state already has the highest average tax burden in the Southeast according to data from the US Census Bureau. How are we now supposed to compete with places like Northern Virginia or Austin, Texas, where they will find a similarly educated and trained workforce, a better education system, and substantially lower taxes?

We can't. And we have only ourselves to blame. *

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