State Budget Practice Report Cards and Budget Resource Guide
North Carolina’s B average in reserve funds for 2017 through 2019 was bolstered by two major policy improvements. The first was adoption in 2018 of a link between historical revenue volatility and the state’s goals for its reserves, a best practice cited in the recent Volcker Alliance working paper, Rainy Day Fund Strategies: A Call to Action. The state now must deposit into the Savings Reserve Account 15 percent of each fiscal year’s estimated growth in state tax revenues. Annual evaluations of North Carolina’s revenue structure and economic volatility are used to adjust the account’s cap. The state also established clear rules specifying when the reserve can be tapped.
North Carolina averaged a B in budget maneuvers, which tracks the use of one-time measures to achieve balance. The grade reflected the state’s use of money from special funds, including transfers from the Department of Insurance to the general fund.
The state’s lowest average was a C in legacy costs, which cover public worker pensions and other postemployment benefits (OPEB), principally health care. North Carolina regularly provides the annual actuarially determined contribution for pensions, which were about 89 percent funded in 2018, about 19 percentage points above the total for all states. But it does not make such contributions for OPEB. For example, in fiscal 2017, the state contributed only 35 percent of the $2.73 billion that actuaries determined was needed to achieve full funding over time.
To emphasize the need for clear and comprehensible budgets to inform citizens, promote responsible policymaking, and improve fiscal stability, the Volcker Alliance in 2016 began a study of budgetary and financial reporting practices of all fifty states. The Volcker Alliance’s mission is to improve the effectiveness of the administration of government at all levels. Making state budgeting more transparent and accountable is an important part of that goal.
The report cards found here contain grades of the state's budgetary practices during the fiscal years of 2017 through 2019. Each state received marks in five critical categories, based on their adherence to best practices in several key budgeting indicators. The five categories covered methods used to achieve budgetary balance as well as how budgets and other financial information are disclosed to the public.
States received grades of A to D-minus (there are no “failed states”) for their procedures in estimating revenues and expenditures; their use of one-time actions to balance budgets; how they oversee and use rainy day funds and other fiscal reserves; the adequacy of their funding of public worker retirement and other postemployment benefits; and the quality of transparency of budget and related financial information. The grades are based on research conducted by public finance and budgeting professors and students at eight US schools of public administration or policy. The universities’ research efforts were augmented by Volcker Alliance staff, data consultants at Municipal Market Analytics, and special project consultants Katherine Barrett and Richard Greene.
State Budget Sources
State Budget Sources: An Annotated Guide to State Budgets, Financial Reports, and Fiscal Analyses is a resource published by the Volcker Alliance designed to help public officials, policy advocates, journalists, academics, and concerned citizens fully understand the critical fiscal decisions that governors and legislators must make. The guide includes the links below to budgets for this state as well as legislative analyses of budget bills and treasurers’ or comptrollers’ monthly state cash-flow statements; capital spending plans; reports on public-worker pension funding and returns; and reports by local and national fiscal research organizations, bond rating firms, and associations of state fiscal and finance officials.