House OKs required annual deposit in state reserve fund
Posted February 15
Updated February 16
Raleigh, N.C. — The House on Wednesday quickly approved legislation calling for annual deposits into the state's so-called "rainy day fund."
Lawmakers on both sides of the aisle in both the House and the Senate have been working on the proposal for the past two years with help from The Pew Charitable Trusts, a national nonprofit.
The bill would require lawmakers every year to put away 15 percent of the growth in the budget from the previous year. That saved money could only be used for budget shortfalls, disaster relief or other unforeseen expenses up to 7.5 percent of the budget. Spending more for extraordinary needs would require a two-thirds majority vote.
Rep. Nelson Dollar, R-Wake, the bill's sponsor, said the savings would be mandatory until the fund reaches a target agreed on by lawmakers and the governor's budget office.
"The idea is to build that fund, not build it too much but build it so that we can withstand nine out of 10 two-year budgetary calamities," Dollar said.
Rep. Billy Richardson, D-Cumberland, argued that the bill could limit lawmakers' ability to invest in key areas and it smacked of a political ploy.
"We don't need to do this. We need to work on education. We need to work on the environment. We need to work on collegiality between us. We need to move forward, not backward," Richardson said.
But supporters like Rep. Dean Arp, R-Union, reminded the House of the 2009 recession, when lawmakers faced a double-digit budget shortfall and had to make deep cuts to services to balance it out.
"If we save responsibly now, we can have the peace of mind knowing that we won't have to make those tough decisions later on," Arp said.
Dollar noted that lawmakers had to slash spending in 2009 when tax revenue plummeted by $3.3 billion, and he said the yearly deposit would make North Carolina's savings reserve one of the strongest in the country, following the best practices recommended by Pew.
The memory of the recession was fresh enough in most lawmakers' minds that the measure passed the House by a 110-3 vote. It now goes to the Senate.