South By North Strategies, Ltd.

The N.C. Budget & Tax Center looks at how the adoption of a TABOR legislation that caps state spending growth to the sum of inflation and population growth would impact North Carolina.

The proposed TABOR legislation before the General Assembly would cap growth of state General Fund appropriations to population growth plus inflation. The TABOR formula fails to take into account that the costs of certain services, such as health care and education, grow faster than inflation. In addition, TABOR ignores demographic shifts, such as the increasing share of North Carolina’s population made up of elderly residents and college students. Therefore, the “population plus inflation” formula is not an appropriate way to measure the cost of providing basic government services and would ensure perpetually insufficient funding.
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Had North Carolina implemented TABOR in 1993, the TABOR formula would have reduced North Carolina’s cumulative investment in public structures by more than $35 billion between fiscal year 1993 and the current fiscal year. In fiscal year 2008, state policymakers would have had to cut state appropriations by 23 percent to meet the TABOR limit.