The House overwhelmingly passed a bill Wednesday to strengthen the state Savings Reserve to ensure North Carolina has money saved up for emergencies such as Hurricane Matthew and the wildfires that plagued the western part of the state in 2016.
The bill, HB 7, was passed in a 110-3 vote on the House floor after debates Wednesday afternoon.
The bill directs the state to save at least 7.5 percent of the General Fund operating budget from the previous year, but more can be added to the Savings Reserve if the General Assembly chooses to. Currently the state Savings Reserve account has more than $1.4 billion.
“This is a commonsense and bold bill that puts into the law our strong principles of good government and fiscal discipline,” said Rep. Dean Arp (R-Union), who is running the bill in the House. “This is about accountability to our children and being responsible with what we’ve been blessed with, with a look to the future.
“If we do not save for future economic downturns, we will have to cut potentially vital and important government functions. This bill attempts to avoid that situation. 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, those tough decisions to cut services we all believe in.
“Saving for the future is a basic financial principle we teach our children, so we ought to practice it in state government as well. This bill is a step forward in doing so.”
The bill makes allowances for how the General Assembly can spend the funds in any given year, from using it to shore up declines in General Fund revenue to paying costs associated with court orders, but if the legislature wants to appropriate more than the 7.5 percent in a given year, then a vote of two-thirds of the General Assembly will be required to approve the expenditure.
At a press conference announcing the legislation last week, Rep. Nelson Dollar (R-Wake), who is also a primary sponsor of the bill, said, “If you think about it, you always tell families that they need to save and that savings should be a top priority in any budget. And we believe it’s the same way with the State of North Carolina.”
The bill has found something that many fiscal bills don’t in the legislature: near consensus between Republicans and Democrats.
Rep. Jean Farmer-Butterfield (D-Pitt) said of the bill after its announcement, “If you notice in the past the General Assembly has always had reserve funds for disasters –rainy day funds. The amounts have fluctuated over the years so I think this is another way of enhancing that, because we know [a natural disaster is] going to come, it’s just a matter of when it will come.”
One criticism of the bill is that by installing this limit the current legislature is telling future General Assemblies what they can and cannot do. Rep. Mickey Michaux (D-Durham) said that is not the case as future legislatures can go back and install their own limits that are not in line with the 7.5 percent limit, if they so choose.
The legislation has been sent over to the Senate and would go into effect in July for a portion of the bill, with the rest becoming active in October. A review of the changes is set for 2019 to check to the success of the policy change.