State Budget Practice Report Cards and Budget Resource Guide
North Carolina was one of only four states to achieve an A or B average in all five categories evaluated by the Volcker Alliance for fiscal 2016 through 2018. The other three were Maine, Oklahoma, and South Dakota.
The state averaged a top mark of A in budget forecasting, largely on its use of multiyear expenditure and revenue forecasts and of consensus revenue estimates. Although a consensus is not mandated by North Carolina’s constitution or statutes, the process has been adopted informally and used consistently.
North Carolina got a B average in reserve funds; its C grades in 2016 and 2017 rose to an A in 2018 after the legislature more closely tied rainy day fund policies to revenue volatility. North Carolina’s attention to its rainy day fund, which has grown tenfold since the Great Recession, paid off when Hurricane Florence hit the state in September 2018. After the storm, lawmakers authorized the drawdown of $756.5 million from the $2 billion Savings Reserve—the rainy day fund—to help finance recovery efforts.
The B average in legacy costs reflected the state’s lack of actuarially recommended contributions for public workers’ other postemployment benefits, mainly health care. In contrast, North Carolina funds its pensions according to actuarial guidelines, which has given it a funded ratio of 90.7 percent as of 2017—about 22 percentage points higher than the total for all states.
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 2016 through 2018. 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.