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June 01, 2006

Flush with cash

Who's flush with cash? The answer appears to be the State of North Carolina. Reports indicate the state budget now has a surplus of over $1 billion, and this may climb to as high as $2 billion. N.C. State University's Mike Walden explains why this happened and what people are suggesting should be done with the money.

"The 'why' part is easy. ... The economy has been growing. It’s been doing much better than it has in recent years. This generates more household income, higher investment returns, more consumer spending, higher corporate profits. All these things are items that the state taxes," explains Dr. Walden, an economist with the North Carolina Cooperative Extension Service.

"So we typically see this happen after a recession. Once we are a couple of years past a recession, revenues to the state government [go] up quite a bit.

"So that’s the easy part. The harder part is what to do with the money. And, of course, there are just as many opinions perhaps as there may be billions of dollars," he adds.

"Some people want to spend it on more programs, expansion of programs, higher salaries for state workers and teachers. Others want to use some of that money at least to perhaps reduce taxes. And some want to say we need to be farsighted here and actually save some of this money for the next time that we have a recession.

"So all of this really is now the $2 billion question."

Posted by deeshore at June 1, 2006 08:00 AM