Getting your Trinity Audio player ready...

RALEIGH — North Carolina’s state government has a multi-billion-dollar surplus. Its enormity has multiple causes: past spending discipline, revenue growth from a resurgent economy, and gobs of borrowed federal money. Its enormity also presents North Carolina’s conservative-run legislature with a challenge.

How can a surplus be challenging? Ask anyone who’s ever been a lawmaker. When times are tough, the decisions are tough — but at least those lobbying you for budgetary goodies have realistically low expectations. With billions of seemingly “free” money on the table, those expectations soar into the stratosphere.

Gov. Roy Cooper and his Democratic allies argue that now is the time for North Carolina to “invest in its people” with dramatic spending increases on education, health care, social services, and public payrolls. Republican lawmakers favor increases in operating spending, too, including raises for teachers and other public employees, but they worry that a significant share of the surplus is transitory — reflective not just of revenue officially labeled “one-time” but also of economic activity goosed by massive federal borrowing.

Republicans also tend to reject the idea that government spending is “investment” but private spending is not. When businesses are allowed to keep more of their incomes, they frequently invest in new tools, locations, technologies, and infrastructure. They hire and train employees. Or they pay higher dividends to shareholders who shift the proceeds into productive investments elsewhere. Similarly, when households are allowed to keep more of their incomes, they invest in new skills, capital goods and the education of their children.

In our country, the vast majority of investment is private, not public. It earns a big rate of return, and not just for the individuals and institutions directly involved in it.

There is such a thing as public investment, however — and the North Carolina General Assembly is leaning heavily into it this year. The just-released House budget transfers $5.8 billion of surplus revenue into the State Capital and Improvement Fund, while an earlier version from the Senate put the figure at $4.3 billion. Both are gigantic sums.

Adding in other construction and renovation spending, including those financed with already approved federal debt, the House budget would devote a staggering $9 billion to capital expenditures across all categories: schools, colleges, universities, water and sewer systems, office building, museums, broadband, and much more. Moreover, Congress and the Biden administration are currently working on an infrastructure bill that would spend even more billions of capital dollars in North Carolina (and require even more federal borrowing, of course).

A reality check is warranted. Yes, some of the resulting capital projects are desperately needed and will pay economic and social returns for generations of North Carolinians. Other projects are defensible to some extent. And many are little more than pork-barrel schemes to benefit special interests and politicians.

Although this fiscal conservative has reservations about the magnitude and financial sustainability of what lawmakers in Raleigh and Washington are proposing, I’ll say this for the House budget: it neither overlooks private investment nor abandons fiscal discipline. It still reduces taxes on personal income, corporate income, and the capital stock of companies, though not as much as the Senate budget called for. It places $2.8 billion of the surplus into state savings accounts, though not the $5 billion the Senate proposed. And both chambers’ plans honor the informal cap on spending growth — expected inflation plus expected population growth — in General Fund operations.

Whether helpful or wasteful, capital spending is, at least, largely nonrecurring. That is, while erecting new buildings or building new sewer lines will create some permanent spending obligations, for operations and maintenance, most of the expenditure is upfront. When (not if) North Carolina experiences another economic downturn, pulling our revenues down and pushing spending up, either the capital projects in question will be completed or they can be deferred without undue hardship on taxpayers and public employees.

Public investment is a real thing. But it isn’t a perpetual-motion machine. I hope our leaders keep that in mind.

John Hood is a John Locke Foundation board member and author.