By John Hood

North Carolina’s state government began its 2020-21 fiscal year with $1.5 billion in cash left over from last year plus another $1.8 billion in rainy-day funds and other earmarked reserves. Since then, the state has collected some $1.5 billion more in General Fund revenue than it has yet spent.

That’s a lot of money. Will it be enough to cover North Carolina’s expected budget deficits? At the moment, it’s impossible to say.

Back in May, the legislature’s fiscal staff and Gov. Roy Cooper’s budget office produced a consensus forecast that predicted the state would collect $4.2 billion less in General Fund revenues than originally expected during the 2019-21 budget cycle.

They properly produced their estimates for the biennium. We can’t get an accurate read by looking at just one year. For instance, lawmakers delayed the April 15 tax deadline into July. Shifting dollars from one year to the next doesn’t change their quantity.

At this writing, that consensus revenue forecast hasn’t been updated. Too many puzzle pieces were still in motion.

Want to feel optimistic? Look at sales-tax collections. They haven’t been as walloped by the COVID crisis as some feared. From July 2019 to June 2020, the state took in $7.82 billion, vs. $7.75 billion in 2018-19. That’s lower than originally projected, of course, but sales taxes didn’t crater.

Want to feel pessimistic? Look at the employment numbers. As of July, North Carolina’s headline unemployment rate was 8.5% — a tick up rather than a drop down from June. Employers are hiring people back, but not as robustly as we need them to. We are still down 326,000 jobs since February. That represents a lot of people on the sidelines of the economy, producing less, spending less, and going deeper into debt.

I take it that some policymakers in the Cooper administration and the General Assembly have concluded North Carolina will not have to take any sweeping and potentially unpopular steps to balance the state budget. They see billions in cash reserves, billions in missed revenue projections, and figure the two will end up roughly matched.

Maybe. But I don’t think they should be counting on it. Here are three reasons why state officials need to tamp down on spending to accumulate additional money in the bank:

• Local needs. While the state went into the COVID crisis with significant cash reserves, many counties, municipalities, and school districts did not. They will come to Raleigh this fall, and especially next spring, with desperate cries for relief. I suspect some of these cries will prove irresistible.

• Second waves. What if the onset of colder weather produces an upsurge in COVID infections and hospitalizations, triggering a new wave of lockdowns? What if Washington doesn’t fully sustain the federal borrowing binge that has propped up consumer spending thus far? Or what if economic downturns in other countries damage export markets for North Carolina industries?

In these and other scenarios, our already-too-slow economic recovery could falter. North Carolina’s revenue shortfall could grow by a billion dollars or more.

• Revealed needs. Both the Cooper administration and the General Assembly say the COVID crisis has uncovered significant needs for long-term public investment such as expanding broadband access, upgrading public-health facilities, and modernizing the air-conditioning and ventilation systems in public buildings to reduce the transmission of airborne pathogens.

No doubt policymakers will propose state borrowing to finance a good part of this — I hope all such bonds are submitted to voters for approval in a referendum — but debts must still be paid and some projects will be better suited for pay-as-you-go finance, anyway. Moreover, if we don’t maintain sufficient state reserves for future rainy days, literal or fiscal, our credit rating could suffer, hiking our cost to borrow.

Although they were sometimes criticized by Roy Cooper and left-wing activists for this, North Carolina’s legislative leaders are to be commended for building up the state’s reserves. Thank goodness we have savings. Now, let’s not blow it all in a single year.

John Hood (@JohnHoodNC) is chairman of the John Locke Foundation and appears on “NC SPIN,” broadcast statewide Fridays at 7:30 p.m. and Sundays at 12:30 p.m. on UNC-TV.