The money is fungible

by Tom Campbell, Executive Producer and Moderator, NC SPIN, June 20, 2014.

All our lives we’ve heard aphorisms about money. Truisms like, “the love of money is the root of all evil,” “a penny saved is a penny earned,” “a fool and his money are soon parted,” and “you can’t spend the same dollar twice.” But it wasn’t until I became the state’s Assistant Treasurer that I learned the one simple and unequivocal truth: Money is fungible.

It means money is mutually interchangeable. Money raised for one purpose can be used for another. In government we see the evidence all the time. Consider the 1989 Highway Trust Fund that was to raise the money to build roads for future generations. We think a trust fund is where money is designated solely for a particular use or purpose, in this instance our roads. But no sooner had the bill passed than the legislature started “repurposing” varying amounts of gas tax revenues to aid the General Fund, not roads.

Proponents of our 2005 state lottery drew out a 50-40-10 formula for allocating lottery proceeds, with 50 percent designated to reduce class sizes in early grades, 40 percent for school construction and 10 percent for college scholarships for needy students. They followed that formula for exactly three years, before they began changing not the formula and use of the money. Our Governor, as chief administrator of the state budget, has the authority to move money from one agency or budget to another in emergencies such as Medicaid cost overruns, storm damage and budget shortfalls. And we learned this week Governor McCrory moved funds from DOT to pay for his own staff salaries. And lest you think this true just in the public sector it happens everyday in corporations, in nonprofits and even your own household budget.

Elected officials have become masters of fungibility, privately admitting they repurpose funds while also acknowledging they cannot commit or bind future legislatures to do the same. All this makes the current hubbub about state lottery funds farcical and a distraction.

We need keep the main thing the main thing. The issue is teacher pay and what pot it comes from is secondary. Lawmakers and the governor have agreed to provide better starting pay for teachers and also committed to give other classroom teachers pay increases. The Governor proposes a 2 percent increase. The House gives an average of 5 percent and the Senate provides an average 11 percent raise, with the caveat teachers give up their “career status” or tenure and that teacher assistants be essentially eliminated.

Lawmakers and Governor McCrory need to decide what is the appropriate amount or percentage to raise the pay of our teachers so as to keep them in the classroom and incentivize them to do their very best. 2 percent seems too little and, while 11 percent might be justifiable, it seems a bit much. The number around 5 percent is a good sustainable place to begin. And the compensation for remaining state employees also deserves more thought than just a few more days of vacation and flat increase.

Only when we have decided how much to pay our teachers and employees should we decide where and how to redirect the funds to pay them, all the while remembering the first rule: Money is fungible.