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Budget and Tax Center Statement on Governor Perdue’s Budget Proposal

The Governor’s budget proposal released today recognizes the need for a balanced approach to North Carolina’s budget challenges – an approach including revenue that is necessary to rebuild our schools, roads, communities and businesses in the aftermath of the Great Recession.  The impacts of a cuts-only approach have been clear in communities across the state: fewer teachers in the classroom, less access to health care, higher costs to accessing the courts and reduced protections for the health and well-being of our environment and communities.

The Governor’s proposal to include three-quarters of the penny sales tax would raise an estimated $760 million in additional state revenues next year.  Her proposal dedicates these dollars primarily to education, greatly reducing the cuts that were passed down to local school districts by last year’s legislative budget and addressing the loss of federal temporary funds for education. Furthermore, her budget invests in the education pipeline by restoring funding to the state’s nationally recognized NC Pre-K program and restoring funds to the need-based grants to improve the affordability of higher education. While this proposal is a strong first step in restoring state funding for education to pre-recession levels, it still falls short of getting us back on track in preparing our children for a brighter future.

Beyond education, there are many other needs across the state that, if left unaddressed, will lessen the well-being of North Carolinians and undermine our state’s uneven economic recovery.  The Medicaid program will enter the new fiscal year with a projected shortfall of nearly $250 million on its books—a shortfall only partially addressed in the Governor’s budget. Cuts to the Clean Water Management Trust Fund have not been restored, leaving fewer dollars to strengthen the competitiveness of communities statewide. Inadequate funding for legal representation of indigent clients continues to negatively impact our system of justice.

The decisions made in our state budget have real consequences for all North Carolina families. This budget acknowledges the reality of the educational needs facing our young people and the future economy, but a child will have trouble succeeding in school if they can’t access dental care, or if their parent lost their job, or if their community is not safe.

The time to rebuild is now, and all lawmakers should consider revenue when approaching the second year of this budget.  While adjusting the sales tax is one option if done in connection with a strengthened Earned Income Tax Credit, there are many other responsible reforms to North Carolina’s tax system that could ensure the equitable and adequate revenues North Carolina needs to invest wisely in shared prosperity.

12 Comments

  1. david esmay

    May 10, 2012 at 1:37 pm

    Berger and Tillis don’t believe in shared prosperity, they take their marching orders from ALEC. They have been a disaster for this state from an economical, educational, environmental, and social stand point.

  2. Doug

    May 10, 2012 at 4:01 pm

    The real disaster has been Bev Perdue ! I don’t see where she’s trimmed any state fat .

  3. Frank Burns

    May 10, 2012 at 4:03 pm

    It needs to be said that raising taxes is unacceptable. That needs to come off the table!

  4. Doug

    May 10, 2012 at 4:05 pm

    Always quick to raise taxes, but very slow to cut anything !

  5. Hawkeye Pierce

    May 11, 2012 at 2:59 pm

    I know, right? The governor keeps asking to dramatically raise taxes, and the budget is ballooning like crazy. Of course, the state institution I work for only had a 16% budget cut last year (granted, Perdue only wanted to cut the budget by 8%), and NC taxes skyrocketed. Ok, so taxes went down last year. But Perdue wanted to raise them. Oh, wait, she just asked to keep in place a 0.75% increase in the sales tax … But hey, simple (“Always quick to raise taxes, but slow to cut anything!”) and extremist (“raising taxes is unacceptable. That needs to come off the table!) rhetoric is always more useful in a debate then… reason, balance, and facts.

  6. Jack

    May 11, 2012 at 5:22 pm

    Wall Street and the banks got trillions and trillions of American tax payer dollars under the “Too Big to Fail” bailout concept and that continues to be just fine with the far right.

    Yet when children need food and medical necessities such as prescription drugs, mental health services, and dental care, prosthetics, and eye exams are deemed frills by the right I have to wonder why they want to destroy the people.

  7. Frank Burns

    May 12, 2012 at 1:20 pm

    Pierce,
    Balace does not mean higher taxes, we already pay more that we need to. To achieve balance means elimination of programs that are no longer effective. There needs to be a redistribution of government. Where did we ever get this idea that once a government programs or agency is started, we need to keep that agency forever? Government should continually review programs, cut and shift dollars between the agencies.

  8. Hawkeye Pierce

    May 12, 2012 at 4:22 pm

    Ferret Face (Sorry-couldn’t resist the M*A*S*H reference and truly hope your real name is not Frank Burns…),
    Balance doesn’t mean rigidity. Balance implies compromise. If one side suggests budget cuts and the other side suggests keeping a pre-existing tax in place, then balance would mean reducing the tax part of the way but also cutting spending. Last year, we cut taxes AND we cut spending. That is only balance if you come from an extreme right position.

    Regarding budget cuts, we have been doing that now for several years. So the fat is constantly being cut. And yes, it sometimes makes sense to redistribute spending across agencies (e.g., one agency is efficient while the other is inefficient), and even eliminating programs (e.g., if they are ineffectual) or even agencies (e.g., if they are redundant–for example the approximately 17 US intelligence agencies) Yes, fat should be trimmed.

    My point: For the last 4 or 5 years, we have been doing what you want (at the state level)–just maybe not to the degree you would prefer. Meanwhile, many state employees have 1) had no raises as the COL has increased; 2) experienced at least on furlough and diminished health care benefits; 3) been asked to do more with less. In the UNC system, this has meant larger class sizes (which hurts the faculty AND the students), the loss of top faculty members (this year the system had virtually no money to keep faculty that received offers from other schools).

    So, during an environment of constant budget cuts (what the right wanted), when the left asked to keep a small sales tax in place (3/4 of one percent), the right followed the party line you suggested (“raising taxes is unacceptable). That is not balance (unless you mean the Roger Ailes/Murdoch version of balanced…). Not even close.

    Finally, when you say “we pay more that (sic) we need to” in taxes, that is your opinion. But many other people do not share your opinion. As someone who is a “radical moderate”, and therefore partially sympathetic to your cause (though also someone who realizes that the left is also partially “right”)–clearly, for many of us (those stuck in the middle), our tax burden is too high. And we are the most likely to consume, and therefore stimulate the economy. And we would also likely use some of that money to invest, in large AND small businesses. Again, stimulating the economy. But for many (including some of those who earn the least, and those that earn the most), the tax burden is probably too low. When billionaires pay less than the middle class, and almost half the country pays nothing, tax reform is indeed necessary. And it probably means increasing the effective tax burdens of some in the bottom 47%, increasing the tax burdens of those in the top 1 or 2%, and lowering the tax burdens for the “middle”–those of us shouldering the disproportionate tax burden. See, that is an example of balance.

    It occurs to me that you may have misunderstood what I meant by balance–that I was referring only to balanced budgets. Of course, by law, the state budget is always balanced, so that isn’t relevant. At the national level, though, compromise is going to be the only way to balance the budget. The right has to cut defense spending (something it is fighting as we speak) while the left has to cut social welfare spending for the poor. And both sides have to reform social security and medicare. BUT… we still are, at some point, going to HAVE to raise taxes. Otherwise, we will never balance the budget (the debt is so big that the interest alone makes it difficult to balance the yearly deficits, let alone lower the debt). And it isn’t reasonable to assume that the economy is going to have a huge burst, generating enough revenue to reduce the debt without tax increases. Certainly not in the foreseeable future.

  9. Frank Burns

    May 12, 2012 at 8:04 pm

    Pierce,
    I disagree with your point that we have already been cutting the budget. We are not making deep, significant cuts that need to be made. I believe there are many opportunities to cut programs that may be uncomfortable but they need to be made. I see evidence of them all the time, I see that the federal government now has a study on how to do studies. I see that we are paying for people to have cell phones with unlimited coverage, I see that we are paying for public entertainment (pbs, npr, etc), how much is enough research on global warming?

    You make a point regarding college funding. How is it that higher education costs have gone up more than inflation? I believe there are opportunities for cutting cost there. Do I feel sorry for state employees having to take furloughs and pay more for their benefits? No, I’m in private business and my benefits and salary have gone down. This is a tough economy and state employees should feel the pain as well. Our taxes in NC are really high, we have a state income tax and our sales tax is getting higher, not to mention all the fees. I get jealous of my relatives in Tennessee, they have no state income tax, and the state pays all the tuition for students who hold a B average. They actually use their lottery money for something worthwhile, a big part of ours goes toward Pre K programs.

    You may well be correct regarding the ultimate increasing taxes due to the big deficit hole we find ourselves in, but people like myself would not support tax increases at all unless deep, significant spending cuts are made first. Let’s see Congress do that first then come back to us for a tax increase.

  10. Hawkeye Pierce

    May 12, 2012 at 9:45 pm

    Frank,

    You can disagree that we haven’t cut enough, but you can’t “disagree with [my] point that we have already been cutting the budget.” That is a fact, not an opinion.

    If you go back and read what I said, you would see that, at least at the federal level, I completely agree that we need to make deep cuts. I do recommend that you at some point look at a summary of the actual budget. Most of the things you suggest cutting make up a minute portion of the budget (well under the the interest we pay annually on the debt). We can debate about NPR, PBS, UN dues, foreign aid, NEA, NSF funding of social science and humanities, etc –the typical targets of the right. In some instances, you have a good argument (e.g., There are reasonable arguments against funding PBS & NPR; I would agree with you regarding climate change, except that there are a lot of knuckleheads out there that still deny it exists, let alone the effects of human behavior on climate change. So maybe we should keep studying that one until people stop denying the evidence and bend a little.). But that is relatively trivial compared to what we spend on defense, medicare, medicaid, and social security.

    I can’t speak for private schools, but higher education costs (in terms of how much it costs us to teach a student) haven’t gone up. The UNC system costs to teach students has actually gone down. What has happened–the burden of those costs has shifted a little from the taxpayers (b/c you don’t want to pay 3/4 of a percent extra on sales taxes) to the college students (or their parents). Personally, I would prefer the taxpayers keep the larger share of the burden (since the benefits from education are felt by the entire society…), but we apparently disagree about that.

    I didn’t ask you to feel sorry for state employees. It is indeed a tough economy (though, here in Charlotte is annoying when I see my BofA and Wells Fargo friends spending bonuses that are greater than my salary, especially given the bailout and the partially culpability of those two banks in the present crisis). I just want you to stop denying that cuts to the state budget have been made. Which you still seem to be denying.

    More facts: our sales tax dropped last year (though maybe your local government raised sales taxes; the state sure didn’t).

    Tennessee is an interesting example, as they do indeed have the lowest state taxes. But the taxes here aren’t THAT bad (we are among the 1/3 of states with the lowest state tax burdens). And the quality of state higher education in NC is much better in NC than TN. To some degree, you get what you pay for. BUT we have a federal system for a reason; as some of my conservative friends have said since the passage of Amendment 1: “If you don’t like, it move to another state.” So… if you don’t like our system, move to TN.

    Regarding the lottery, we are again on common ground. I voted for the lottery in GA b/c they started the Hope scholarship (which TN copied). Unfortunately, we let criminals like Kevin Geddings design the NC lottery and we are paying the price.

    See, here is the problem I was trying to get at with respect to balance. You want what you want (deep spending cuts, presumably in social welfare programs?) first. Then, and only then, are you willing to give. The extremists on the other side want what they want first: spending cuts in defense and raising taxes on the richer people (those that make more than $200,000 or so. So nothing happens and the debt keeps balooning. Guys like Grover Norquist fan the flames and make tons of money doing so. Meanwhile, we incur the possible financial risks. Neither side wants to give until the other side gives. My point–both sides need to give. The only way to get things done if we, the people, stop being so darned inflexible. We need to realize that we have to cut social welfare AND defense AND taxes. We don’t have a choice. BUT instead we let things spiral toward disaster because we want what we want first (which reminds me of my 6 and 8 year old kids…).

    It’s like energy policy, Obviously, the left needs to give a little so that we can expand drilling (though that won’t help in the short run, since most new drilling sites aren’t productive for close to a generation). But the right needs to give a little and support programs designed to reduce fossil fuel energy consumption or find alternative sources of energy.

  11. Frank Burns

    May 13, 2012 at 7:10 am

    Pierce,
    Climate change does exist and it has existed since the beginning of time, it’s mother nature’s way. I agree with you, I don’t agree that climate change is influenced at all by mankind. There is no evidence of that. The polar bears are having fun, the temperatures are flat since 1998, the ice is expanding, and the sea levels are going back down. We don’t need to be spending billions on more research on a flawed theory. It spending more good money after bad.

    I agree with you on the huge bonuses being paid by the banks are outrageous. What does the taxpayer get for bailing them out?

    I do think deep spending cuts are necessary on the federal level and that also includes defense, not just social programs. But yes social programs do need to be cut as well. We can’t afford to be so generous. I do not want defense to be cut enough where we can’t defend ourselves from attack. There are still many threats. We certainly need to cut foreign aid to the bone.

    I agree with finding alternative sources of energy, but they have to be cost effective. Solar and wind are not cost effective right now. Maybe they will be in the future. I see no need to reduce fossil fuels since we now have technology to use domestic energy. Carbon is not a bad thing. The middle east is a bad thing, so for that reason we should reduce dependancy on it. We cannot afford to prop up ineffective green technologies just so we can say that we’re going green and feel good about that.

  12. Hawkeye Pierce

    May 13, 2012 at 10:43 am

    Frank-
    We do mostly agree. Climate change is a part of nature. The bank bonuses are insane. We need to cut defense, social programs, and foreign aid. But we have to be reasonable where possible–we need to have a strong enough military to defend ourselves. And we need to be reasonable about developing alternative sources of fuel. That includes developing cost effective means (and right now, the intermediate technologies are not cost effective, like wind and ethanol). And we shouldn’t use subsidies to prop up the use of these technologies. If we are going to use any money, it should be to support R&D to develop alternative sources. Oh, and I may be presumptuous here, but we might also agree that we could use more nuclear energy (but we need to be reasonable about the location of the plants). Finally, we do need end our dependence on foreign oil. It distorts the balance of power, and creates serious risks.

    I think we do, however, disagree on the margins. I think the bailout helped the taxpayer to a degree. Had the government (both the Bush & Obama administrations) not done something, we could have had a world-wide economic collapse instead of a “great recession.” So, to the extent that the bailouts mitigated some of the economic disaster (admittedly, this is supposition, since we do not have a counterfactual to compare it to), it benefited the taxpayers. AND, don’t forget that most of the bailout money was returned to the government with interest. So the interest is another benefit. BUT we do agree that the bonuses were outrageous.

    I can’t say that I agree with the statement that climate changes is not influenced at all by mankind. There is indeed a large bit of scientific evidence supporting this claim. You can argue that it is some vast left-wing conspiracy, but I tend to think that argument defies logic. For one thing, the scientists (and it is an overwhelming majority) and the liberals don’t have as much to gain as the oil companies (including Exxon, the most profitable corporation in the history of the world since… 1998… and that is not hyperbole).

    But we can debate this, and the evidence, forever. My points: a) there are reasonable people on both sides of the political aisle that differ over the scientific evidence. That alone suggests that we shouldn’t abandon the research. You have your opinion, and it is indeed supported by some scientists, and a few of those scientists do not receive substantial sums of money from the fossil fuel industries. On the other side, there are thousands of scientists, many of whom do not receive money from industry, who would disagree. b) My fear is that level of certainty that people have about things like climate change is part of the problem. When there is literally a ton of scientific evidence supporting the conclusion that human behavior plays a role in climate change, the wholesale rejection of this conclusion because the tests are not perfect and because some of the hacked emails by a small number of researchers suggested that they presented the results in the light most favorable to their claim seems to be an overreaction that is muddled by politics. On the flip side, the left (and, in many cases, mainstream science) often forgets that science itself is a probabilistic enterprise. Do we know for sure that human behavior plays a role in climate change? No. Do we know for sure than man evolved from ape-like creatures? No. And when the left states those claims with 100% certainty, that is bad use of science. HOWEVER, if the weight of the evidence suggests that the scientific theory is likely true (and I think most folks, when they rip down the ideological and/or religious veil(s) that blocks their ability to perceive reality clearly, believe that there is evidence to support both theories), then we have to give credence to the theories. WE don’t have to teach them as facts, just theories with a lot of evidence.

    BUT, we should be open to altering our behavior given these possibilities. Look at the evidence, recognize that fossil fuel consumption may play a role in climate change, and climate change may have harmful consequences for human life on the planet. Then alter our behavior accordingly. This does not mean we abandon fossil fuels. It means we try to develop ways to use them more efficiently. It means that we avoid being stupid (no one “needs” a Hummer unless they are in combat) about the consumption of fuels. And it means we try to find cost-effective alternative sources of fuels. It also helps when this behavior meshes with other goals–like limiting the economic and political power of oil rich countries like Venezuela, Iran, Russian, and Saudi Arabia. It also makes sense when we realize that fossil fuels are scarce resources, and that economic development in Asia and Brazil is dramatically increasing the demand for these fuels, such that we will run out them in the not so distant future. Not in our lifetime, but in under 200 years. BUT even if we still have the oil and gas in or lifetimes, the increasing demand will play havoc on the economy. Put simply, when fuel costs increase, the costs to transport goods (and, in many instances, produce goods) increases. And that leads to inflation, etc.