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.