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Statement on Governor McCrory’s Budget

Posted By Alexandra Sirota On March 20, 2013 @ 12:58 pm In NC Budget and Tax Center | Comments Disabled

Governor McCrory released a budget today that falls short of returning us to pre-recession levels but does expand investments in critical areas. The budget assumes that available revenues will remain the same as collections under the current tax system and benefits from slight improvements to revenue collections due to improved economic performance. The Governor is therefore primarily able to expand investments in certain areas by reducing spending in others and relying on tuition increases and other fees.

Notably, the Governor fails to define the tax changes he would consider as part of a tax reform effort representing another missed opportunity and a signal that piecemeal changes to the tax code are acceptable. Indeed, the Governor commits to repealing the state’s estate tax which benefits multi-million estates. Last year, just 23 estates paid the state estate tax. 

It is difficult to imagine a scenario in which it would be possible to achieve his broader goals for tax reform of revenue neutrality and no tax increases while still cutting personal and corporate income tax rates.

Among the notable spending decisions in this budget are:

  • Fully funding Medicaid with an additional $575 million.
  • Setting aside $600 million  to maintain and enhance reserves, some of which could also be available during tax reform discussions. $400 million is allocated to the Savings Reserve Account, $180 is allocated to a new Medicaid Risk Reserve, and $20 million is allocated to the Disaster Relief Reserve.
  • Investing an additional $52 million in pre-Kindergarten programs, an investment that will serve 5,000 additional at-risk four-year-olds.
  • Providing a cost of living salary increase of 1 percent to teachers and state employees as well as retirees.

Again, the missing piece is how and who will pay to support these investments in future years. That information is critical to understanding whether the decisions about spending priorities can be sustained.

The time to rebuild is now. Ensuring our children receive a quality education, our infrastructure is sound and our communities are safe can establish a foundation for stronger economic growth in the coming years.


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