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Governor McCrory’s budget proposal misses the mark, keeps state on unsustainable path

This afternoon, Governor McCrory released his $20.99 billion 2015 fiscal year budget for the period that runs from July 2014 to June 2015. His proposal creates more problems than it solves, failing to take prudent steps that would put North Carolina’s budget on a more sustainable path. Similar to his budget proposal last year, his new spending proposal follows suit and fails to catch up—let alone keep up—with the needs of kids, working families and communities in many areas of the budget.

The Governor’s budget was constrained in major ways—which were self-imposed by state lawmakers last year when they decided to cut taxes. The state is facing a revenue shortfall of $191 million in the 2015 fiscal year (not to be confused with the nearly half-a-billion shortfall for the current 2014 fiscal year that ends in June). The driver of these revenue shortfalls—despite an economic recovery—is the series of tax cuts that Governor McCrory signed into law [1] last year that was already estimated to drain available revenues to the tune of $437.8 million in the 2015 fiscal year.

As we reported last week, estimates suggest that the revenue losses from the tax plan, particularly stemming from the personal income tax changes, could reach $600 million next fiscal year [2].

Yet, rather than prudently recommending the halting of future tax cuts that are scheduled to go into effect in January 2015, the Governor chose to keep this next round of tax cuts in place despite the diminished revenue picture. As we warned last year, North Carolina cannot afford to pay for tax cuts that primarily benefit the wealthy and profitable corporations at the expense of teacher layoffs, growing waiting lists for critical public services, and higher tuition rates.

State spending under the Governor’s proposal would continue to remain well below pre-recession levels, as illustrated in the chart below, even though spending over the base budget would slightly increase. All areas of education funding fall short of what was called for in the continuation budget. Tax cuts are making it harder to regain lost ground.

Gov budget 2014 REV [3]

Art Pope, State Budget Director, will present the Governor’s spending proposal to the Joint Appropriations Committee tomorrow morning. My colleagues and I at the Budget and Tax Center reviewed the proposal [4] and put together a short list of noteworthy items in the major budget areas (dollar changes below are compared to the certified budget lawmakers enacted last year):

K-12 Education:

Community Colleges and UNC System

Health and Human Services: 

Natural and Economic Resources:

Specifically, in the Department of Commerce

Justice and Public Safety:


The North Carolina Budget and Tax Center is closely examining the Governor’s spending proposal. Stay tuned for further details as they develop. And tomorrow, we will break down the general fund availability statement to give you an idea of how the Governor pays for his budget.