NC Budget and Tax Center

NC Senate Budget: The devil’s in the details

The North Carolina Senate passed their budget just past mid-night, in the wee hours of Saturday morning. The Senate budget puts into clear perspective the high price ordinary North Carolinians will have to pay for last year’s tax cuts that primarily benefit the wealthy and profitable corporations. Despite progress in some areas, the proposal leaves too many vital public services operating at diminished levels—failing to catch up with the needs of kids, working families, and communities five years into the official economic recovery. Our overview of the Senate budget can be read here.

State spending under the Senate budget would be 6 percent, or $1.4 billion, below the last budget that was enacted before the Great Recession, adjusting for inflation. Yet, there are more students to educate, citizens to serve and protect, and older adults to help care for.

Due to tax changes enacted last year, budget writers are now dealing with the consequences of a self-imposed budget challenge. State lawmakers created a structural deficit in which revenues are falling short of what is needed to meet critical needs across budget areas. 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 lawmakers approved and Governor McCrory signed into law last year that will drain available revenues to the tune of $437.8 million in the 2015 fiscal year. As we reported earlier this month, estimates suggest that the revenue losses from the tax plan, particularly stemming from the personal income tax changes, could reach $600 million in next fiscal year.

It is important to put these revenue losses into the context of foregone public investments that are the building blocks of a strong economy, as the table below does. It is also important to remember that better options exist. In the short term, lawmakers should halt the future tax cuts that are scheduled to go into effect in January 2015.

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One Comment

  1. Joe Reed

    June 2, 2014 at 11:31 am

    An Open Letter to the General Assembly:

    Dear Honorable Members of the General Assembly:

    Last year we undertook a major battle to restore funding for the Wright School in Durham, the ONLY facility of its kind in NC. Thousands of people signed a petition, and parents and former students came forward with story after story of the amazing success this facility has with treating otherwise untreatable children. The school was saved, or so we thought.

    Wright School, if you are unfamiliar, is a nationally-known 50-year old institution, and is a best practice, short term, high quality residential treatment center for children statewide with severe emotional, behavioral and learning difficulties whose needs cannot currently be met in their communities. It serves as a model facility nationwide for the principles of Re-Education, and has a sterling record of unqualified success. I daresay it is unfortunately one of the few truly successful programs that DHHS now operates. (You can read more by visiting http://www.wrightschoool.org)

    Believe me, I understand the onerous task of trying to be fiscally responsible and balance our budget. I do. And I do not envy you for making the horribly difficult choices you were elected to make. But a terrible, terrible mistake has been made…

    The new Senate budget calls for closing the facility this September. THIS IS UNCONSCIONABLE. This year, you must not — you can not — abandon these children and their families and the communities that will be impacted if the school is closed. In the past, reasons for closing the school were put forth that were factually inaccurate. In case you have heard these again this session, I want to point these out and offer the truth:

    — WRONG: Funding must be prioritized for facilities with a statewide impact
    — RIGHT: Wright School serves children, their families, and the communities of all 100 counties in NC and always has. The school has in fact had a NATIONAL impact, as it is a model school for the principles of Re-Education.

    — WRONG: Wright School only provides services for 24 students/year
    — RIGHT: Wright School has 24 beds and serves 24 students at a time; however, children rotate in and out of the school monthly. Over the past several fiscal years the school has served an average of 60 children a year, as well as providing outreach services to families and communities. Also, the impact of removing these students from the general population while in treatment means that thousands of other students benefit from the reduced disruption in their classrooms.

    — WRONG: It costs well over $100,000 per year per student to operate Wright School
    — RIGHT: The actual cost per child, based on the correct number of students served in a year, is approximately $45,000 per year. Nothing else comes close to providing a combination of treatment and educational services to this age group at all, much less at this cost.

    — WRONG: These children will be returned to their communities where treatment may be obtained from local resources
    — RIGHT: There ARE no local resources to treat these children. These children are at Wright School precisely because what meager local resources exist are not equipped to treat children with these magnitude of issues, and parents and families have already exhausted any other means of treatment.

    In these times of strife between parties, when every move is considered a political threat to “the other side,” I beg you to come together and do what is best for the children of NC and their families and communities who rely on the Wright School to quite literally save their lives.

    This is not a matter of Right or Left, Liberal or Conservative, Democrat or Republican…Honorable members, this is a matter of Right AND Left, Liberal AND Conservative, Democrat AND Republican. How often do you get a chance to work together anymore?

    Do the right thing, and the citizens of North Carolina will, on this one issue, support all of you.

    I am begging you. Please. For the children.