North Carolinians are being dealt a bad hand. The deep revenue losses resulting from the 2013 tax plan is creating a reality in which there are too few dollars available to meet the needs of children, families, and communities. Budget writers are facing a self-imposed budget crisis and finding it difficult to agree on just how large the cut to public schools and public health should be to meet its priorities and balance the budget. To be clear, budget writers agree that those core budget areas should be cut compared to the enacted 2015 fiscal year budget but have yet to agree on the size of the cut.
That’s the main reason why North Carolina is more than two weeks into the new fiscal year without a revised state budget.
For weeks budget negotiators in the House and Senate have been shuffling the deck, making proposed cuts in core areas of the budget and moving that money around in order to finance much-needed pay raises. This budget shuffle is further proof the state is facing a revenue problem. It is important for state lawmakers to raise adequate levels of revenue to meet the levels of investment that are needed to support North Carolinians and a strong economy.
Oddly enough, the majority of the attention given to the budget debate has been dedicated to the politics of the budget process. It has been lost in the public debate that the spending plans put forward on both sides for the 2015 fiscal year would cut the public education budget compared to the budget already approved by lawmakers last year—as illustrated in the graphic below. The latest House proposal would cut the public education budget by $293.1 million compared to the enacted budget, and the Senate would make an even deeper cut at $436.7 million.
One area of agreement has remained constant throughout the entire budget debate: the Governor and legislative leadership insist on keeping the next round of tax cuts that are scheduled to go into effect next January. This is the case even though it’s more than clear that the state can’t afford those tax cuts. Stopping the next round of tax cuts would save approximately $100 million in the 2015 fiscal year and $300 million in the 2015 calendar year.
State estimates put the cost of last year’s tax plan at just over $700 million for the 2015 fiscal year (includes the downgrade in the consensus forecast). But, North Carolina stands to lose more than $1 billlion in state revenue in the 2015 fiscal year when measuring the tax plan’s cost using up-to-date taxpayer information. We cannot afford that revenue loss or the education, health, and safety cuts that come with it. Better choices are available than the fiscal house of cards lawmakers are pushing forward.