NC Budget and Tax Center

Statement on House Budget from Alexandra Sirota, Budget and Tax Center

When it comes to building prosperity in North Carolina, the House has sets its sights even lower than the Governor’s already limited budget.

The House decision to use an arbitrary, flawed formula to determine spending won’t meet the needs of communities and families across the state.

The phase-in over the next three years of another poorly targeted tax cut represents yet another gimmick.  The increase in the standard deduction is not an effective way for policymakers to address the upside down tax code. More than half of taxpayers who make more than $95,000 a year get a tax cut under such a proposal.  North Carolina would be better off with a state Earned Income Tax Cut that helps people who work hard for low pay. An EITC wouldn’t cut taxes for people making over $95,000 a year, and it would help those who work and earn under $35,000.  And since the budget proposed doesn’t account for the full cost of this tax change, it is impossible to know what will need to be cut or where taxes will need to be raised to make up for the lost revenue to communities and the state.

In pursuing more tax cuts over investment, the House is undercutting the foundations of a strong economy. The House budget will not meet the needs of North Carolina, such as improving classroom experiences for every child, revitalizing the main streets of every community and promoting the health and well-being of families and seniors. It is time for policymakers to get serious about the unmet needs in North Carolina and pursue public investment over tax cuts that benefit the rich at the expense of everyone else.

NC Budget and Tax Center

Federal spending matters to North Carolina’s bottom line

Governor McCrory and legislative leaders have failed to acknowledge the critical role that federal investments play in North Carolina, as shown in their shortsighted response to the letter from the U.S. Department of Justice that notified the state that repeal of House Bill 2 was required to keep the state in compliance with the U.S. Civil Rights Act.

For years, policymakers in North Carolina have refused to acknowledge the role that federal dollars play in building a stronger economy for our state, whether it be in the demonstrated stabilization delivered by the Recovery Act or the support that could have been received from Medicaid expansion to rural communities and health care providers.

The willingness to defy the federal government so that the state can continue to discriminate puts at risk billions of dollars.

A recent analysis from the Williams Institute suggests that number would top $5 billion. Those are dollars that help to ensure hungry children have access to nutritious food, that children can receive a good education regardless of the wealth of their community, that housing can be kept to code and accessible to seniors and people with disabilities, and that higher education can be accessible to more North Carolinians.

By jeopardizing federal funding, North Carolina policymakers are once again creating their own self-made fiscal crisis. A few facts on federal funding to North Carolina from Pew Charitable Trust’s Fiscal Federalism Initiative:

• In 2014, the last year for which data is available, North Carolina received $16.6 billion in federal grants ranging from funding that went to transportation, health care, housing and education.

PEW_Funding_from_Federal_Grants_Varies_as_a_Share_of_State_Budgets_v1 ffi-1

• These federal grant dollars alone represented 3.5 percent of the state’s GDP, with total federal dollars flowing to North Carolina representing one-fifth of the state’s GDP in 2014.

PEW_Funding_from_Federal_Grants_Varies_as_a_Share_of_State_Budgets_v1 ffi-2

North Carolina has already experienced the loss of federal funding through sequestration—a decision made by Congress—that has resulted in cuts to child care subsidies and housing investments. A self-imposed reduction to federal investments is fiscally irresponsible in light of the already long list of unmet needs in the state and the very poor fiscal responsibility adopted by our leaders with their commitment to tax cuts for the wealthy and profitable companies.

Perhaps this is a good time to remind policymakers in Raleigh that North Carolina benefits tremendously from the investments that the federal government makes in our state’s communities and the well-being of our residents from infants to seniors. To put at risk those dollars so that the state can discriminate will only drive up the costs for us all in the immediate and long-term.

2017 Fiscal Year State Budget, NC Budget and Tax Center

North Carolina deserves better

Just two weeks into the legislative session, North Carolinians already are seeing how limited policymakers’ aspirations are for the future of communities and families.

First, the Governor proposed a state budget that fell far short of what North Carolina needs to have thriving communities and broad prosperity.

Then, yesterday, leaders of the House and Senate agreed on setting their sights even lower.

As if the limitations forced by tax cuts that mostly benefit the wealthy weren’t enough, legislative leaders went a step farther in the wrong direction by tying their spending targets to a flawed formula that replaces judgment with rigid numbers.

In deciding that what the state spends in a year can’t increase by more than the percentage growth in population and inflation, legislative leaders set a target at a little over $22 billion – less than the governor’s.

Such a formula is similar to one that has been severely reducing the quality of life in Colorado. A report from Colorado just this weekend found this inflexible policy is seriously diminishing educational opportunity. Students are trying to learn with outdated technology, and schools are having a hard time attracting or keeping the best teachers. The state’s ability to compete in the global economy can only suffer as a result. Read more

2017 Fiscal Year State Budget, NC Budget and Tax Center

The Governor’s priorities

“Don’t tell me what you value, show me your budget and I will tell you what you value.” –Vice President Joe Biden

Governor McCrory made his vision for our state clear when he announced a summary of his budget two weeks ago, saying that his proposal followed the highest priorities he has for the state’s economic success and delivery of a high quality of life to all.  Unfortunately, however, the priorities in the Governor’s proposal are wholly out of sync with North Carolinians’ priorities for a stronger more inclusive economy, as well as unlikely to deliver the outcomes he desires.

The Governor’s clearest priority places deep tax cuts for wealthy and profitable corporations above important investments that could help build an economy that works for all. His decision to allow corporate income tax rate cuts to phase in over the next two years and personal income tax rates to drop to 5.499 percent  means the loss of at least $786 million in 2017 for the state. Since 2013, the tax changes add up to nearly $2 billion, despite the evidence that such tax cuts for the wealthy and profitable corporations do little to grow the economy and do exact a huge cost in our effort to build thriving communities.

The Governor’s budget proposal has several other examples of how his priorities do not match the priorities of a strong, thriving North Carolina: Read more

2017 Fiscal Year State Budget, NC Budget and Tax Center

Delivering efficient, effective, equitable public services

The operations of government and the targeted deployment of public services for public goals is the purpose of the General Government budget area.

In year’s past, the General Government area of the budget has supported important investments in affordable housing development and the supports to managing efficient and effective core functions of government.

Here are a few of the key items to highlight in the General Government budget:

• Creates a statewide network that develops and leverages existing NC entrepreneurial management talent and recruits investors, entrepreneurs and managers to NC ($2.5 million).

• Translates University research and development for commercialization through non-profits or housing entities ($2.5 million).
• Provides funding to conduct a School Facility Needs Assessment for low-wealth counties (despite an existing assessment indicating that $8 billion is needed for school construction). In 2013, lawmakers eliminated a dedicated school construction fund via the corporate income tax revenue in order to pay down the cost of the income tax rate cuts ($1 million).

• Funds to support access to permanent, community-based integrated housing for individuals with disabilities, directly supporting Olmstead Settlement ($5.5 million). Provides no additional funding for the Housing Trust Fund or the Workforce Housing Fund, despite pressing needs.

• Provides additional funding for the Human Relations Commission, which lawmakers placed on a continuation review last year ($788,076).

• Expands elections outreach to help ensure fair elections (but leaves in place recent election law changes such as Voter ID) and implements a new campaign e-filing process (more than $900,000).