2017 Fiscal Year State Budget, NC Budget and Tax Center

Follow the Money: How the joint budget is funded

Last night, the House and Senate held a press conference, and they subsequently released their joint budget agreement, which will be voted on over the next week or so in both chambers.

The final budget holds to the rigid formula of population plus inflation, spending only $22.3 billion to operate core public services, as well as meet the needs of a growing state population undergoing significant demographic shifts and the persistent challenges in ensuring that every community has access to opportunity. This spending level is a mere 2.8 percent above spending for the current fiscal years and does not reflect the actual needs of North Carolina. Opportunity exists to invest in North Carolina to meet those challenges and pursue every opportunity for greater success and well-being; however, policymakers have instead chosen to reduce the state’s collective commitment bringing state spending to 4.14 percent relative to the size of the economy, well below the historic average of 6 percent.

Lawmakers are relying on a largely disproven theory that cutting public spending and reducing taxes for the wealthy and profitable corporations will deliver improved economic outcomes for all North Carolinians. Some point to the state’s apparent recovery, which mimics the overall national recovery, but lawmakers have failed to address the fact that wages aren’t recovering for everyday North Carolinians, there aren’t jobs for everyone who wants to work in the majority of North Carolina counties, and there is persistently high poverty in urban and rural communities alike.

Our leaders’ loyalty to severe budget constraint and lopsided tax cuts, which primarily benefit profitable corporations and the wealthy, are making it impossible for them to meet the needs of communities and families across the state. And as research and prior experience shows, this tax-cut, disinvestment approach will not deliver the economic gains they promise. It diminishes the ability of the state to pursue the investments that do deliver returns to the broader economy: preparing every child for kindergarten, increasing post-secondary attainment of the workforce, and targeting investments in main streets and small business development in struggling areas, for example.

While most of the public budget debate this week will be on the spending side (see our initial take here), examining how the North Carolina General Assembly plans to pay for their proposal is just as important. They pay for their 2017 budget proposal in the following way: Read more

2017 Fiscal Year State Budget, NC Budget and Tax Center

Statement from Budget & Tax Center Director Alexandra Sirota on final state budget

All of the state budget proposals this year have fallen short of what it will take to get North Carolina back on track. The final budget agreement appears to be no exception based on the press conference releasing topline details this evening. Rather than respond to what families, communities and the economy need to thrive, policymakers have followed a rigid formula divorced from our day to day realities.

The final budget agreement continues to plow ahead on the path to a reduced income tax and an expanded sales tax that will continue to benefit the wealthiest North Carolinians and profitable corporations at the expense of our communities and working families.

The reality is that North Carolinians know the path to a better future is built through shared commitment to good schools, protection of air and water quality, support for main street development and other building blocks of a strong economy and healthy community. It’s time for lawmakers to see that as well.

NC Budget and Tax Center

Statement from Alexandra Sirota on tentative approval of HB3 in Senate

House Bill 3 represents a deep confusion about the role of Constitutions in our lives. Constitutions are overall frameworks for governing, not the place for public policy choices to bind future generations. That’s why we elect leaders: to debate and decide what makes sense to do today to make our communities work better and our economy work for everyone. 

This latest move to amend our Constitution with a low and arbitrary income tax cap and limits on accessing the state’s savings in emergencies reflects the current gerrymandered General Assembly’s fear that their ideas are time-limited in their value. By placing these changes into our Constitution, they are not seeking to bring greater democracy to the budget process, but instead to lock in their choices and limit the choices of North Carolinians tomorrow, 10 years, and 100 years from now.  

This unnecessary step is one taken out of fear, not responsibility for the common good. The results will be costly for us all and our state.

NC Budget and Tax Center

HB3’s Rainy Day Fund provisions aren’t going to save NC from fiscal challenges

Among the various changes to the state Constitution proposed in House Bill 3 are a series of Rainy Day Fund provisions that reflect unnecessary and counterproductive limits to the ability of lawmakers to use these savings to protect North Carolina communities and families from the brunt of a natural disaster or an economic downturn.

The Rainy Day Fund is the state’s savings account that is built up in good times so that, in downturns or disasters, policymakers can meet unanticipated needs or smooth unanticipated drops in revenue.  Through aggressive action in the past few years, the state Rainy Day Fund has reached a balance of $1.1 billion, as lawmakers have stashed away approximately $150 million each year on average since 2011 despite persistent unmet needs across the state.

Under budget proposals for the upcoming fiscal year, the Rainy Day Fund balance would grow to at least $1.4 billion, or around 7 percent of the state’s General Fund appropriations.

The proposed changes to the management of the Rainy Day Fund represent another example of enshrining in the state Constitution something that can already happen while forcing the negative effects on North Carolina communities and future generations. Read more

NC Budget and Tax Center

Changes to the state Constitution headed to the Senate floor

The Senate Rules Committee gave approval Friday to a suite of constitutional changes that would undercut our state’s economy permanently by setting a low, arbitrary income tax rate and limiting access to the state’s savings in times of emergency.

It is an entirely unnecessary move that seeks to permanently limit future budget choices to the ones that our current leaders prioritize above all else.  It is not only an insult to the wisdom of the framers of our state Constitution, but also to future North Carolinians and legislators whose priorities may differ from their own.

To recap just why such a move is completely unnecessary, let’s review how policymakers have already pursued these approaches to budgeting through public policy.

First, policymakers have already set a low, arbitrary income tax rate for individuals and profitable corporations, which will drop to 5.499 percent for individuals in January 2017 and eventually to 3 percent for businesses.  These changes began in 2013 and will continue to phase in, ultimately reducing the dollars available to invest in schools, parks and public health by at least $2.5 billion each year. More than two-thirds of the tax cut from the low individual income rate has benefited the top 20 percent of taxpayers. Policymakers continue to pursue a shift to the sales tax to make up for the revenue loss, which means the tax load has shifted to middle- and low-income taxpayers. Read more