NC Budget and Tax Center

The new House budget is a shell game not a financial plan.

It moves money around without addressing North Carolina’s growing needs and promoting broad prosperity.

It shows once again that the tax plan adopted last year lowers our state’s horizons, making it impossible to meet priorities of all North Carolinians like quality education, healthy communities and a growing economy.

The proposal continues to rely on lottery dollars – putting too big a burden on those least able to afford it, and betting on what has proven to be an unreliable source of money over time.

It is essential that state lawmakers pass a budget that both meets our state’s growing needs today and lays a financial foundation to do so tomorrow.

To catch up — and keep up — with the needs of families, halting the income tax cuts scheduled for January 2015 would be a great start.

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Friday the Bureau of Labor Statistics and the NC Division of Employment Security released data on the state of North Carolina’s labor market. The unemployment rate ticked up to 6.4 percent over the month but is still below where it was a year ago.  Despite this annual improvement in the unemployment rate, the reality is the labor market continues to provide too few job opportunities for those who seek work.

The number of missing workers, which estimates who would be in the labor market if job opportunities were stronger, provides additional insight into the state of North Carolina’s labor market.  As of May 2014, there are an estimated 230,517 missing workers in North Carolina.  Again, these are North Carolinians who would be seeking work if jobs were available. If these workers were included in the official unemployment rate that rate would be nearly twice the official unemployment rate: 11.3 percent rather than 6.4 percent.

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NC Budget and Tax Center

From the way legislators have been behaving the past two years, you would think that North Carolina’s recovery from the recession has weathered the economic storm. And yet, time after time, the evidence has shown that North Carolina continues to be far from where we need to be to declare clear and sunny days.

Revenue needed to pay for basics like schools and health care is still far below pre-recession levels, there are still too few jobs for those who want to work, and the state’s poverty rate remains higher than normal. Over the past two years, lawmakers have approved budgets that failed to meet classroom needs, reduced funding for health care for those in need and allowed backlogs to grow in our courts.

So their decision to continue to set aside money in the Rainy Day Fund, a reserve they traditionally contributed to in good times to ensure that they didn’t have to make deep, damaging spending cuts during the next downturn, is, well, strange. It’s like digging a storm shelter in the middle of a tornado.

To be clear, the Budget & Tax Center has always been an advocate for a stronger Rainy Day Fund in North Carolina. And yet, boosting contributions to the fund when core public investments are being starved is just another self-imposed limitation on lawmakers’ ability to meet pressing current needs. At each turn in the budget process the Governor, the Senate and the House, have all opted to squirrel away a little more rather than meet current needs. That’s not responsible. It’s counterproductive and short-sighted, especially since North Carolina’s Rainy Day Fund balance currently is about 3 percent of overall state operations, nearly double where it was four years ago, when it was just 1.56 percent.

BTC - Rainy Day Fund ContributionsRight now, the biggest threat to the state’s future is not inadequate Rainy Day Fund contributions. It’s the tax plan lawmakers passed last year, which has drastically reduced the state’s ability to invest in priorities like education, transportation and other keys to building a strong economy that creates widespread prosperity. Indeed, the revenue shortfall that lawmakers will have to contend with in the fiscal year that begins July 1 could be as high as $600 million.

Setting aside money in the Rainy Day Fund won’t do anything to fix the gap that the tax cuts have opened between available revenue and the cost of providing for the everyday needs of North Carolina families, schoolchildren and seniors. While having a strong Rainy Day Fund is nice, having a tax system strong enough to meet our needs is even more fundamental.

NC Budget and Tax Center

The House budget shortchanges the needs of North Carolinians — the inevitable result of tax cuts for wealthy people and large, profitable corporations.

And the House worsened the state’s prospects by voting down restoration of the state Earned Income Tax Credit, a proven tool for helping low-paid, working families make ends meet.

It’s time to reverse course and get back to investing in North Carolina’s future. That means stopping the next round of tax cuts scheduled to start in January 2015 and reducing reliance on lottery proceeds – an income source that falls most heavily on lower income people.

NC Budget and Tax Center

Earlier this week Senator Berger announced that he and his colleagues drafted an amendment that would meet the demands of Moral Monday protestors but couldn’t find any sponsors. That seems curious given that, barring two sections which have no basis in the Moral Monday agenda, the proposal is not only revenue neutral but provides for additional revenue to meet the state’s pressing needs that have been unaddressed since the start of the Great Recession.

In reviewing the amendment for the amendment’s alignment with the Moral Monday agenda and fiscal impact, it is clear that there is a fiscally responsible path forward for meeting the priorities of North Carolinians to ensure that the state’s most vulnerable citizens can access health insurance, our children can be ready and prepared to learn at school with quality childhood experiences, our workforce can be trained for the jobs of the future, working families can be supported as they struggle to get by on low-wages and the human rights and ability to access a fair justice system for all North Carolinians can be protected.

So here is a bit on what we found. Read More