Note:  Based on more detailed data available regarding teacher pay schedules, it is possible that the Governor’s plan could cost $312 million.  By including all university personnel in the state employee figure, the cost would grow to $334 million. See the table provided below with explanation.

The key question that the Governor had to answer today went unanswered.  How will he pay for the critical investments he proposes in teachers and the classroom?

With revenues coming in under projections in the current fiscal year (and next fiscal year as well) and with the increasing likelihood that costs of the tax plan are actually even greater than revised projections suggest, the Governor has just proposed either to make the structural budget deficit in the state much bigger or to slash other critical services to fund public education.

Here is the basic math.

• The Governor has proposed to make investments in teacher pay and classrooms that total roughly $280 million.  These are recurring expenses and will impact the state budget in future years.
• The Governor has suggested in the past that there is $600 million available for this investment.  However, there is no sustainable revenue source available given what we know about revenue collections now and in the future.  This suggests that there would need to be cuts to other areas of the budget to make these investments, a move that would  not allow the state to achieve its goals.  After all children need to be healthy to learn, and need to have safe neighborhoods to thrive, and need to have the opportunity to continue their learning at the state’s institution of higher learning whether they choose community colleges or a public university.
• There could be some money from reversions or other one-time sources but these would not provide the sustained revenue to support this kind of investment.

The Governor said that these investments will be a priority above all other new spending or tax cuts in 2016.  But what about tax cuts in 2015?  There could be $300 million available if the proposed rate reductions to the personal income tax and corporate income tax don’t go into effect as scheduled.

It, of course, also seems the fiscally responsible thing to do to assess the entire tax plan including the elimination of the graduated rate structure for the personal income tax and the corporate income tax rate cut that occurred without closing a significant number of loopholes.

Putting forward a proposal that costs $280 million should require a careful accounting of whether the funds will be there to sustain that investment in the current year and future years.  It appears, however, that fiscal responsibility is not the path North Carolina policymakers have chosen to tread.

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On late Friday, a consensus revenue forecast by the Fiscal Research Division and the Office of State Budget and Management was released which identifies a current year revenue shortfall of $445 million.  Next year, revenue is anticipated to be $191 million below projections.  These revisions mean policymakers will have to make immediate adjustments to the current fiscal year budget when they return next week as well as plan for fewer dollars than expected in the next year fiscal year as well.

While policymakers address the immediate challenge, they also should assess the damage of the tax plan passed last year which is now, and will continue to be, a primary driver of revenue shortfalls. Read More

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A little known but very powerful policy tool in supporting jobless workers is called work sharing and the federal funding to administer the program will run out for states if they don’t apply before December.

Work sharing helps employers and workers alike to weather economic downturns by providing partial unemployment benefits to workers who have their hours reduced temporarily, allowing employers to ramp up their time when demand for goods and services returns.

There are 27 states that have adopted work sharing.  Nebraska most recently.  North Carolina has legislation drafted and is just waiting for a hearing.

From the recent article in the Washington Post:

Economists on both the right and the left say the program can be highly effective in reducing unemployment. According to government data, worksharing saved half a million jobs between 2008 and 2013. New applications have fallen off as the economy has strengthened, but an average of about 20,000 people a week are still enrolled in the program.

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