2018 Fiscal Year State Budget, NC Budget and Tax Center

NC House budget stays the course on the wrong path for North Carolina

The House debate over their budget proposal was another evening to early morning affair at the General Assembly.  Despite being limited by various rules for considerations on the floor, the debate still made clear the stark contrasts in policymakers’ approaches to the state’s current economic position and the well-being of North Carolinians.

Whereas House leaders argued that North Carolina should “stay the course”, the minority of House members expressed concerns regarding unmet needs and the cumulative short and long-term cost of ignoring them.

The budget passed with few substantive changes to make smarter investments or policy decisions.  The amendments presented provided more examples of the ways in which steady tax cuts in recent years have narrowed our vision for what is possible in the state.

For example, a robust debate about access to high-speed broadband in rural communities made clear the economic and educational imperative of this modern-day infrastructure to communities across our state. Even lawmakers who opposed providing funding for this unmet need acknowledged the importance and economic benefits of access to broadband, yet they kicked the can down the road until later when maybe they could afford to make this investment. The funding source proposed for this infrastructure investment may have been less than ideal, but other potential revenue sources exist highlighting the shortsightedness of lawmakers.  A tax break included in the House budget for distribution companies like Amazon—which doesn’t have a cost attached yet—could go some way to funding the build-out of broadband infrastructure in more communities. Furthermore, holding the corporate income tax rate at 4 percent rather than 3 percent could go a long way to fund rural broadband and a more robust rural economic development strategy that addresses housing, small business lending and other fundamental infrastructure needs that promote thriving communities.

An amendment was introduced to increase the cost of living adjustment for retired public employees, but the amendment was tabled and never voted on.  In tabling the amendment, it was noted that while an important priority, the request wasn’t one that could be afforded at this time.

At the other end of the career pipeline was a debate about reducing the state’s future commitment to private school vouchers in order to fund scholarships for high school graduates to have a tuition-free community college education. This effort would make our state more competitive in a 21st Century economy by helping increase degree and credential attainment.  This debate was particularly telling in the clear misunderstanding of the real challenges that many students face in affordably accessing the skills and training that will prepare them not just for careers but also for life as an engaged citizen.  Again, this amendment was not adopted.

Time and again, House leadership noted and acknowledged how various proposed amendments were important and addressed real needs and challenges for our state.  They said they just couldn’t afford to do something about it.

It is all too clear to most of us following at home that they can.  It will, of course, require them to reconsider their major tax cuts in recent years.

2018 Fiscal Year State Budget, NC Budget and Tax Center

N.C. House’s proposed budget misses more opportunities for North Carolina

The $22.9 billion state budget proposed by the House for the upcoming 2018 fiscal year – and the $23.8 billion budget for the following year – reflects a missed opportunity to embrace smart public investments and prepare for federal uncertainty brought on by cost shifts in Medicaid and food assistance, among other core public program and service cuts proposed at the federal level.

The House budget would continue to move away from historic levels of investment relative to the state’s economic health. The 45-year average of state investments as a share of the economy is 6 percent, which has allowed North Carolina to sustain the foundations of its economy and make transformative investments in early childhood and career training, for example. Under the House’s proposed biennial budget, the level of state investments would remain below that 45-year average: In both years, investments would be held at 5 percent as a share of the economy.

The artificial constraints placed on the level and growth of state appropriations year over year mean that we are falling behind in good times, even as the population continues to grow and the costs of delivering education and health care, in particular, increase significantly faster than the cost of consumer goods and services.

Perhaps most concerning is what the path we are on will lead to: year after year of cuts and no economic boom to celebrate.  Read more

2018 Fiscal Year State Budget, NC Budget and Tax Center

Statement from Alexandra Sirota, Director of the Budget & Tax Center on House Budget Proposal

North Carolina lawmakers should not have to choose between the House or Senate budget. Instead, they should choose to do what is right for our state.

While the House has taken a more prudent approach by cutting taxes less than the Senate, there will still be unmet needs and missed opportunities across North Carolina as a result of more tax cuts and the continued loss year after year from tax cuts passed since 2013.  In the face of proposed federal funding cuts as well as unmet needs for rebuilding Eastern NC after Hurricane Matthew, these cumulative losses will be compounded.

The potential of promoting the well-being of all North Carolinians and  a high quality of life in every community is threatened without reconsidering the current approach that privileges tax cuts for the wealthy and profitable corporations over investments in thriving places.

Each year that our lawmakers fail to fully review and debate the tax changes and their impacts to date, is another year that we are missing an opportunity to assess our priorities and our commitment to build a stronger economy for everyone.  Our leaders can choose to improve classroom experiences for every child, revitalize the main streets of every community and promote the health and well-being of families and seniors.

It is no longer enough to stop cutting taxes year after year, although that remains the first step to be taken.  It is time for policymakers to get serious about the unmet needs in North Carolina and choose to create a tax code that meets the needs of North Carolina today and in the future.

2018 Fiscal Year State Budget, NC Budget and Tax Center

Twelve more big policy changes buried in the N.C. Senate budget

There are a lot of issues with the N.C. Senate budget proposal as drafted. One issue is the sheer number of major substantive policy changes, including in the biennial spending proposal. Absent a full debate by policymakers and public input on each of these items, it is impossible to fully consider the multitude of ways in which the systems serving North Carolinians and communities will change as a result of the passage of this single bill. We noted a dozen such items in a post last week. Here are another dozen that should give further support to the notion that the House needs to start from scratch with a budget proposal that truly seeks to serve the broader good:

  1. Increases expenditures on ads for the North Carolina Education Lottery to 2 percent up from 1 percent (page 10, Section 5.3 (b))
  2. Converts state’s drivers education program provided to students to a reimbursement program that will likely price-out and reduce the number of low-income students served by program (page 31, Section 7.21 (b))
  3. Establishes individual county Departments of Social Services as financially responsible for erroneous issuance of Medicaid benefits and Medicaid claims payments (page 174, Section 11H.22(f))
  4. Eliminates the local school board statutory authority to file funding lawsuits against its county (page 53, Section 7.30)
  5. Eliminates longevity pay for principals and assistant principals (page 57, Section 8.3(a))
  6. Creates the Legislative School to replace the Governor’s School and gives the authority to approve the curriculum to the UNC Board of Governors (page 74, Section 10.16(a))
  7. Increases the age of juvenile jurisdiction except for certain felonies but without funding for the juvenile justice system (Section 16D.4(a))
  8. Aligns Department of Transportation program for participation by disadvantaged minority-owned and women-owned businesses with federal law to limit requirements and application to specific projects or contracts (page 317, Section 34.15(a))
  9. Requires the return of Bicycle and Pedestrian Planning Grant funds if projects in a municipality or county fail to be completed within six years despite long-time frames for securing all funding needed, review by all relevant agencies (page 32, Section 34.22(a))
  10. Eliminates Pesticides Advisory Committee (Page 195, Section 12.1)
  11. Creates new Site and Building Development Fund, a loan fund designed to help communities put up shell buildings, water/sewer, access roads with no clarity on how it will interact with the existing Industrial Development Fund, which provides grants for the same purpose (except buildings) (Page 229, Section 15.7)
  12. Earmarks Rural Division grants for specific projects in lawmakers’ districts (Page 232, Section 15.8)
NC Budget and Tax Center

Federal cuts threaten key NC priorities; State Senate budget makes matters even worse

The Senate budget passed last week sets out the ways in which federal dollars will be invested in various key priorities for the health, well-being and infrastructure of our communities. But, unlike previous years, it is not guaranteed that North Carolina will receive these funds. North Carolina already faces an uncertain future in 2018 as the state is projected to lose $1.1 billion (8.7 percent) in federal discretionary grant funding compared to 2016 levels. If these dollars do not arrive from the federal government, it will present a serious challenge to how North Carolina will pay for important investments.

As we have detailed since the release of President Trump’s budget blueprint, proposed elimination of key programs and unspecified cuts will hurt North Carolinians and our communities. It will also shift costs to states.

North Carolina can ill afford further abandonment by the federal government of its commitment to strengthen the state’s economy and communities. These 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 water and sewer infrastructure is sound.

Indeed, federal cuts and program eliminations could force state policymakers to let more needs go unmet or raise taxes.

Here is how the Senate would like to allocate just three of the 20 major federal grants on the chopping block.  Importantly, there is no mention by Senate leaders of how they would address the loss of these funds. Read more