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North Carolina’s total unemployment rate is showing small but steady improvement, but the employment gains are not shared equally by all communities in the state. Progress made in this uneven recovery continues to pass over many rural and low-wealth communities, where unemployment remains persistently high and job growth is stagnant – or, in some cases, negative.

At the same time, in many of these communities, local revenues have not made significant gains since the official economic recovery was declared in June 2010, and subsequently, local budgets remain tight. Since local governments function as sizeable employers in their counties—and not just as providers of public services—tight budgets can have a significant impact on a county’s jobs picture, and do so in ways that vary from county to county across the state. Read More

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Who benefited most from the 2011-13 state budget’s tax and spending cuts? Certainly not working North Carolina families, counter to claims made by a video from Americans for Prosperity and Civitas. The video states that legislators both cut taxes for working North Carolinians and balanced the budget. The Budget and Tax Center has already disputed the truth of the video’s claim to add 2,000 teachers to North Carolina’s public schools despite massive tax and spending cuts.
Instead of mending North Carolina’s outdated tax systems, policymakers made tax cuts in the budget that disproportionately benefited the wealthiest North Carolinians and businesses at great expense to public structures necessary to moderate- and low-income families; teachers in classrooms, health care for the elderly, a strong court system, and infrastructure for businesses and communities.
  • Discontinuing the higher personal income tax surcharge and the tax surcharge on profitable corporations put $200 million per year into the pockets of the wealthiest North Carolinians and largest corporations, but did not benefit North Carolina families – working or not – of more modest means.
  • Legislative leaders gave away more than $467 million over the biennium to businesses in the form of a $50,000 business tax exemption. This exemption does not come with any requirements, such as job creation, and as a result is highly unlikely to make a dent in North Carolina’s persistently high unemployment rate.
Beyond the budget bill itself, legislators continue to press for changes to state corporate tax law that would make it even easier for multi-state corporations to shift profits earned in North Carolina to other states and counties in order to avoid paying state taxes. The changes sought by industry groups representing these corporate taxpayers could cost North Carolina’s public schools, community colleges, and courts hundreds of millions of dollars.
By undermining revenue availability in these ways, North Carolina policymakers put the state budget in a precarious fiscal position while taking no action to improve the revenue system’s equity or adequacy to support a stronger state for all.So while you may have heard about a revenue “surplus”, don’t believe it. It’s still far too early to declare a state revenue surplus (which is revenue collections over projections at the close of the fiscal year, in June) and even more unrealistic to assume that some economic improvement short of major gains in statewide employment will be enough to mend this unbalanced budget. Revenue collections ahead of target are not the same as a revenue surplus. Even if it was, the $140 million ahead of target at current time isn’t even enough to meet current-year obligations, let alone increase availability for next year’s budget.
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UPDATED: How does a loss of 915 teacher positions statewide magically become 2,000 teacher positions added? The answer: budget trickery. A video from Americans for Prosperity and Civitas called “NC Real Solutions” claims that the 2011-13 state budget managed to cut taxes for working North Carolinians, stay balanced, and add 2,000 teachers to North Carolina’s public schools. The Budget and Tax Center disputes the truth of each of these claims. Here are the facts on the state budget and teacher positions, and we’ll follow up throughout the day on the real impact of the budget’s tax cuts as well as what makes a balanced budget – and even more importantly, what doesn’t.

Line 5 of the 2011-13 public education budget annotated committee report (page F-1) appropriates $62 million in FY2011-12 for “Class Size Reduction in Grades K-3.” The line states that this appropriation will fund 1,124 “additional” teacher positions. If you add that position number to the 2012-13 appropriation in the same line ($63 million, for 1,144 teacher positions), you get 2,268 teacher positions – but only hypothetically. In order for these appropriations to result in the expansion of teacher position, there would need to be no other reductions in state funding that supports teacher positions, regardless of how they are funded. Unfortunately for NC Real Solutions, that simply isn’t true.

On the very same page, line 4, “LEA Adjustment,” made a $124 million unspecified cut to North Carolina’s school districts in the current school year (2011-12). Coupled with a major unspecified cut made to the public school budget in the 2010-11 state budget which didn’t take effect until this year, LEAs statewide must return nearly half a billion dollars in state appropriations to the General Fund before establishing their operating budgets. That fact alone outweighs, and undoes, any smaller line-item expansion in funding for classroom staffing in public schools, from the mountains to the coastline.

What the video may want voters to focus on is a small-picture statistic – the number of state-funded elementary teacher positions that grew by 2,000 from 2010-11 to 2011-12. But the number of federally-funded elementary teacher positions fell by 1,400 from 2010-11 to 2011-12, as well as a decrease of about 120 locally-funded elementary teachers. Overall, the DPI data shows just about 500 more elementary school teachers in North Carolina’s public schools than last year, far less than the 2,000 claimed.

This change is undermined by the cuts to teachers in other grades. Taken as a whole – which is the only way to gauge the classroom impact of these decisions – there are 915 fewer teacher positions in the public schools this year than last year.

North Carolina’s public schools have been doing more with less - educating more students with fewer teachers and other school personnel - since the start of the Great Recession. Even hundreds of millions in federal recovery funding couldn’t balance out the loss of more than 16,000 school positions statewide during this difficult time. Data from the Department of Public Instruction derived from the statewide public school payroll - the same data cited by NC Real Solutions – clearly shows the magnitude of position losses made across the state’s LEAs. From 2010-11 to the current school year, 915 teachers and 2,125 teacher assistant positions were eliminated completely. Across all categories of positions, 4,500 public school positions have been eliminated since the current legislative budget took effect.

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A report released today by the Budget and Tax Center offers a new perspective on how budget cuts at the state and federal level disproportionately impact North Carolina’s rural local governments and communities. Local governments have long filled a singular role by investing in community development and increasing access for individuals and families to education and other supports necessary for a vibrant and growing middle class. But today, rural county governments are less able than urban counties to sustainably fund their operations at current service levels.

Rural counties also exhibit troubling signs of widespread economic hardship in the form of high shares of residents living in poverty, a higher share of residents who have no form of either public or private health insurance, and lower overall wealth as indicated both by county median income and assessed property values. Furthermore, many are heavily reliant on state and federal funding to support core governmental operations, but all less able to raise revenue to bridge their own budget shortfalls, leaving only drastic measures for balancing budgets such as cutting or eliminating local jobs and core services that support economic recovery.

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The latest installment in North Carolina’s current-year funding shortfall for the Medicaid program hinges around a short exchange between HHS chairman Rep. Nelson Dollar and Sen. Martin Nesbitt. Rather than discuss the legislature’s current dilemma of how to address a $149 million shortfall in current-year funding for the program – a shortfall created by state appropriations hundreds of millions below continuation requirements – Rep. Dollar spoke about the prior year’s shortfall and how it was addressed. When Sen. Nesbitt pointed out the legislature’s need to take action on the current problem, Rep. Dollar would only say that the legislature would take “appropriate action” on the shortfall when the short session begins in May.

This may be cutting it a bit too close since Medicaid will literally run out of money to pay claims by May, according to statements made by DHHS staff at a public meeting of the Medical Care Advisory Committee in December 2011. Read More