NC Budget and Tax Center

Amid major differences between the House and Senate respective budgets, public schools across the state wait to see what level of state support will be provided for public education. The final decision doesn’t just matter for the education of our children but the attractiveness of our communities and the long-term potential of our economy to grow together.

Funding may not solve every challenge in public education, but it certainly can make a difference in ensuring that a quality education for every child can be provided. As I’ve previously highlighted, smart allocation of public dollars can ensure that regardless of where they live in the state, every child receives a quality education, and in so doing an opportunity for them and in turn the economy to do well in the future.

Here are six trends that highlight the impact of state-level budget decisions on public education in North Carolina.

  1. Total state funding for public schools remains below pre-recession level

State funding for public schools has not yet reached its peak level for FY 2008 prior to the Great Recession. For FY 2015, total state funding for public education was $8.04 billion compared to $8.6 billion for FY 2008 when adjusted for inflation. This decline in state funding equates to $578 million in less funding for public schools.

Total Pub Ed Spending

Note: For this blog post, state funding for teacher pay increases are included in total spending for public education. BTC normally backs this particular funding out of the public education budget, as it has historically been included in the Reserves section of the state budget. Accordingly, figures in this blog post may differ from BTC’s other analyses of the state budget.

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NC Budget and Tax Center

For the 2015-16 school year, the NC Department of Public Instruction reports that around 1,200 public schools are eligible to participate in an initiative that aims to fight hunger in high-poverty schools. Referred to as Community Eligibility, this initiative allows eligible high-poverty schools, groups of schools, or school districts to offer breakfast and lunch to all students free of charge.

When children arrive at school hungry, it is very difficult for them to concentrate and do well in the classroom. Accordingly, community eligibility helps ensure that all children in high-poverty schools arrive to class each day fed and ready to learn. Last year, North Carolina got off to a good start with nearly 650 schools (around half of eligible schools) adopting community eligibility to feed more than 310,000 kids. Participating schools note that more NC children are eating school meals because of community eligibility, with a particular increase in the number of children eating breakfast.

The second year of this initiative provides an opportunity for additional eligible schools to join this initiative. With 1,200 public schools eligible for the upcoming school year, this means that hundreds of schools are not currently participating. Eligible schools that are not currently participating in Community Eligibility have until August 31, 2015 to confirm that they will join the initiative.

The impact of Community Eligibility extends beyond ensuring that children arrive to class fed and ready to learn. By eliminating the need to collect school meal applications, schools are able to use their staff more effectively and reduce administrative costs. These cost savings are likely welcomed by local schools amid limited financial resources and tight budgets.

This is not to say that the transition is easy. For example, a key feature of community eligibility is that schools no longer have to collect school meal applications; however, this paperwork has long been key to determining school funding mechanisms and poverty estimates, among other things. However, the USDA and US Dept. of Education have issued a variety of rules intended to address this issue and viable solutions exist for other particular challenges.

North Carolina has an opportunity to build upon its initial success with fighting child hunger through community eligibility. The overall health and prospects for the state will largely depend on the care and attention given to one of our most valuable assets – our youth. Supporting participating schools and getting more eligible schools to join community eligibility helps promote opportunity for all children.

NC Budget and Tax Center

It is becoming ever clearer that recent tax cuts have not endeared North Carolina to the entire business community. Proponents of the 2013 tax cuts argued that they would create a more competitive and business-friendly climate. Looking at recent business climate rankings, however, undermines this argument in two key ways.

First, multinational corporations already liked North Carolina just fine before the latest tax cuts. Second, the tax cuts have undermined our economic competitiveness in other important areas.

The 2014 Top Competitive States ranking by Site Selection, in which North Carolina is ranked #1, suggests that the tax cuts worked. However, North Carolina has consistently been at or near the top of the Site Selection rankings for a decade, including being #1 in some years prior to the 2013 round of tax changes. This ranking is largely based on the level of private capital investment a state secures, the number of jobs created, and a state’s tax climate – as determined by the conservative Tax Foundation. Essentially, low tax rates and high levels of capital investments – made possible in part due to generous economic incentives provided to corporations by state governments – benefits a state’s performance in this ranking. Read More

NC Budget and Tax Center

With lawmakers set to hammer out a final state budget, North Carolinians are hearing a lot of misleading claims about the inability to afford important investments in the state’s economic future. Unmentioned is that the state’s constrained finances – at a time when the economy is improving – stem from the decision to sharply cut taxes over the past three years instead of building a strong foundation for lasting growth.

So when policymakers say that making investments in one area of the budget limit the ability to invest in other areas, they are right in lamenting limited resources. But they are offering false choices because they leave out the fact that the limits on resources available to help North Carolinians build a secure future come from House and Senate leadership prioritizing tax cuts over investments that drive the economy forward. And these constraints are likely to continue far into the future because the proposed House and Senate budgets include tax cuts that cost anywhere from $650 million to $1 billion over the next two years, depending on which version of the budget the two houses eventually agree to enact.

By locking themselves into these false choices legislators fail to acknowledge that halting further tax cuts would help ensure that schools have the resources they need and that important supports are available to promote healthy and safe communities.

Let’s sort out some of these false choices and shed light on how different it could be if the state had taken the common-sense path of avoiding such damaging tax cuts.

  • Classroom Teachers vs. Teachers Assistants. Today, our schools have nearly 4,800 fewer classroom teacher positions and more than 7,000 fewer state-funded teachers’ assistants than in 2009, which is especially bad considering there are 43,000 more students in our schools. The Senate budget drastically reduces funding for teachers’ assistants and provides some additional funding for classroom teachers. But neither the House nor Senate budget would restore the number of teachers and assistants to the 2009 level. Without tax cuts, North Carolina could invest in teachers and teachers’ assistants, providing the next generation a better shot at getting the skills to compete in a global economy.

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Falling Behind in NC, NC Budget and Tax Center, Raising the Bar 2015

A tax plan state Senate leaders presented this week would promote neither shared economic opportunity nor prosperity across North Carolina. Far from it.

The proposal would cost more than $1 billion in annual revenue loss as the tax plan continues down the path of handing out more costly tax cuts to large, profitable corporations at the expense of everyday North Carolinians. This approach won’t restore the state’s economy to a sound footing.

The proposed tax plan does nothing about persistent stagnant wages, an uneven economic recovery in which all gains are going to the wealthiest North Carolinians, and the lack of economic and job growth in many parts of the state. Senate leaders would pay for only a portion of the income tax cuts by having North Carolinians pay more in sales taxes, which hit people making relatively low incomes the hardest. And the state would continue to walk away from its responsibility to make much-needed investments in our public schools, public colleges and universities, repair the state’s eroding infrastructure, and other building blocks of a strong economy.

Key aspects of the Senate tax plan stand out as strong reasons why its adoption would fail to promote broad prosperity.

  • The proposal’s reduction of the personal income tax rate to 5.5 percent from 5.75 percent has no benefits to the state’s economy or its competitiveness. At the cost of much-needed public revenue, the tax rate cut won’t drive significant job creation, motivate businesses or people to locate in North Carolina or encourage local investment. Not only do income tax rates affect these factors negligibly, if at all, North Carolina’s personal income tax rate is already in line with the region’s, falling in the middle among southeast states.
  • While putting a limit on how much in itemized deductions a taxpayer can claim is good policy, using the added revenue this produces to reduce tax rates isn’t. Because this proposal would place all itemized deductions—mortgage interest, charitable contributions, medical expenses, etc.—under the cap, it creates greater equity in the treatment of taxpayers. Capping itemized deductions reduces revenue loss from these deductions and helps address inequities in the tax code, as wealthier taxpayers typically benefit more from deductions.
  • Increasing the standard deduction is a wasteful way to address the problem of too many North Carolinians struggling to make ends meet because it deprives the state of much-needed public resources that could boost public investments that promote economic growth. A better way to help hard-working taxpayers keep more of what they earn is to adopt a strong refundable state EITC to help offset not only income taxes, but sales and property taxes that fall hardest on those with lower incomes.

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