2017 Fiscal Year State Budget, NC Budget and Tax Center

A stroll down memory lane of recent budgets, tax cuts are the guide rails

Tax changes passed since 2013 have not only significantly reduced revenue available for public investments, but also shifted the tax load to low- and middle- income taxpayers and away from the wealthy and profitable corporations. The tax burden on low income taxpayers increases on average by $30 while it decreases by around $15,000 on average for millionaires once all tax changes are fully in place.

These tax changes mean the amount of revenue raised through the state’s three main tax revenue sources – the personal income tax, the corporate income tax and the sales tax – was reduced by billions of dollars. Simply put, state leaders lowered the bar of possibilities for North Carolina. Thus, better-than-projected revenue of $330 million above projections still means we have less than we would have had and less than we need to build a solid foundation for prosperity for North Carolina.

This reality is reflected in the low spending target agreed to by leaders in the House and Senate – which is below the Governor’s modest budget proposal. There simply aren’t enough dollars to go around to fulfill even the modest stated priorities in an election year. It’s wishful thinking that NC will have enough funds to be able to boost its economy by making smart public investments that prepare every child for success, support every family’s health and well-being and deliver on a vision where every community in the state can thrive.

Here’s a recap of the sequence of tax policies passed in recent years. It is worth repeating that under these changes taxes, once they are fully in place, annual revenue loss will total at least $2 billion – much needed dollars given the growing needs of the state.

In 2013, state leaders included a package of tax changes in their approved state budget that made significant changes to the state’s tax system. These consequential tax changes included:  Read more

2017 Fiscal Year State Budget, NC Budget and Tax Center

Initial review of Governor’s modest public safety budget

Safe communities and efficient courts contribute to a quality of life in local communities that is attractive for raising a family and operating a business. Revisions to the Governor’s modest budget for Justice and Public Safety largely consist of funding for pay increases for state employees, in which the majority of these dollars represent one-time bonus payments, with modest investments in other areas of the budget.

Here are key items in the Justice & Public Safety budget.

Judicial Branch

  • Funding provided for discretionary one-time bonuses, maximum $3,000, to selected state employees ($9.9 million).
  • Funding provided for permanent experience-based pay raises for clerks and magistrates, and market-based salary adjustment for assistant district attorneys ($7.4 million).
  • Transfers dollars from Department of Health and Human Services for specialty courts that serve special populations such as individuals with mental health and substance abuse issues ($2.5 million).

Read more

2017 Fiscal Year State Budget, NC Budget and Tax Center

Initial review of Governor’s higher ed budgets that fail to ensure affordable higher education

Here are key highlights from Gov. McCrory’s proposed higher education budgets.

Community College System

Consists of 58 community colleges across the state serving all of North Carolina’s 100 counties.

The community college budget follows a larger trend of failing to boost public investment in the state’s education pipeline, with the exception of some additional funding for one-time bonuses, equipment upgrades, and a locally-driven initiative to promote post-secondary success. After years of steady increases in tuition, the proposed budget does not reverse this trend, failing to make post-secondary training and education at community colleges more affordable.

  • Funding provided for discretionary one-time bonuses, maximum $3,000, to selected state employees at NC community colleges ($29.4 million).
  • Savings recognized due to decline in enrollment ($26.2 million).
  • Funding provided for locally-determined support services to help ensure students earn a credential or degree ($16.6 million).
  • One-time funding provided to upgrade and maintain instructional equipment at NC community colleges ($7.5 million).

UNC System

Consists of 16 four-year public universities across the state serving more than 220,000 students, as well as the NC School of Science and Mathematics. Read more

2017 Fiscal Year State Budget, NC Budget and Tax Center

Initial review of Governor’s K-12 education budget: Falls short of ensuring public schools have adequate resources

Gov. McCrory’s proposed revised budget for K-12 education for the upcoming fiscal year maintains the status quo for public investments in public schools. Under the Governor’s budget, state funding per student remains well below pre-recession spending when adjusted for inflation and schools will continue to be hurting for resources.*

Teacher pay is just one thing on a long list that needs to be addressed so that public schools are able to deliver a top-notch education to all students. And while additional funding for pay increases for educators is much welcomed, this increase is largely delivered as one-time bonuses. As the only major component of the Governor’s education budget that is possible under the tax-cut constrained reality, it leaves far more needed to ensure every child’s access to a quality education.

Consequently, the Governor’s proposed budget once again challenges schools to do more with fewer resources and support despite heightened expectations regarding student achievement.

Here are key items in the K-12 education budget. Read more

NC Budget and Tax Center

State leaders need to know: Cash-strapped N.C. homeowners do exist

Simply saying something doesn’t exist doesn’t create a new reality. The Senate Finance Committee voted in favor of a bill yesterday that includes a provision that will continue to require cash-strapped homeowners to pay state income tax on mortgage debt forgiven by lenders, even though no cash is provided to the homeowner. State leaders pushed through this tax change last year and plan to keep it in place this year.

In rejecting a request by Sen. Ford, who represents Mecklenburg, to exclude the provision from the bill, committee co-chairman Sen. Rucho, who also represents Mecklenburg, stated that he had not heard of any North Carolinian benefiting from the tax provision. He made the same assertion last year when making his case for targeting cash-strapped homeowners.

Could it truly be the case that the massive and pervasive mortgage fraud committed by financial entities that ushered in the disastrous national economic downturn bypassed North Carolina? The simple answer is no. In the wake of the crisis, a number of financial institutions agreed to settlements that provide consumer relief to affected homeowners with unaffordable mortgages, which include reducing the amount of principal debt owed on mortgages to make them more affordable. SunTrust Mortgage, for example, agreed to provide as much as $21 million in relief to North Carolina homeowners in a national settlement. The General Assembly’s Fiscal Research Division estimates that requiring cash-strapped homeowners to pay state income tax on mortgage debt forgiven by lenders will generate $8 million in revenue for this fiscal year – an indication that North Carolina homeowners who may be eligible to receive such mortgage relief exist.

Yet state leaders continue to adopt this out of sight, out of mind thinking that was on display yesterday. To the contrary, they expend the necessary energy and effort to push through tax cuts that largely benefit the wealthy and profitable corporations at the expense of hardworking North Carolinians who struggle to make ends meet. This effort to once again target cash-strapped homeowners is yet another example of the disconnect between rhetoric and actual policy decisions by state leaders.