NC Budget and Tax Center

Last week, state officials announced that revenues are estimated to come in $400 million above projections set by the state. This is good news for North Carolina, as we previously noted, but it’s important to remember that it is a relatively small boost that doesn’t come close to covering the cuts to services made since the recession and is likely one-time money driven by the improving national economy, not North Carolina’s tax code. These considerations are timely as the House plans to fast track its budget, with the goal to release and approve a proposal by the end of next week ahead of the holiday weekend.

Most importantly, this revenue announcement will not come close to addressing the challenges that state budget writers face. There remains a very deep level of underinvestment in schools, higher education, and communities, and lawmakers’ choice to pass cut taxes that primarily benefit the wealthy and profitable corporations in 2014 and again in 2015 means that there are far fewer dollars available to position the state competitively.

Here are a few things about the revised revenue estimates that state lawmakers should keep in mind as they work on the state budget:

  1. A surplus means we have more than we expected, not that we have more than we need.

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NC Budget and Tax Center

The Budget and Tax Center’s weekly posting of Prosperity Watch takes a look at how North Carolina’s communities are grappling with stark racial income disparities. Economic exclusion has its roots in predatory and discriminatory economic policies dating back centuries.

The harm of that economic exclusion is stark. Communities of color are far more likely to live in poverty than their white counterparts. To match the state’s white poverty rate of 12.3 percent, approximately 464,000 North Carolinians of color would have to be lifted above the poverty line. Racial disparities keep the economy from reaching its full potential to the tune of $63.53 billion, meaning bringing down poverty among people of color is an economic imperative. It’s also a moral imperative too.

Check out the latest Prosperity Watch for the details.

NC Budget and Tax Center

Food assistance for vulnerable communities would be slashed deeply under budget resolutions that the US House and Senate budget committees approved last week. The cuts would likely increase hunger, thrust more people into poverty, and push families that are poor even deeper into poverty. Considering that North Carolina has the 5th highest level of food insecurity in the nation, the proposals would deliver a huge blow to North Carolinians living paycheck to paycheck and struggling to provide food to their families.

Under the House plan, the SNAP program—formerly known as food stamps—would be block-granted and cut by at least $125 billion, or one-third, between 2021 and 2025, according to experts at the Center on Budget and Policy Priorities (CBPP). There is some flexibility in terms of how states would be able to carry out the deep funding cuts. If states decided to rely solely on benefits cuts, the average SNAP recipient would face a $55 per month cut in food assistance. For a family of 4 that cut is about $200 a month—or worth about one-quarter of a very low-cost meal plan. States could also turn to eligibility cuts and reduce income limits to achieve the cuts. Either way, cuts of this magnitude will bring harm to families, children, and other vulnerable groups.

North Carolina would lose at least $3.8 billion in food aid over those five years. That would force North Carolina policymakers to make some very difficult decisions about whose food assistance to reduce or terminate, impacting many Tar Heel families who already find it difficult to pay the bills and meet their most basic needs. Read More

NC Budget and Tax Center

Last week, Governor McCrory unveiled his two-year budget proposal for July 2015 through June 2017. He has since touted how his plan reinvests in the public services and programs that are essential for economic opportunity and quality of life. However, a close look at his 2016 fiscal year (FY2016) spending plan reveals that he fails to reinvest in a meaningful way in the critical public structures that benefit us all. Genuine progress will continue to be hampered until state lawmakers build a tax system that can adequately match the needs of a growing economy.

Governor McCrory’s proposed budget for FY2016 increases year-to-year spending by nearly $439.8 million, or 2 percent. This is in sharp contrast to past recoveries when state investments were far quicker to return to, and advance beyond, pre-recession levels. Enrollment growth in public schools, the UNC system, and the Medicaid/Health Choice programs is estimated to exceed the year-to-year increase in spending in the governor’s proposal, totaling nearly $442.6 million in FY2016. That means every new dollar increase, on net, is dedicated to funding enrollment growth (see chart below).

It also means that non-enrollment expansion items in the proposal are made possible by cutting or allowing spending to expire for other vital programs that are already stripped bare from previous underinvestment. That’s like rearranging the deck chairs on a sinking ship. Read More

NC Budget and Tax Center

This morning, Governor McCrory released his two-year plan to invest in education, health care, public safety and other priorities that are essential for economic opportunity and quality of life. He spoke of a “new paradigm” for state budgeting. A new paradigm indeed, one that abandons many of the practices that served North Carolina well in the past—like ensuring funding to maintain current service levels year-over-year or reinvesting in the recovery rather than locking in low levels of revenues by keeping the 2013 tax plan on the books.

A preliminary review of his budget plan shows that too many vital public services are at diminished levels, threatening their effectiveness, reach, and efficiency. No amount of “budget spin” will cover up how the budget baseline has been eroded from years of cuts or how the current tax system cannot sufficiently keep up with growing needs.

Below is a quick summary of how the Governor’s budget compares to pre-recession levels and also how the Governor chose to pay for his budget. Read More