NC Budget and Tax Center

2015 Fiscal Year State Budget, NC Budget and Tax Center

State revenues are coming in $62 million under projection for the first three months of the fiscal year, according to the Fiscal Research Division’s (FRD) new General Fund Revenue Report. This report provides an assessment of revenue collection performance for the state on a quarterly basis and is particularly important considering the state’s inadequate and unsustainable budget (a point that has been fleshed out in this Budget and Tax Center’s blog series). The growing cost of the 2013 tax plan further challenges state lawmakers ability to rebuild what was lost in the aftermath of the Great Recession.

Despite state revenues having not yet fully recovered from the downturn, lawmakers overhauled North Carolina’s tax code last year in a way that significantly reduced state revenue. In its first year of implementation, the tax plan is already costing far more than expected. Fiscal Research Division estimated that in FY2015, the plan would cost $512.8 million—but it is already costing $191 million more than that. By the end of the fiscal year, the revenue shortfall could reach as high as $600 million—for a total cost of the tax plan of more than $1.1 billion—according Institute on Taxation and Economic Policy estimates using up-to-date taxpayer data (see the chart below).

In other words, the $62 million revenue shortfall in the first quarter of the state’s fiscal year foreshadows what’s to come by the end of the fiscal year, assuming ITEP’s estimates turn out to be accurate. Read More

2015 Fiscal Year State Budget, NC Budget and Tax Center

North Carolina is among 14 states that have cut per-student state funding by more than 10 percent for the current school year compared to before the Great Recession, a new report by the Center on Budget and Policy Priorities (CBPP) highlights. This waning commitment to public education by state lawmakers in recent years has heightened the challenge of public schools having to do more with fewer resources.

K12_CBPP Ed Report 2014

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2015 Fiscal Year State Budget, NC Budget and Tax Center

Numerous researchers have pointed to the benefits of a strong public university system. First and foremost, we often think of the individual benefits of providing an affordable education to the state’s citizens so that more can join the middle class. North Carolina took this role so seriously for its public university system that the idea of an education that is “free as far as practicable” is inscribed in the state constitution. But there are other broader benefits of a public university system that are equally important: universities serve as a hub for research & development that can spark private sector innovation and improve the quality of life for millions, they also support community economic development by serving as an anchor around which private and public investments can take hold and revitalization can be planned.

Some have said that the successive cuts to the UNC system have had no measurable impact on the quality of its education or its ability to serve these additional goals of supporting local economies. The reality, however, is that the state’s investment continues to remain far below pre-recession levels by 9.4 percent. Since the recession ended, lawmakers have ordered the Board of Governor to cut $1.1 billion through management flexibility, nearly equivalent to the operating state budget of the entire community college system. And North Carolina is one of just four states that made additional cuts to higher education this year, while other states began to reverse cuts made during and after the recession. The reductions to the UNC system have had an immediate harmful impact and will hamper the state’s future economic potential.

Here are three reasons why continued cuts to the UNC system will harm us all. Read More

2015 Fiscal Year State Budget, NC Budget and Tax Center

The 2015 state budget for creating jobs and growing the economy doubles down on the wrong turn taken by the legislature on economic issues over the last year. First it was the decision to continue to last year’s ill-advised tax cuts for the wealthy instead of investing in job training and education—the real building blocks of sustainable economic growth. Then it was the decision to privatize the business recruiting activities of the Department of Commerce—despite evidence from other states these initiatives produce more scandals than jobs—and eliminate regional planning initiatives that helped small communities coordinate their economic development efforts.

And now the state budget completes this trifecta of poor choices for economic development by spending more of our state’s limited resources on programs that are both ineffective at creating jobs and are overwhelmingly targeted to the wealthiest urban areas of the state instead of the more distressed areas in rural North Carolina.

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Falling Behind in NC, NC Budget and Tax Center, Poverty and Income Data 2013, Poverty and Policy Matters

New data released by the US Census highlight the pervasiveness of poverty nationally and in North Carolina. In 2013, one in six North Carolinians lived below the federal poverty rate – less than $24,000 a year for a family of four and  $12,000 a year for an individual. For communities of color, the poverty rate is far worse: 32.5 percent for Latinos, 28.9 percent for American Indians, and 28 percent for African Americans.

These daunting poverty rates highlight that far too many individuals and families across the state face economic hardship. The persistence of poverty has been accompanied by a rise in income inequality, which poses consequential implications for the overall economy and North Carolina’s state economy. The bulk of economic gains from the ongoing economic recovery have flowed to a small group of high-income earners. In the first three years of the economic recovery, the top 1 percent of income earners captured 95 percent of the income gains nationally. Here in North Carolina, income for the top 1 percent of income earners in the state grew by 6.2 percent from 2009 to 2011 while the bottom 99 percent saw their income decline by 2.9 percent. The latest US Census data show that this early post recovery trend is likely to hold. By 2013, the top 20 percent of households in North Carolina captured more than half of all income earned by all households in the state (see graphic below). Read More