NC Budget and Tax Center

So-called “mini-budgets” put NC’s fiscal health at risk

For the first time in recent history, North Carolina has failed to pass a final state budget. Absent a comprehensive budget, the state leaders are passing individual spending bills, or “mini budgets.” Comprehensive budgets are preferable to piecemeal legislation because they allow for greater fiscal control, oversight, and planning. Unifying state spending within a single document helps monitor performance over time, provide clarity to the public on priorities, and facilitate long-term sustainability. 

In 2015, the Organization for Economic Cooperation and Development (OECD) released a set of budgetary principles imploring governments around the world to “present a comprehensive, accurate and reliable account of the public finances.” Without a complete budget, it is nearly impossible to achieve accuracy, clarity, inclusive participation, and transparency while maximizing value for money.

Ignoring these principles creates significant risks for duplicative spending, fragmentation, misinterpretation, inaccurate calculations, inadequate appropriations, and inaccessible documentation of expenditures. Together, these risks and realities compromise North Carolina’s fiscal health, undermine the credibility of the state, and “shake the foundations of our democracy.”

Failing to pass a comprehensive budget also restricts North Carolina’s ability to track how investments change over time. Even as GDP continues to rise, state investments as a share of GDP are at an all-time low. Research by the Washington Center for Equitable Growth confirms that low-income children and families are disproportionately harmed by under-investment in infrastructure, education, and innovation. 

Coupled with tax cuts for the rich, widening economic inequality keeps people from realizing their full potential and slows overall productivity. Now, when the economy is growing and interest rates are low, the state should be funding infrastructure projects that bring transportation to disconnected communities, public education initiatives that close the achievement gap, and research and development that can be used by businesses and entrepreneurs to spur innovation and growth. 

State budgets are important for many reasons, not the least of which is determining whether government spending is aligned with community needs and public priorities. Breaking the budget up into bite-sized bills makes it easier for special interests to influence spending decisions, increases structural inequality, and exacerbates socioeconomic disparities. If North Carolina wants to build a stronger, more vibrant, more inclusive, and more sustainable economy, it should pass a comprehensive budget that prioritizes public investments and cultivates shared prosperity.

Leila Pedersen is a Policy Analyst with the Budget & Tax Center, a project of the NC Justice Center.

NC Budget and Tax Center

New research confirms: Tough immigration enforcement policies do not lower crime rates

New research released by professors at the University of California at Davis finds once again that there is no relationship between deportation and the level of crime in communities. It also debunks the myth that programs of cooperation between local law enforcement and immigration authorities like Secure Communities and 287(g) agreements make communities safer, confirming the stance of sheriffs across North Carolina who have renounced such programs.

The research, looking at thousands of local communities across the country and using unique data on deportation and crime rates, finds that:

  • Places that deported the most appeared no safer than those that deported the fewest.
  • Aggressive enforcement and deportation does not lead to faster resolution of criminal cases.
  • Deportation is not an effective way to address crime.

For years, researchers have documented the lack of evidence supporting claims that more aggressive enforcement of federal immigration law contributes to public safety goals. As the New York Times reporters write:

“Research demonstrates that immigrants overall and undocumented immigrants in particular are less likely to be arrested than the native-born population; that both are less likely to be incarcerated; and that immigration does not raise an area’s local crime rates (neither does undocumented immigration).”

Our own research in North Carolina on the costs of aggressive enforcement by local governments of federal immigration law shows a high cost to all taxpayers. The cumulative cost to North Carolina taxpayers over the past decade of cooperation with the federal Immigration and Customs Enforcement was at least $81.7 million. These are dollars that could have been redirected to other public safety strategies and the promotion of opportunities for communities to thrive such as investments in youth development programs, and public education.

Alexandra Forter Sirota is the Director of the Budget and Tax Center, a project of the North Carolina Justice Center.

NC Budget and Tax Center

N.C. lawmakers resort to trickery for budget that’s bad for our state

It appears that House leaders couldn’t get their way through debate and compromise, so rather than coming to the table with everyone, they used trickery to override the Governor’s veto of a budget that fails our state and every North Carolinian. Only 64 out of 120 House Representatives were present this morning when the vote was called after Democrats were told there would be no vote and some were at commemoration of the historic 9/11 attacks.

A final budget should lay out a vision for where our state is headed and how it plans to get there. It is the single most important policy decision that legislators make each year. It is a statement of their priorities and a marker of their stewardship of our tax dollars.

Legislators in our democracy are tasked with the tough work of negotiating those priorities and finalizing the budget. After failing at that work, legislators took the extreme step once again of changing the rules of the game.

The benefits of those changes will help very few in the near term and no one in the long-term.

This budget, which was vetoed by the governor and overridden by only about half our Representatives — which will go into effect should the Senate also override — fails to recognize the reality of a state that is growing apart economically and civically.

Where one lives in North Carolina determines whether there are jobs available for all those looking for work, whether there is quality child-care available for working parents, or even how long one will live. Public investments, particularly at the state level, can go a long way to making sure every community can thrive and every person can live a good life and reach their full potential. Despite the national economic expansion, North Carolina has continued to reduce spending as a share of the economy. Lawmakers have effectively dug a hole deeper than any modern-day recession has created in our state’s budget because of the priority that they have given to tax cuts for the wealthy and big companies.

When the Governor presented a counteroffer to legislative leaders after his veto of their inadequate budget, he asked them to prioritize the health of North Carolinians and stop tax cuts for high net worth companies so that greater progress could be made in investing in families and communities. Read more

Commentary, NC Budget and Tax Center, News

New Census data highlight rise in uninsured, the importance of Medicaid

The U.S. Census Bureau released new data Tuesday morning on income, poverty, and health coverage across the nation. The highlights include:

  • For the first time since 2009, the number of people in the U.S. with health care coverage has decreased.
  • While still far too many people are experiencing poverty, this is the first time the poverty rate has dropped below pre-Recession levels.
  • This data on income in the U.S. provide insight into a potential economic slowdown even while there have been modest improvements since the end of the Great Recession. Programs like Social Security, SNAP, and refundable tax credits such as the EITC lifted tens of millions of people in the U.S. out of poverty last year.

For the first time in three years, median household income remained unchanged from the previous year. At $63,179, the amount of income in a typical household has slowed. This indicates that despite job growth and people working harder to find jobs, many jobs are not paying wages that keep up with the rising costs of rent and child care, for example. Stagnation in median household income was experienced for Black, white and Latinx households over the period, while households with older Americans saw an increase in median income.

The overall poverty rate decreased by half a percentage point to 11.8 percent, representing 38.1 million people living on less than $25,100 for a family of four. This is the first time the poverty rate has dropped below pre-Recession levels.

From 2017 to 2018, the child poverty rate dropped from 17.4 percent to 16.2. Not everyone benefited equally from the reduction in poverty. White residents were the only racial group to experience a decrease in poverty while the rate among other racial groups was statistically unchanged from 2017. Additionally, every region in the U.S. saw a decrease in poverty except for the South, where the poverty rate remained at 13.6 percent.

A reduction in hardship without improvements to the financial position of Americans fails to boost our collective well-being.  One striking effect is that the rate of health insurance coverage decreased by 0.5 percent to 8.5 percent in the U.S. This marks the first time the number of people without health insurance has gone up since 2009. A portion of this loss of coverage was attributed to a 0.7 percent decrease in the number of people accessing Medicaid.

The Census report measures the impact of social programs on the poverty rate. Last year, Social Security benefits lifted 27.3 million people out of poverty. Refundable tax credits, like the EITC, and the Supplemental Nutritional Assistance Program (SNAP) lifted 7.9 million and 3.1 million people out of poverty, respectively. Meanwhile, medical expenses were responsible for pushing 8 million Americans into poverty.

Brian Kennedy II is a Senior Policy Analyst at the Budget & Tax Center, a project of the N.C. Justice Center.

NC Budget and Tax Center

N.C.’s ‘rainy day’ funds need a boost this Hurricane season and ahead of the next downturn

Image: Adobe stock

North Carolina legislators are considering a bill that would distribute dollars to some taxpayers from a revenue surplus coming in over conservative projections, due to the stock market gains of a few. This flawed strategy would distribute to individuals small amounts of funds that would instead have a much larger impact if applied to one of the many needs in our state, such as ensuring our communities are resilient in the face of the next natural disaster or economic downturn.

The state’s savings reserve, often called the Rainy Day Fund, should be the obvious vehicle to hold these dollars for the greatest good of North Carolina. In June, the balance reported by the State Controller’s office totaled approximately $1.2 billion, down over 30 percent from the prior year and well below what could be needed in the near-term.

First, with the successive hurricanes Matthew and Florence, efforts to build up the state’s savings has met with the ongoing pressures created by underinvestment in the infrastructure —planning and affordable housing, particularly — which results in higher rebuilding costs.  North Carolina’s hurricane season is well underway, with the damage of Hurricane Dorian still being assessed.

Last week’s Hurricane Dorian is likely to be just the first of several this year, climate experts have predicted. With ongoing efforts to recover from Hurricane Matthew in 2016 and Hurricane Florence last year, our legislators should be looking to increase the amount we’re saving as a state, not looking to threaten our state’s financial solvency through one-time redistributions.

Second, during the Great Recession, the state cut funding for basic services, including public schools, in order to make up for the $2.5 billion budget shortfall, in order to balance the state budget. That is precisely the purpose of building a strong Rainy Day Fund – to prevent a budget shortfall that would result in a cut in services by having funds available during recessions or other unexpected events that cause a decline in revenue.

With some economists predicting that a U.S. recession is imminent, it would be the fiscally responsible thing to build up our state’s dwindling savings rather than advance this gimmick of a bill.

What’s more is that our state is operating on a continuation budget, which means no funds have been appropriated to the Rainy Day Fund for the fiscal year currently underway. Instead our General Assembly has chosen to pass smaller, piecemeal budget bills so they can avoid coming to the table to discuss what public investments are needed to build thriving communities.

Lawmakers’ decisions about where to allocate tax dollars have tangible effects on our state. Similarly, decisions about where not to allocate funds — like preparing for the next devastating manifestation of climate change, or the next economic downturn — have long-term effects for all of us whose well-being is on the line.

The revenue surplus is ultimately the result of our state’s wealthy becoming even wealthier, and policymakers would do well to strengthen the connections to opportunity for everyone.

Suzy Khachaturyan is a Policy Analyst at the Budget and Tax Center, a project of the North Carolina Justice Center.