NC Budget and Tax Center

Falling Behind in NC, NC Budget and Tax Center

Governor McCrory signed a final budget into law for the current 2015 fiscal year, which runs from July 2014 through June 2015, this morning. The $21.1 billion budget includes new spending initiatives – largely pay raises for teachers and state employees – but fails to include additional revenue to sustain this spending in the long-term. Contrary to fueling North Carolina’s economic comeback, as Governor McCrory claims, the final budget continues to fund core public services at diminished levels, well below pre-recession levels, and compromises the ability of the state to get ahead and prepare for the future.  Moreover, it puts North Carolina on a fiscally irresponsible path that will continue to create budget challenges in the years ahead, largely as a result of the tax plan that was little debated and discussed in the final budget.

North Carolina faces a revenue challenge, and actions taken within the final budget make this reality clear. The final budget signed by the Governor spends every available dollar and uses dollars from last year’s budget as a result of the Governor requiring agencies to cut their respective budgets. No funding is available to build up the state’s Savings Reserve fund, which is meant to position the state to weather a future economic downturn. Furthermore, the budget relies on one-time funding sources that, once depleted, cannot be replenished with such low revenue and shifts funding for core public investments such as K-12 education to lottery receipts and early childhood programming to federal block grants.

Such budget decisions are driven largely by the tax plan the governor signed into law last year, which significantly reduces revenue available for public investments. Revised analysis by the General Assembly’s Fiscal Research Division estimates that the income tax rate cuts in the plan will cost at least $200 million more annually than initially expected – more than $1 billion less in annual revenue once the plan is fully implemented. The Governor and state policymakers failed to account for this reality in the final budget, which means that, absent new revenue, more budget cuts to core public services are likely to occur in future years as the tax plan continues to be implemented. Another round of tax cuts is set to occur in January 2015.

Under the final budget signed by the Governor, state spending remains 6.6 percent below pre-recession levels (see chart below). Read More

NC Budget and Tax Center

Over the course of the past three days, nearly 10,000 North Carolinians signed a petition calling on legislators to address the rising cost of the tax cuts that passed last year.  Tax cuts that primarily benefit wealthy taxpayers and profitable corporations.  The petition was delivered yesterday to legislators and yet early this morning the Senate approved a budget that fails to stop future tax cuts or address the growing gap between the priorities of the state and the adequacy of our revenue system.

PetitionDelivery

As the House debates the budget today, it is time to turn to the Governor for leadership on this issue.  He had early in 2013 committed to revenue neutral tax reform but as is increasingly clear the plan passed last year is not revenue neutral and is growing in cost.  The income tax cuts alone are projected to cost more than $5 billion over five years.  And it is quite possible, as we have written before, that the revenue shortfall for this fiscal year could be as high as $600 million.  That would mean the total tax plan would lose the state $1 billion in revenue each fiscal year.

Without those dollars it will be difficult for policymakers to meet the priorities of North Carolinians, sustain their plans for a teacher pay raise or ensure that North Carolina is on competitive ground and delivering a high quality of life to all.  Let’s hope the House rethinks the budget and if not that the Governor will lead the state down a more fiscally responsible path.

NC Budget and Tax Center

The 2013 tax plan continues to rear its ugly head. The final budget deal released late last night is yet another reminder that the state cannot afford cost of the tax plan that primarily benefits the wealthy and profitable corporations.  If the state could afford those deep revenue cuts, budget writers would not be relying on more federal dollars and lottery revenues to make their budget balanced nor including another round of harmful budget cuts and policy changes to early childhood education, public schools, higher education, and social programs. But, those are the conditions North Carolinians will be facing over the next year as we enter year six of the official economic recovery.

While the budget delivered on its promise to provide an average 7 percent teacher pay raise, that boost in much-needed pay came at the expense of dollars needed to pay for other state priorities—even within the public education budget for programs that serve at-risk students, for example. And unfortunately, it’s just a snapshot of what we should expect to see in future years. Meanwhile, other states are moving full steam ahead and replacing the most damaging cuts made during the aftermath of the recession.

The cost of North Carolina’s personal income tax cuts will be much higher than previously expected, at least $200 million more each year. Read More

NC Budget and Tax Center

Another new jobs report, the same old story for North Carolina’s metro areas–too many of the state’s urban centers are struggling to create jobs and meaningfully create opportunities for the unemployed. Some of the low-lights from yesterday’s June report on local area unemployment include:

  • 13 out of 14 metros saw their labor forces decline since June 2013, suggesting that too many workers are unable to find work and continue to drop out of the workforce.
  • 8 out of 14 metros saw their unemployment rates drop because the majority of unemployed workers moved out of the labor force rather into jobs. That means that the unemployment rate isn’t going down because things are getting better for workers, but rather because things are getting worse.
  • 3 metros (Fayetteville, Hickory, and Jacksonville) have fewer people going to work in June 2014 than they did last year.
  • Only 4 metros (Durham, Raleigh, Charlotte, and Wilmington) have created enough jobs to fully replace the jobs lost during the Great Recession. After five years, 10 metros have yet to fully recover from the recession.
  • For 10 metros, it will take more than a year to fully replace those lost jobs, if they create jobs at the current pace.
  • One metro, Hickory-Lenoir, will take almost a half century to fully return to pre-recession employment levels if they maintain their current pace of job creation.

All told, this is a dismal jobs reports for our state’s metro areas, far removed from recent claims about the state’s supposed economic renaissance.

Women and the Economy

Support for Paid family leave advanced in the U.S. Senate yesterday, as lawmakers heard testimony on its benefits in a key Children and Families Subcommittee hearing on Capitol Hill.

During the hearing—which was requested by U.S. Senator Kay Hagan—North Carolina business owners, advocates, and representatives of working families made the case for why paid family medical leave policies benefit both employees and businesses. Such programs allow workers to recover from a serious illness or care for a sick loved one or new child without risking their job or the income they need. The hearing renewed a call for a universal family and medical leave insurance program that doesn’t shoulder all the burden of cost on employers.

Currently the Family and Medical Leave Act is the only federal law designed to help working people succeed both as providers and caregivers. It leaves out 40 percent of the workforce and guarantees only unpaid leave, which millions cannot afford. Only 12 percent of U.S. workers have access to paid family leave through their employers, and less than 40 percent have personal medical leave through an employer-provided temporary disability program. This means millions of workers who develop serious health conditions, have seriously ill family members or become parents are forced to choose between providing care or having the income they need to cover basic expenses.

In North Carolina, 77 percent of mothers with children under 18 work, and 44 percent of workers have no access to paid sick days, let alone paid family medical leave. Low-income workers have it even worse off and are often given no flexibility in their work schedules at all.

Two North Carolinians testified at the hearing. Jeannine Sato is a resident of Durham, NC and member of NC MomsRising. Sato’s previous employer denied her extended leave after the birth of her first child. She said:

We are human – to pretend that people don’t get sick and that they don’t give birth just doesn’t make sense….Families should have the opportunity to care for their loved ones without the risk of losing their jobs or falling into poverty…. America needs to step up and join the rest of the industrialized world in offering paid family leave in order to be competitive and humane.

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