NC Budget and Tax Center

It’s official: Legislature’s new budget marks TEN consecutive years of declining state investments

The legislature has released a $23.9 billion budget for the 2018-19 fiscal year that fails to invest adequately in our schools, communities and people. Under the budget, total state spending for FY2019 remains below 2008 pre-recession spending as the proposed budget marks ten consecutive years that state spending has declined as a share of the state’s economy. The budget for FY2019 – which runs from July 2018 to June 2019 – increases spending by 3.8 percent over the prior fiscal year, but this modest increase does not make up for years of under-investment in North Carolina.

The budget released yesterday will keep giving out tax breaks in 2019 to wealthy people and profitable corporations, instead of investing those resources in growing a prosperous North Carolina.

 

The new budget includes a total of $24.4 billion in revenue available for public investments for FY19. The majority of this revenue is raised through the state’s tax system, which is expected to provide $22.9 billion in base General Fund revenue for FY19. In addition to this base revenue, lawmakers rely on revenue collections coming in above what state officials anticipate ($356.7 million); money from the most recent fiscal year they anticipate agencies will return to the state (known as reversions, estimated at $275 million); non-tax revenues ($911 million); and unappropriated dollars from the most recent fiscal year ($499.4 million). In total, there will be $24.4 billion in revenue available to lawmakers for public investments for FY19.

Unfortunately, lawmakers do not fully appropriate the $24.4 billion of available revenue for FY19, and instead plan to carry over $561.3 million. This means continued inadequate state support for public investment across the state budget — public schools, higher education, health services, and economic development, at a time when North Carolinians have been calling and marching for adequate investments.

Furthermore, the legislature plans to grant $900 million in new tax cuts for wealthy people and profitable corporations starting in January 2019, building on a failed tax-cut experiment that has already resulted in $2.6 billion in annual revenue losses.

Luis A. Toledo is a Public Policy Analyst for the Budget & Tax Center, a project of the North Carolina Justice Center.

NC Budget and Tax Center

Statement from Budget & Tax Center Director Alexandra Sirota on legislative budget proposal

For yet another year, legislative leaders won’t invest in our classrooms, our health, and our communities at the levels needed to provide for the wellbeing of every North Carolinian. They won’t do so because they continue to keep in place $900 million in tax cuts for January 2019, building on a failed tax-cut experiment that has already resulted in $2.6 billion in annual revenue loss.

Their commitment to tax cuts above communities will keep North Carolina on track to fall farther behind our neighbors. North Carolina now invests less per student than South Carolina.

Their commitment to tax cuts above people’s wellbeing will keep North Carolina on track to lose ground in connecting more people to opportunity as the state’s population grows. Our state’s tax code will fail to meet current service needs as early as next year, according to official estimates.

Getting back on track will require listening to North Carolinians and what they need to thrive. A behind-closed doors budget process without any opportunity for changes in the legislative debate blocks out the concerns of teachers, parents, students, and community leaders.

A budget should be about how to ensure every North Carolinian can connect to opportunity. It shouldn’t be used to boost the wealth of the few at the expense of us all.

NC Budget and Tax Center

A rushed, closed door budget process doesn’t align with NC values, can’t effectively identify NC priorities

North Carolina’s legislative leaders will not be in Raleigh for too long during this year’s short session. Over the past few weeks, behind closed doors, legislative leaders in the House and Senate have been putting together their budget and plan to move it through this week through a process that will allow for no input from the public or amendments from members.

Legislative leaders plan to introduce their final bill as a conference report skipping the committee approval processes and prohibiting amendments. Legislators haven’t completely skipped the amendment process since at least the early 1970s. As a result, the two chambers will hold up-or-down votes in the coming days on what is called a “conference report”, with no ability for changes or to vote for some of the $23 billion budget plan.

As a critical document that can support our priorities and the values that we share, a budget crafted in a secretive and undemocratic process won’t ensure that leaders hear all the views and needs of North Carolinians.

Traditionally, lawmakers come back for a short session a year after passing a two-year budget to adjust the second year’s spending. Traditionally, lawmakers review agency needs, emerging opportunities and challenges for communities and discuss policy issues that are connected to appropriations.

Instead, legislators are on track to ignore much of what people have asked for since the last budget was passed. Investments in every child’s educational success, protection of air and water, support to ensure the health and well-being of families and older North Carolinians, and the affordability of higher education, for example.

Legislators seem poised to ignore budget recommendations from the governor that were pointing North Carolina in the right direction, such as stopping the scheduled tax cuts in 2019 and making progress in many areas that have been neglected over the years. These areas included paying our teachers and principals adequately; investing in mental health, air and water clean-up and monitoring, improving prison facility security, increasing low-income housing, and promoting new workforce training and programs that lead to industry credentials in high-demand fields.

As the state budget process is still unfolding legislators have an opportunity do the right thing by promoting transparency, encouraging debate, and stopping the harmful tax cuts that are scheduled to go into effect in 2019. Advocating for these principles demonstrates a real commitment to the people, our democracy, and true accountability in the budget process. Rushing the budget process is not what North Carolinians need or expect from their legislators.

Luis A. Toledo is a Public Policy Analyst for the Budget & Tax Center, a project of the North Carolina Justice Center.

NC Budget and Tax Center

“Tweaking” North Carolina’s state budget fails to address the underlying issue of failure to invest

Legislators are planning to release and vote on a state budget for 2019 by June 1. The budget this year will be released as a conference report which according to House Speaker Moore will only deal with minor changes to the second year of a two-year budget, which was debated and approved last year.

While the final details are yet to be seen, based on recent budget proposals it is clear that ”tweaks” to the budget will not address its shortcomings and the under-investment that is occurring because of tax cuts.

Analysis of both the final $23.6 billion budget passed by the legislature last year and the Governor’s recent $24.5 billion budget proposal shows that while they contain different priorities for 2019 they share one thing in common: they are missing investments because of the tax changes that have primarily benefited the wealthy and profitable corporations since 2013.

Reconsideration and debate of the tax changes since 2013 and how they continue to hamper our commitments to community and family well-being is fundamental to creating a budget that reflects our values as a state.

More than tweaking here are also some key areas of investment that are critical and will require a tax code that aligns with the needs of our state:

  1. The aging of North Carolina’s population

The final budget last year put $1 million less in the Division of Aging and Adult Services than was invested in 2017. Preparing for the aging of our state is critical as analysis within the budget shows that North Carolina’s population age 65 and over is already growing faster than other age groups. According to the state’s budget office, “between 2017 and 2037, the older adult population will increase by just over 1 million people (63.3%) to 2.6 million in 2037, and the oldest adults (ages 85+) will more than double from 181,000 in 2017 to 381,000 by 2037.”

  1. The infrastructure for the 21st Century

North Carolina’s infrastructure ranks as the 11th worst in the country yet the final budget did not address in a strategic and comprehensive manner the state’s need to rebuild our infrastructure and create jobs for the 21st Century. A comprehensive approach would target investments towards decaying water systems, mass transportation projects, a clean-energy future, and resilient infrastructure in natural disaster prone areas. It would also advance a more robust investment in broadband access so more people, particularly in rural areas, could access high speed internet.

  1. The preparation of our future leaders and workforce

The final budget fell short of investing in each child’s education because it prioritized another round of tax cuts. Those dollars could have allowed North Carolina to get back to pre-Recession per-pupil spending levels. They could also ensure that children have the textbooks, technology and instructional materials they need to get ahead. Not only in the K-12 classroom but in early childhood, North Carolina continues to miss an opportunity to follow the evidence and commit state resources to expanding pre-k access and supporting access to quality early childhood programs for children in low-income families. At the other end of the education pipeline, North Carolina has not kept post-secondary education affordable or adequately supported a workforce development system that can reach those looking for work and careers that will pay a living wage.

Tweaks won’t make the fundamental fiscal challenge we face go away. It is only likely to make it worse. North Carolinians need leaders to reconsider their prioritization of tax cuts over communities and families.

Luis A. Toledo is a Public Policy Analyst for the Budget & Tax Center, a project of the North Carolina Justice Center.

Commentary, NC Budget and Tax Center

Legislature considering changes to Medicaid that would pose a huge danger to mothers and infants

Early next week the North Carolina General Assembly is expected to release a budget that may include taking health coverage away from people who do not meet work requirements. Faced with unrealistic work hour quotas, these proposals will mean that many adults, such as new moms, will lose essential health coverage. Loss of coverage, and the decline in health that will result, will make employment and employment prospects more difficult and will push women and their families further into poverty. While it remains to be seen if CMS would approve such a harsh proposal, its potential impact would be felt throughout North Carolina.

These requirements would likely require new mothers to return to work 60 days after birth, at which time pregnancy Medicaid expires. In reality, many mothers do end up working; data show that 62% of parents on Medicaid work. Rushing new moms into the workforce is bad for infant health, and poor maternal-infant bonding is known to have lasting effects. Research shows that mothers’ early return to work has negative impacts on the duration of breastfeeding, infant vaccinations, and regular checkups, and may diminish maternal-infant bonding as a result of less time spent together and increased maternal stress. Studies show that children are more likely to receive the care they need if their parents have insurance coverage, suggesting that the health of low-income infants and children would decline as a result of work requirements for parents.

A rigid work requirement for moms and parents with low-income fails to account for the cost and difficulty of finding child care and job market realities.

And in the case of North Carolina, such a policy would create a cliff for many families where increasing work hours and income will push them into the coverage gap. For example, a single mother with two children who works 23 hours per week at minimum wage, earning only $667 per month, would be ineligible for Medicaid because their income is too high. With high-quality child care costing a median $832 per month per infant in our state in 2017, North Carolina mothers and families are already forced to make tough decisions about returning to work.

To protect maternal and child health in North Carolina, policymakers should be closing the coverage gap not pushing more people into it without the prospect of accessing the tools to live healthy and financially secure lives.

Suzy Khachaturyan is a MSW/MPH Intern with the N.C. Budget and Tax Center