2017 Fiscal Year State Budget, NC Budget and Tax Center

The Governor’s priorities

“Don’t tell me what you value, show me your budget and I will tell you what you value.” –Vice President Joe Biden

Governor McCrory made his vision for our state clear when he announced a summary of his budget two weeks ago, saying that his proposal followed the highest priorities he has for the state’s economic success and delivery of a high quality of life to all.  Unfortunately, however, the priorities in the Governor’s proposal are wholly out of sync with North Carolinians’ priorities for a stronger more inclusive economy, as well as unlikely to deliver the outcomes he desires.

The Governor’s clearest priority places deep tax cuts for wealthy and profitable corporations above important investments that could help build an economy that works for all. His decision to allow corporate income tax rate cuts to phase in over the next two years and personal income tax rates to drop to 5.499 percent  means the loss of at least $786 million in 2017 for the state. Since 2013, the tax changes add up to nearly $2 billion, despite the evidence that such tax cuts for the wealthy and profitable corporations do little to grow the economy and do exact a huge cost in our effort to build thriving communities.

The Governor’s budget proposal has several other examples of how his priorities do not match the priorities of a strong, thriving North Carolina: Read more

2017 Fiscal Year State Budget, NC Budget and Tax Center

Missed Opportunities: Investments that are MIA in Governor McCrory’s budget

Deep tax cuts are preventing Gov. McCrory from proposing a bold, visionary state budget for the upcoming 2017 fiscal year. The 2013 and 2015 tax cuts are draining more than $1 billion in revenues annually, squeezing out much-needed reinvestment in the programs and services that help children, families, and communities thrive. Under his budget, North Carolina will continue to be held back by substantial unmet needs.

There are few public dollars available for anything else after previous deep tax cuts and the governor’s prioritizing of an uneven compensation package for teachers and state employees. Without those tax cuts, what could have been possible for North Carolina?  There has been plenty of coverage of what is in his budget over the last week but there has been little coverage of what’s not in his budget. Below is a short list of investments that are missing in action but still greatly needed to build a stronger, more inclusive economy for us all.

 Economic Security

  • Fails to restore the state Earned Income Tax Credit, which allows low-income workers to keep more of what they earn. We are the only state to eliminate this anti-poverty tax credit in 30 years.
  • Fails to provide a raise for all teachers and state employees. Teachers and school personnel get a mix of raises and one-time bonuses. On average, teacher pay would increase by 5 percent (excluding the bonuses) but his plan would not provide every teacher a raise, including veteran teachers. State employees get a one-time 3 percent bonus. He also appropriates funds to implement a new market-aligned salary structure for state agencies, and to adjust salaries in state job classifications where employee pay is below market value, not competitive in the marketplace, and where the state is having difficulty recruiting and retaining employees.
  • Fails to provide a cost of living adjustment (COLA) for state retirees despite shrinking purchasing power due to changes in the economy.

Early Childhood Education, K-12 Schools, and Higher Education Read more

NC Budget and Tax Center

Governor McCrory still spinning economic record, using economic measure that is out of touch with reality

Pat McCrory 2

Governor McCrory is at it again, peddling the myth that his team made North Carolina’s economy the best in the country. On Thursday, the administration trumpeted the glad tidings that North Carolina’s gross domestic product (GPD) grew faster than any other state since he took office.

If that sounds out of touch, it is. Wages in North Carolina are below average, unemployment is higher than the national rate, and whole communities are still struggling to recover from the Great Recession.

Sadly, North Carolina’s economic performance over the last few years has been mediocre, not meteoric.

So how did the Governor get it so wrong?

First, GDP just captures how much stuff the economy is producing, but it completely misrepresents how most working North Carolinians are doing. For example, GDP goes up when gas prices rise; even if that actually means that most workers put more of their paychecks into the gas tank. Similarly, the markup that is applied to consumer electronics counts toward GDP, even if most of the product was manufactured overseas. Because of problems like these, most economists recognize that GDP doesn’t actually measure prosperity.

At a deeper level, using GDP shows that the Governor is out of touch with the central economic challenge we face today: a lack of wage growth. It used to be that GDP was a decent measure of prosperity; when the economy produced more, working people earned more. But that hasn’t been the case in almost thirty years. As we have reported several times, North Carolina workers keep churning out more goods and services without seeing their income increase accordingly.

If the Governor wants to build an economy that truly works for everyone, GDP is just a distraction.

Click here to read the Governor’s press release.

(To learn more about why GDP is a poor measure of prosperity, see the following video from renown economist Joseph Stiglitz)

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NC Budget and Tax Center

Many communities still struggling, according to latest employment data

LABOR-JOBS market graphic2cState leaders should not lose sight of the fact that many communities across the state are still struggling to erase the damage left by the Great Recession. While parts of the state have long-since surpassed their pre-recession economic peaks, more than half of the counties in the state still have fewer jobs than they did before the financial collapse, now more than eight years ago.

Signs that many communities have not recovered include:

  • Almost three-quarters of our counties have a higher unemployment rate than before the Great Recession. With statewide progress in reducing unemployment stalled, many local communities are getting stuck with a worse employment picture than they had before the recession.
  • More than half of our counties have not gotten back to pre-recession levels of employment. Even after years of economic recovery, 55 of North Carolina’s 100 counties have fewer jobs today than existed before the Great Recession. With many of the new job opportunities clustering in a few parts of the state, many communities are still struggling to get back to where they were almost a decade ago.
  • Lack of recovery is not a purely rural problem. Several cities, including Fayetteville, New Bern, and Rocky Mount still have not recovered to pre-recession levels of employment

(For a summary of each county’s current economic data, see our Labor Market Watch page, and to see how each county’s current economic figures compare to pre-recession levels, see our Recession Watch page.)

Read more

2017 Fiscal Year State Budget, NC Budget and Tax Center

Initial review of Governor’s modest public safety budget

Safe communities and efficient courts contribute to a quality of life in local communities that is attractive for raising a family and operating a business. Revisions to the Governor’s modest budget for Justice and Public Safety largely consist of funding for pay increases for state employees, in which the majority of these dollars represent one-time bonus payments, with modest investments in other areas of the budget.

Here are key items in the Justice & Public Safety budget.

Judicial Branch

  • Funding provided for discretionary one-time bonuses, maximum $3,000, to selected state employees ($9.9 million).
  • Funding provided for permanent experience-based pay raises for clerks and magistrates, and market-based salary adjustment for assistant district attorneys ($7.4 million).
  • Transfers dollars from Department of Health and Human Services for specialty courts that serve special populations such as individuals with mental health and substance abuse issues ($2.5 million).

Read more