NC Budget and Tax Center

State budget writers are currently grappling with the task of ironing out a final budget in the face of last year’s huge tax cuts that are hampering our ability to invest in the building blocks of a strong economy. As we entered into the new fiscal year without a revised budget, the News and Observer Editorial Board called upon lawmakers to reconsider their revenue-losing, lopsided tax plan. Here’s more from their editorial that ran over the weekend:

As North Carolina lawmakers struggle to agree on the second year of the state budget, it’s becoming clear that last year’s decision to cut taxes came too early and went too far. The state compressed its three-level personal income tax rates of 6, 7 and 7.75 percent to a flat 5.8 percent and reduced the corporate tax rate from 6.5 to 6 percent.

Had the Republican-led General Assembly held off on these cuts, North Carolina would be enjoying a budget surplus now. There would be money to increase teacher pay without cutting education elsewhere. There would be money to invest in the University of North Carolina and in the state’s neglected roads, bridges and water systems. And there would be money for modest, well-targeted tax cuts.

Instead, the legislature’s Republican leaders and Republican Gov. Pat McCrory cut taxes in a way that is creating an artificial crisis. The state doesn’t have enough money to meet the needs of its growing population and can’t find a sustainable way to lift the public schools teachers’ pay that has sunk to 48th in the nation. In North Carolina, the rich are getting richer as the stock market hits all-time highs and corporations are profiting from a rising economy, but the state has forgone the tax boom that should have come with that recovery.

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Lawmakers should take another look at taxes and find a way to generate revenues that will meet the state’s needs and support its ambitions.

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North Carolina Senate and House budget writers met today in a rare public meeting to break the budget logjam and iron out a final budget deal for the 2015 fiscal year (FY)—which began yesterday. Because lawmakers approved a two-year budget last year as part of the biennial budgeting process, vital public services and programs are continuing but at modified levels per the Governor’s budget directive.

Leaving the budget for FY2015 in place is an option but it’s a bad option. Spending for Medicaid would be far below what’s needed under the already-approved budget due to enrollment and claims backlogs as well as the Medicaid rebase. The budget also fails to include other election-year priorities such as much-needed pay raises for state employees and teachers.

The Senate and House all put forward budget proposals that use wildly different estimates on items that should be fairly consistent across budget proposals. Before moving on to sub-committee negotiations where the full budget differences will be hashed out, budget writers’ goal for the meeting today was to seek harmony on a final budget estimate for three basic areas: 1) agency reversions; 2) the Medicaid shortfall and rebase; and 3) lottery revenues. Doing so allows budget writers to know how much money is available on the spending side. Lawmakers walked away with an agreement on estimates for agency reversions and Medicaid estimates but not on the lottery revenues. Read More

Beginning today, jobless workers in North Carolina can access fewer weeks of unemployment insurance despite a continued lack of jobs and the persistence of long-term unemployment. This is the direct result of a provision in HB4, the unemployment insurance overhaul bill that went into effect last July 1st.

The provision establishes a sliding scale for the maximum number of weeks that is tied to the unemployment rate. The lower the rate, the fewer weeks of unemployment insurance anyone can get. Such an approach to establishing the number of weeks available is only done by 2 other states—Florida and Georgia.

Jobless workers in North Carolina will only be able to access 14 weeks maximum of unemployment insurance beginning today, the lowest duration of weeks in the country. In the last year, the average weeks of duration was 17. And available data point to the continued persistence of long-term unemployment and the disturbing trend of missing workers, workers who would otherwise be in the labor market if job opportunities were stronger. Read More

We keep hearing that North Carolina’s economy is turning around. But while it’s true that we’re slowly making progress in replacing the jobs lost during the Great Recession, the bad news is that the overwhelming majority of these new jobs just don’t pay enough to make ends meet. In fact, many don’t pay enough to keep workers out of poverty, despite working full time. Check out the latest Prosperity Watch for details.

In a bizarre turn of events, the House Committee on Appropriations met today to review and vote on a new spending plan for the upcoming fiscal year. The bill passed in what appears to be along partisan lines, and it heads to the House floor tomorrow. For the most part, the new spending plan leaves in place the second year (FY2015) of the two-year budget that lawmakers already approved last year. The changes are mainly geared toward moving lottery dollars into the General Fund, boosting pay for teachers and state employees, and adjusting the education budget.

See the NC Budget and Tax Center’s statement on the budget here.

The day started with Governor McCrory and Speaker Tillis holding a joint press conference at 1pm to make an education announcement. It was revealed that House leadership planned to unveil a new spending plan that doesn’t rely on raising additional lottery dollars generated from increased advertising.  What wasn’t mentioned at the press conference is that the new plan relies on more lottery dollars to finance pay raises, those dollars just aren’t generated from relaxing the advertising rules. Those dollars just happen to be the result of revised lottery projections under current rules. In other words, the budget is still relying on a source of funding that is unstable and regressive. Read More