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The tax plan that North Carolina’s Senate leaders unveiled yesterday should not be mistaken for tax reform. It is, in reality, a plan to gut North Carolina’s schools, public colleges and universities, infrastructure, and other key state investments that promote long-run prosperity.

The plan’s massive tax cuts, which would mainly benefit large corporations and the wealthy, would cost the state $1.3 billion each year once fully in place, roughly the entire annual budget for North Carolina’s community colleges. Blowing such a massive hole in the budget would jeopardize the quality public schools, nationally-recognized public university system, and other assets that have attracted businesses — and jobs — to the state in industries like financial services and scientific research.

Other states that considered similar proposals this year backed off in part because of the reality that huge tax cuts for the wealthy must be paid for with untenable reductions in funding for schools and other state services, tax hikes on others, or both. The North Carolina Senate’s plan ignores that reality and opts instead for wishful thinking.

Claims that the Senate plan will cause North Carolina’s economy to boom are simply empty promises. Any boost from cutting income taxes will be canceled out by the spending cuts or tax increases the state will be forced to adopt to balance its budget.

Elimination of the corporate income tax is largely a giveaway to multistate corporations that — rather than creating jobs — will likely stick the savings in an out-of-state bank or use it to pay higher dividends to stockholders, most of whom don’t live in North Carolina.

The plan’s personal income tax cuts won’t likely create jobs, either. Most small businesses would get a tax cut so small that it wouldn’t even cover one worker’s salary. Plus, small businesses rely on state education, roads, and other services that would degrade year after year under this plan.

To ensure a bright economic future, North Carolina should focus on strengthening the K-12 and higher education systems that have set the state apart in the past but faced deep cuts in recent years due to the recession. Blowing a huge hole in the state budget would make that crucial task much harder. North Carolina has nothing to gain and much to lose from the Senate’s misguided plan.

Funding for teachers, textbooks and school buses are just some of the areas that Senate lawmakers are choosing to cut from public education in North Carolina, according to the Senate budget proposal submitted Sunday night.

SB 402, the Appropriations Act of 2013, would appropriate $7,849,691,842 for 2013-14 and $8,032,588,328 for 2014-15.

While these amounts reflect an increase over what is currently spent on public education, they fall short of what would be necessary to fund current levels of programming. The budget would appropriate roughly $135 million less than what is necessary to provide current services in 2013-14 and $79 million less in 2014-15. The Senate budget also includes more than $700 million in tax cuts.

These cuts come on top of the previous biennium’s $1 billion in spending reductions to public education.

The Senate proposal does eliminate the $376 million “LEA adjustment,” also known as discretionary cuts, which require school districts to make hard funding decisions and then send money back to the state. However, that elimination is substantially offset by more specific cuts to classroom teacher allotments, instructional support personnel and instructional supplies. Those cuts amount to $310,342,910 for 2013-14 and $270,456,519 for 2014-15.

Student-teacher funding ratios go up from kindergarten through 12th grade as a result, and the cuts to instructional supplies are in addition to massive cuts to textbooks and supplies over the past several years.

Other reductions in spending include:

  • Teacher assistants: cuts total $142,329,582 in 2013-14 and $149,188,180 in 2014-15, amounting to 6,800 lost teaching assistant positions in 2013-14 and 7,100 lost positions in 2014-15
  • Pre-kindergarten: cuts 2,500 slots in 2013-14 and 5,000 slots in 2014-15 in addition to the 5,000 slots that will be lost due to the expiration of Governor Perdue’s executive order, totaling 17,500 lost Pre-K slots over two years.
  • School bus replacement: changes current policy to require school buses to be replaced after 250,000 miles of service, instead of 200,000 miles. Funding is cut 42% this year, on top of huge cuts in the 2011 budget.
  • Funding for limited English proficiency (LEP) students: reduced by $6,000,000.
  • Average salaries for certified personnel: cut by $11,873,083 because actual salaries are less than projected. The reason? Mass exodus of experienced teachers.

Credit for analysis of the Senate budget proposal goes to the Matt Ellinwood, policy analyst for the N.C. Justice Center’s Education and Law project.

Perhaps the biggest news story of the week is the release of the Senate leadership’s budget proposal. Yesterday, the Budget and Tax Center provided an overview of what the budget pays for. Today, we took a close look at how it’s paid for.

How the state will raise the billions of dollars that fuel the state budget gets relatively little scrutiny compared to the rest of the budget. But because the Senate budget this year includes tax cuts for the rich, dramatically reducing resources to pay for vital services, it’s more important than ever to examine how the state will make up for the tax cut’s $770.2 million price tag in the next biennium.

Here’s what’s important for you to know about how the Senate pays for its FY2014 budget: Read More

It’s been a tough week for proponents of austerity economics—the misguided notion that government spending cuts and debt reduction magically produce economic growth. First, a team of respected mainstream economists completely discredited one of the foundational studies supporting the claim that excessive public debt holds back economic growth. Then, the International Monetary Fund—formerly a bastion of austerity economics—warned the United States that its budget cuts (including sequestration) had gone too far and would likely damage the nation’s economic growth.

Essentially, these developments repudiate the idea that high levels of public debt hurt economic growth along with the fantasy that cutting government spending help economic growth. Altogether, it’s been a bad week for austerity, as we can see below the fold….

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State Budget Director Art Pope wasted no time getting to work after Gov. Pat McCrory was sworn in privately on Jan.5, 2013, reminding all state department and agency heads, in a memo dated Jan.7, that they had until Jan. 11 to submit two percent budget reduction options to his office.

As Governor McCrory begins the 2013-15 budget reparation, these reduction options are needed to initiate the budget preparation process. Agencies that did not submit the requested 2% reductions, must submit them to the Office of State Budget and Management by January 11, 2013. Agencies that wish to review and revise the reductions submitted to this office may submit revised reductions by January 11, 2013.

That’s not good news for the state courts, whose budget has already been “cut to the bone” over the past four years, Director of the Administrative Office of the Courts John Smith said in an interview last week.  The system is operating at a stress level higher than any he’s seen during his 30 years of involvement there, and added the following in response to the request for reduction options:

Simply put, the Judicial Branch cannot sustain another budget reduction at this level without sending people home. My highest priority at this time is protecting our workforce against another reduction and the damaging effect such a reduction would have on citizens trying to access justice.

Among the items that Smith ranks as urgent are the reinstatement of at least 28 magistrate positions;  restoration of the court employee step pay plan; and approximately two million dollars in funding to cover additional interpreter services, expert witness fees and the costs of the Racial Justice Act.

In addition, Smith said, the courts need to fill approximately 700 to 800 positions — superior court clerks, district court judges, additional magistrates, assistant district attorneys and support staff — in order to meet current workload demand.