Archives

News
McCrory_budget3

Gov. Pat McCrory unveils his recommended 2015-17 state budget

Governor Pat McCrory unveiled his recommended $21.5 billion budget Thursday, which continues his promise to boost beginning teacher salaries up to a minimum $35,000 a year but does not provide significant increases for veteran teachers and makes yet another cut to the state’s university system.

“We’re changing the basic paradigm of how we evaluate and distribute our limited tax dollars,” McCrory told reporters Thursday. “The new paradigm is directing our monies toward where we’re having the highest attrition, where the greatest need is and based upon the market performance…we’re really speaking in a different paradigm that’s more market-oriented than civil service oriented.”

More than half of McCrory’s 2015-17 recommended state budget is devoted to education. An additional $200+ million is spent on fully funding student enrollment growth in K-12 education over the next two years, and around $84,000 is tagged for increasing beginning teacher salaries from $33,000 (which the General Assembly approved last year) to $35,000 beginning this fall.

While veteran teachers did not receive significant pay bumps in spite of the fact that many say they were cheated out of raises during last year’s much touted teacher pay raise, McCrory’s new budget director, Lee Roberts, emphasized that eligible teachers would still move along the newly-enacted state salary schedule if McCrory’s budget passes.

The old salary schedule for teachers had previously been frozen, Roberts said. The state’s new system provides teachers with pay bumps every five years.

McCrory’s budget hits the University of North Carolina system with a 2 percent funding decrease, also known as “allowing flexibility to achieve efficiencies.”

That cut comes on top of years of budget cuts to the state’s strapped universities. In addition, universities would also be capped at $1 million with regard to how many state dollars they can spend toward private fundraising efforts.

McCrory told reporters that he’s consulted with UNC leaders.

“We’ve talked to the university leaders about this and what they like is the flexibility we’re giving them, said McCrory. “Instead of the politicians out of Raleigh telling them how to find savings, we’re giving them the flexibility to do that.”

The word flexibility was a commonly used one in today’s budget reveal.

“In the past, they’ve [UNC] gotten the directive of what to reduce or increase out of Raleigh. Those days are ending. We want to give that flexibility to our universities and our community colleges and, by the way, our superintendents,” McCrory said.

Other education-related takeaways from the Governor’s budget: Read More

NC Budget and Tax Center

Some legislators want to severely limit the resources the state can invest in schools and other needs and are considering arbitrary formulas to guide those decisions, even though we are already doing less with less. State investments as a share of the economy would be $3.2 billion higher if North Carolina caught up to 2008 levels. That means the Governor and legislative state budget writers have a lot of catching up to do to replace what was lost while also keeping up with the growing needs of a growing state. Tying our hands with artificial limits on how much we can invest is a road to ruin.

The goal of these arbitrary formulas is to radically restrict state spending and shrink the reach and effectiveness of critical public services, regardless of need or cost. One example is a formula that would limit year-to-year growth in total state spending to the rate of inflation plus population growth. Automatic spending limits—as well as caps on year-to-year revenue growth—are sold as common-sense measures, but in reality they are not a responsible way to measure the cost of providing basic government services. Instead, such limits merely ensure perpetually insufficient funding and never allow policymakers to replace the cuts enacted in the aftermath of downturns.

Case in point: inflation, as measured by the Consumer Price Index, doesn’t accurately reflect the cost of providing public services overtime. That’s because the CPI measures changes in the cost of goods and services that urban households purchase—not changes in the cost of public goods that benefit all of us. Read More

NC Budget and Tax Center

The flood of numbers associated with the state’s tax collections has created growing confusion.  However, what should not get lost in this confusion is that those numbers all converge on one truth: the tax plan passed in 2013 costs more than was originally projected and is likely to hamper our state’s ability to reinvest as the economy recovers. Yesterday’s announcement by state officials that the consensus revenue forecast expects revenue to be $271 million short of projections for the current fiscal year confirms the challenges ahead.

So here is a break down on the numbers.

The total cost of the tax plan is approaching $1 billion for the current fiscal year that runs from July 1, 2014 to June 30, 2015. This number measures the difference between the amount of tax revenue the state would have collected under the old tax structure and what the state is collecting under the new tax plan. The new tax plan was originally estimated to reduce tax revenue by $512.8 million for the current fiscal year, but that estimate is proving to be far lower than what we’re seeing today. BTC’s original estimates suggested that the total cost of the tax plan could reach $1 billion by the end of the current fiscal year. Read More

NC Budget and Tax Center

State revenue collections are coming in $199.2 million below projections half way through the fiscal year, according to the legislature’s non-partisan Fiscal Research Division’s new revenue outlook report. This report provides an assessment of revenue collection performance for the state on a quarterly basis. The main culprit behind the mid-year shortfall is the 2013 tax plan that reduces revenue availability while primarily benefitting wealthy taxpayers and profitable corporations. The plan’s personal income tax cuts are costing more than previously expected.

The growing cost of the 2013 tax plan further challenges state lawmakers’ ability to rebuild what was lost in the aftermath of the Great Recession and reposition itself to compete nationally and globally. North Carolinians are already dealing with the fallout of the current state budget that falls short of what’s needed for children, families, and communities to thrive. The inadequacy of the budget has been chronicled in the news, with many stories focusing on how there are too few textbooks (even toilet paper) as well as the local challenges that state budget and tax decisions are creating.

It is important to view this mid-year revenue shortfall in the context of the dollars that lawmakers already lost due to the tax plan. For the 2015 fiscal year, Fiscal Research Division originally estimated that the plan would cost $512.8 million but soon revised its revenue outlook to account for an additional loss of $191 million. This latest report of $199.2 million in under-collections comes on top of these already-accounted-for losses.  By the end of the fiscal year, the total cost of the tax plan could reach as high as $1.1 billion, according to the Institute on Taxation and Economic Policy’s estimates. That’s roughly equivalent to the state dollars that support the entire Community College System.

Highlights of the Revenue Outlook Report Read More

NC Budget and Tax Center

The latest Who Pays? report released today by the Institute on Taxation and Economic Policy (ITEP) takes a look at the fairness of state tax systems. For North Carolina, the lowest income North Carolinians pay over 70 percent more in state and local taxes as a share of their income compared to the state’s wealthiest residents, the ITEP report highlights.

The lowest 20 percent of North Carolinians – with an average income of $10,700 – pay 9.2 percent of their income in state and local taxes, the study finds, compared to 5.3 percent for the top 1 percent, the average income for this group is $969,100.

North Carolina’s unfair tax system presents both short- and long-term challenges and concerns. The state’s unfair tax system not only contributes to widening income inequality in the short term, but also leaves the state struggling to raise adequate revenue for public investments in the long term, ITEP notes. These realities are already playing out in the North Carolina. As state lawmakers return to Raleigh this week for the 2015 legislative session they face an ongoing revenue shortfall as a result of tax cuts passed in 2013.

North Carolina has moved away from many features that create a fairer tax system. State lawmakers replaced a graduated personal income tax rate structure (meaning the higher one’s income, the higher one’s effective personal income tax rate) with a flat rate that doesn’t take into account a taxpayer’s ability to pay, allowed the state’s Earned Income Tax Credit to expire, expanded the sales tax base, and allowed the corporate income tax rate to be cut from 6.9 to 5 percent and potentially as low as 3 percent.

These changes have resulted in a sizable reduction in revenue, with the state now challenged with funding basic public obligations such as education and healthcare services for the elderly and poor. Returning to a graduated income tax rate structure, reestablishing a state Earned Income Tax Credit, creating a renter’s credit or an enhanced and refundable Child Tax Credit, and stopping further tax cuts that largely benefit the wealthy and profitable corporations are important opportunities to create a fairer state tax code.

A state tax code that works for all North Carolina taxpayers is important for ensuring that economic opportunity and prosperity is broadly shared. The Who Pays? report highlights that there is work to be done to make this a reality.