NC Budget and Tax Center

Governor McCrory provides glimpse into his budget proposal that he will unveil in late April

At a press conference earlier today, Governor Pat McCrory provided a narrow and preliminary look into his budget proposal for the 2017 fiscal year that begins in July 2016. His remarks focused solely on the investments that he would make in the health and services (HHS) section of the budget. The Governor stated a desire to boost investments targeting vulnerable communities such as at-risk children, adults who suffer from mental health and substance abuse disorders, and older adults with Alzheimer’s.

Governor McCrory did not mention any additional rounds of tax cuts that primarily benefit the wealthy and profitable corporations—a genuine concern given his willingness to sign into law such tax breaks in the last few budgets. He also did not mention any details for other investments that the state budget funds such as education, community economic development, and the justice system.

Without knowing all of the details of his likely $22+ billion budget and tax plan, it is unclear how he pays for the investments in his new proposal. He could pay for them with money expected to be left on the table this year, new revenues that are coming in due to a slowly improving economy here and across the nation, and/or by relying on a mix of new revenues and tax cuts. Several fiscal scenarios exist.  As such, a complete analysis of today’s news must wait until the Governor releases the full proposal later this month.

Below are topline summaries of the Governor’s health and human services budget for the upcoming fiscal year. Read more

News

Western N.C. school system—reeling from budget cuts, charters—may have to close a school

charterschools-300x202Troubling news out of Haywood County, a mountainous district west of Asheville that may be facing a school closure and the loss of almost two dozen teaching positions. The culprit? According to an Associated Press report late last week, local funding cuts and competing charter schools.

School officials told the A.P. last week that they are attempting to remedy a $2.4 million local funding deficit for the 2016-2017 school year, at least partially because of about $933,000 in lost state funds due to competing charter school openings.

The system said another $508,000 of local tax dollars were “diverted” to charter schools inside and outside of Haywood County.

From the report:

“You have a decrease in funding. You have a significant decrease in the number of students, and you have a charter school opening in your own district,” Haywood County Schools Associate Superintendent Bill Nolte said. “Those are the factors that have come together to create for us a $2.4 million deficit in our local budget.”

Read more

NC Budget and Tax Center, Uncategorized

Top 10 state budget missteps in 2015

The 2015 year brought plenty of budget missteps on Jones Street—from another round of tax cuts to state investments that are mired at historic lows. Here’s a look at the top 10 missteps that state policymakers should address in 2016.

  1. State lawmakers once again chose to cut taxes that primarily benefit the wealthy and profitable corporations over meaningful levels of reinvestment. The tax plan will reduce revenue by $1 billion annually when fully implemented, cutting off pathways to greater economic success like early childhood development, public schools, and community economic development while also failing to boost the economy or create jobs.
  2. State lawmakers failed to restore the state Earned Income Tax Credit (EITC), which benefited nearly 1 million families and their 1.2 million children. Yet, they chose to expand the sales tax to new services like maintenance, repair, and installation, effectively further shifting the tax load onto middle- and low-income taxpayers.
  3. The 2015 tax changes make our tax system more upside-down by asking even more from people who are already struggling to pay the bills. Under full implementation of the tax package, the lowest income working families will end up paying a tax increase of $7, on average, whereas millionaires are the big winners again with a tax cut of more than $1,800 on average.
  4. This budget doesn’t address falling wages, just as the last two budgets failed to do. In 2013 an hour’s work in NC earned around $2.50 less than the national average; now that gap has grown to almost $3.00. Allowing the state’s lowest-income families to keep more of what they earn through an EITC is a key way to build a stronger economy, along with a higher minimum wage and collective bargaining rights, but legislators failed to restore the tax credit and raise the minimum wage.
  5. State investment is at historic lows. State lawmakers passed a budget that keeps state spending as part of the economy below the 45-year average. That would be fine if needs have shrunk but they’ve grown. State budgets typically allow spending to grow as the population grows and the economy changes, especially after an economic downturn when revenues plummet and services are frozen or cut.
  6. State investments break an unwelcome modern record as they remain diminished. Lawmakers passed a budget that caps off the only period since 1971 in which state spending declined as a part of the economy for seven and eight straight years while the economy itself grew. Continuing on a tax-cut path means there simply won’t be enough revenue left over to repair critical investments or to position our state to compete.
  7. Eight years later, state investment remains below pre-recession levels despite more children to educate, more older adults to care for, and more citizens to serve and protect. Such long-term disinvestments have translated into significant unmet needs for our state’s growing population—a shortage of K-12 textbooks, school nurses, and community services for older adults.
  8. This budget continues to hold us back from ensuring educational success for every child. For the current school year, lawmakers invested more per student compared to the 2015 fiscal year budget but well below 2008 pre-recession levels—nearly $500 less per student. This will cause real harm to the classroom and educational outcomes. The number of students in North Carolina schools has continued to increase since 2008, yet the amount of funding per student— and, therefore, the resources available to educate each student—has not been state lawmakers’ priority over tax cuts.
    • For example, textbook spending is below half its 2010 peak level, leaving some schools with outdated textbooks or with no textbooks at all.
  9. Continuing down a tax-cut path is deepening cracks in NC’s opportunity structure—and it has left several vital areas of public programs and services inadequate.
    • For example, lawmakers kept year-over-year spending flat for the pre-kindergarten program that serves at-risk 4-year olds. They failed to restore the more than 6,400 slots lost since 2009 or give opportunity to the 7,200 children stuck on the waiting list.
    • For example, tuition at community colleges rose for the seventh consecutive year to $76 per credit hour from $72—an 81 percent increase since 2009—increasing the likelihood of a college education being out of the reach of many.
  10. This tax-cut path—and the revenue losses that come with it—also mean that some investments are completely missing from the budget.
    • For example, there is no cost-of-living adjustment for retired public employees like former state troopers and teachers despite their shrinking purchasing power due to changes in the economy.
    • For example, there is no Medicaid expansion, which means lawmakers denied affordable health care to about 500,000 North Carolinians.
    • For example, there is no support to ensure that all rural communities have reliable high-speed internet access that is increasingly essential to participating in the global economy—which leaves struggling rural communities further behind urban areas.

Read more

News

Mental health funding in steady decline in North Carolina

A new report from the National Alliance on Mental Illness finds that North Carolina is one of only 12 states that cut funding for mental health this year.  The map below from the report tells the story and the cuts are becoming a habit in the current era when tax cuts for corporations take precedence over everything else.

Fewer than half of states increased their mental health budgets this year. The rest reduced funding, including three states that have been in steady decline over three years—Alaska, North Carolina and Wyoming.

state-mental-health-budgets-fy-2015-2016

NC Budget and Tax Center

Claim justifying more tax cuts not supported by facts

The latest quarterly revenue report by the General Assembly’s Fiscal Research Division (FRD) highlights that tax cuts do not explain the better-than-projected income tax revenue collections for the most recent fiscal year 2015.

According to FRD, two factors likely affected income tax collections for the most recent fiscal year.

  • Corporate taxable profits accelerated as wages remained low and write-offs on losses from the recession dwindled. This pushed collections 21.2% above forecast expectations.
  • Timing in personal income tax collections from changes enacted beginning with the 2014 tax year meant lower monthly withholding revenue – but higher final payments and smaller refunds in April. The forecast didn’t fully capture those dynamics leading to a shortfall the previous fiscal year and a surplus in FY 2014-15.

There’s evidence to support these two points. Corporate profits are at a record high as the economy recovers in part due to a steady increase in productivity. Meanwhile, wages for workers have remained stagnant – an indication that workers have not participated in the economic gains during the ongoing recovery. Furthermore, FRD notes that tax changes in recent years made it difficult to determine the timing of income tax revenue collections, resulting in a projection that was well below actual collections for FY 2014-15. Read more