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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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NC Budget and Tax Center

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

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On the first day of a new fiscal year, it appears state Senators are in no rush to wrap-up budget negotiations with the NC House.

On Monday, the Senate rejected the House “mini-budget” that has the blessing of Governor Pat McCrory.  Senate President Pro Tem Phil Berger made it clear that without a more accurate assessment of Medicaid costs, his chamber was not prepared to make other budgetary decisions.

And with political observers now projecting the “short” session will last most of July, advocates are urging lawmakers to take time and reconsider restoring the state Earned Income Tax Credit.

The NC Budget and Tax Center calls the state EITC ‘a highly effective anti-poverty tool‘ with lasting, positive effects on children and low-income working families.

House Minority leader Rep. Larry D. Hall discussed the need to restore North Carolina’s EITC when he appeared last weekend on NC Policy Watch’s weekly radio show News & Views with Chris Fitzsimon. Click below to hear Rep. Hall’s remarks:

YouTube Preview Image Nearly one million families in the Tar Heel state —including 64,000 military families— benefited from the North Carolina EITC last year.

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In case you missed it, be sure to check out today’s edition of the Fitzsimon File in which Chris explains what’s really at issue in the stalemated state budget negotiations. Most notable on the list: the remarkably regressive positions of Senate President Pro Tem Phil Berger.

“Senate President Pro Tem Phil Berger told WRAL-TV that any budget deal must not only include the Senate’s estimates of Medicaid costs but must also reduce the number of people who are covered by the program.

Berger said the Senate wanted ‘reductions in the welfare spending that is ongoing at the present time.’  Medicaid, the health care safety net for the most vulnerable people in North Carolina, is now welfare in Berger’s far-right view of the world.

The budget the Senate passed earlier this session would kick at least 5,200 aged, blind and disabled people off of Medicaid. More than 1,600 of them have Alzheimer’s or dementia and are in special care units, which to Berger must be a new fancy way of saying welfare.”

As Chris also notes, there is an easy way out of the mess: Read More

NC Budget and Tax Center

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