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NC Budget and Tax Center

As North Carolina students embark upon a new school year, lots of media coverage has focused on waning state-level support for public schools. This waning support extends beyond public schools to both ends of the education pipeline – early childhood and higher education. Whereas North Carolina should be boosting investments in its entire education pipeline in order to become a more competitive and attractive state, we have taken a different path.

Early childhood programs, like NC Pre-K and the Child Care Subsidy Program, are crucial to promoting the healthy development of North Carolina children. Although child poverty has worsened since the Great Recession, state investments in early childhood programs remain woefully inadequate while waiting lists persist. Today, the NC Pre-K program serves approximately 8,000 fewer four-year olds compared to 2009 peak levels during the recession (see chart below).

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NC Budget and Tax Center

The North Carolina House just passed HB 943, which would put a $2.86 billion bond referendum before the voters this fall. This move is based on a growing consensus that investing in our schools, roads, state facilities, parks, and local infrastructure is an economic must.

Issuing new debt should be pared with a few pragmatic fiscal steps. First, we should not cut taxes again, which would undermine the flexibility we will need to repay the debt. Second, we should use regular appropriations to pay for most repairs, and keep the bond finances for transformative projects that move North Carolina’s economy forward.

If we are going to issue more debt, we cannot afford another round of tax cuts. If we borrow to improve the state’s infrastructure, the state will need strong future revenue growth to repay borrowers; more tax cuts or limits on revenue growth are bad fiscal policy. Moreover, reducing taxes even further could jeopardize North Carolina’s AAA rating, and force us to pay higher interest rates. The bond rating agencies are very sensitive to states’ long-term fiscal stability and states with lower credit scores have to pay higher interest rates. Other states that have cut taxes even more dramatically than North Carolina (e.g. Kansas) have been downgraded by the credit rating agencies, not an example that we should follow if we are about to purchase new debt.

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NC Budget and Tax Center

A report released yesterday by ThinkNC First argues that decision makers in Raleigh have walked away from many of the programs that helped to build a middle-class in North Carolina. Authors William Lester and Nichola Lowe of the University of North Carolina review data showing that middle-income jobs have become much harder to find over the last decade. The report ties this disturbing trend to recent policy decisions to underfund state programs that foster industries that create livable wages and ensure that all North Carolinians can access those jobs. The report makes a strong case that state leaders should heed our history and remember how North Carolina became an economic powerhouse in the Southeast in the first place.

The central problem documented in the report is becoming increasingly difficult to ignore. For the second half of the 20th century, North Carolina’s economy generated strong employment growth up a down the wage scale. Since the start of the Great Recession however, most of the job growth has been in either very high or very low paying industries. The labor market hollowed out, as many industries, particularly in manufacturing, saw employment decline. We here are the Budget and Tax Center have been watching this same trend, and its not pretty.

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N.C. Community College President Scott Ralls

N.C. Community College President Scott Ralls

North Carolina is now on the hunt for new leaders of both its higher education systems, with today’s announcement that N.C. Community College President Scott Ralls is taking a job in Virginia.

The News & Observer’s Jane Stancill reported early this afternoon that Ralls is taking a new job to head the Northern Virginia Community College, a campus with 75,000 students.

In North Carolina, Rawls has headed the 58-campus state community college system that serves 850,000 students since 2008. He will start his new job in September. (Click here to read the announcement from the Virginia community college.)

From the N&O:

Ralls has led the North Carolina community college system since 2008. The system had phenomenal growth — 28 percent — in the first three years of his tenure, which was during the depths of the recession.

At the same time, the system experienced a budget crunch, all while embarking on a strategy to revamp curriculum, improve graduation rates and forge new transfer agreements with the state’s university system.

A former president of Craven Community College in New Bern and Havelock, Ralls said Thursday he had always intended to return to a campus setting, where he could interact with students and faculty.

“That’s who I am and where my heart is,” Ralls said Thursday. “I’ve always aspired to go back to a campus.”

Ralls’ forthcoming departure comes at the state’s university system is also looking for its new leader, after the UNC Board of Governors moved in January to push out President Tom Ross.

UNC Board of Governors Chairman John Fennebresque denied that politics played a roll in Ross’ ouster, but no reasons other than a general desire for change have been given.

Ross is staying in his position until January, and a successor is expected to be announced this fall.

Commentary, NC Budget and Tax Center, Raising the Bar 2015

Editor’s note: The following post by Jeremy Sprinkle, communications director at the NC State AFL-CIO, is the latest installment in “Raising the Bar” — a new series of essays and blog posts authored by North Carolina leaders highlighting ways in which North Carolina public investments are falling short and where and how they can be improved. 

No one wants North Carolina to have a strong economy more than its workers, who want to be able to work and to earn enough to support their families. Our state budget includes vital investments in supporting our current and future workforce, for example through workforce development, re-employment support and early childhood education, and our K-12 public school system. We know that making investments in these areas ultimately benefits all workers, families and our economy.

Unfortunately, legislative leadership in North Carolina has not pursued a path of investing in our workers and future workforce, but instead implemented a costly tax plan passed in 2013 that bleeds the state of much needed revenue for workforce development and training and innovative, proven initiatives that would create good-paying jobs in our state. The plan they passed gave big tax cuts mostly to profitable corporations and individuals at the very top of the income scale. Legislators based the pursuit of this strategy on a theory that tax cuts lead to higher job creation. However prior experience and research tells us that tax cuts don’t create jobs and they don’t grow the economy.

The 2013 tax cuts haven’t fixed the labor market despite disproportionately going to so-called “job creators” – the wealthiest North Carolinians and profitable major corporations.

As billionaire venture capitalist Nick Hanauer has said, if it was true that tax cuts for the rich created jobs, we would be drowning in jobs — but we’re not.

There are more people looking for work today than before the recession, and many of the jobs out there are low-wage jobs that don’t pay enough to support families or to reverse the decline of our middle class.

In fact, adjusting for inflation, an hour’s work today actually buys less than it did in 2007. Another tax cut isn’t going to fix that.

The way to raise wages and fix the labor market is by investing in our workforce and by empowering more workers to engage in collective bargaining to turn low-wage jobs into good jobs.

Policymakers have for too long asked working families to pay more and settle for less.

The 2013 tax cuts for the wealthy forced the state to slash programs that would have helped workers recover from the recession and rebuild their lives.

Workforce development, reemployment services, child care subsidies, and the Earned Income Tax Credit have all been cut or eliminated. Meanwhile, the cost of job training at community colleges or of pursuing a higher education is more expensive than ever.

Workers are consumers, and that makes us the real job creators in our economy. There aren’t enough wealthy people to make up for the declining buying power of North Carolina’s workers, and another tax cut for the rich won’t change that.

If lawmakers want to create jobs, they need to invest in workers, and investment takes revenue, revenue that is lost by cutting taxes.

And if they want to do something meaningful to put more money into workers’ pockets, they’d be better off encouraging workers to form unions and bargain collectively than by doubling down on the failed ideology that tax cuts are some sort of cure-all that past experience and common sense tell us just isn’t true.