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NC Budget and Tax Center

With lawmakers set to hammer out a final state budget, North Carolinians are hearing a lot of misleading claims about the inability to afford important investments in the state’s economic future. Unmentioned is that the state’s constrained finances – at a time when the economy is improving – stem from the decision to sharply cut taxes over the past three years instead of building a strong foundation for lasting growth.

So when policymakers say that making investments in one area of the budget limit the ability to invest in other areas, they are right in lamenting limited resources. But they are offering false choices because they leave out the fact that the limits on resources available to help North Carolinians build a secure future come from House and Senate leadership prioritizing tax cuts over investments that drive the economy forward. And these constraints are likely to continue far into the future because the proposed House and Senate budgets include tax cuts that cost anywhere from $650 million to $1 billion over the next two years, depending on which version of the budget the two houses eventually agree to enact.

By locking themselves into these false choices legislators fail to acknowledge that halting further tax cuts would help ensure that schools have the resources they need and that important supports are available to promote healthy and safe communities.

Let’s sort out some of these false choices and shed light on how different it could be if the state had taken the common-sense path of avoiding such damaging tax cuts.

  • Classroom Teachers vs. Teachers Assistants. Today, our schools have nearly 4,800 fewer classroom teacher positions and more than 7,000 fewer state-funded teachers’ assistants than in 2009, which is especially bad considering there are 43,000 more students in our schools. The Senate budget drastically reduces funding for teachers’ assistants and provides some additional funding for classroom teachers. But neither the House nor Senate budget would restore the number of teachers and assistants to the 2009 level. Without tax cuts, North Carolina could invest in teachers and teachers’ assistants, providing the next generation a better shot at getting the skills to compete in a global economy.

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News

The Senate’s budget proposal for the next two years had some significant health policy changes packed into it, namely a proposal to peel Medicaid oversight away from the N.C. Department of Health and Human Services and open the door for managed-care management of the $14 billion program.

House and Senate Republicans have spent the last few years debating what to do with Medicaid and how to address routine budget overruns from the federally-mandated program that provides health care coverage for low-income, seniors, the disabled children and some of their parents and the disabled.

House members favor keeping Medicaid within DHHS, and phasing in changes that would open up the Medicaid program to management from non-profit groups (called ACOs, or accountable care organizations).

Sen. Ralph Hise, the Republican senator from Spruce Pine who has long pushed for a managed-care solution to Medicaid, said that beginning the Medicaid reform process and moving Medicaid administration into a stand-alone division would allow the legislature to better predict and cap costs for what is the state’s largest program. (Scroll down to watch video of Hise talking about the Senate budget proposal.)

The Senate proposal does have room for ACOs, with options to have managed-care companies offer state-wide coverage while also having six regional divisions that will have slots for ACOs to work, Hise said.

Any changes to the state Medicaid program will need federal approval as well.

The Senate budget, which is expected on the floor for a vote tomorrow, would also cut ties with Community Care of North Carolina, a provider-led network that had been credited with keeping Medicaid costs down by closely managing patient cases, and pairing high-risk patients with primary care physicians. The contract with the state would end by Jan. 1. The cut will amount to a $32 million cut in the 2015-16 budget year, and savings of $65 million in the second year.

There were plenty of other note-worthy details in the budget proposal, with some re-investments in some areas of the budget, and cuts in the others. To read the 504-page budget, click here. The accompanying money report is herehere.

Among the proposed changes were proposals to:

  • Eliminate 520 slots in the state’s pre-kindergarten program, which currently offers early education offerings to 28,700 low-income children.
  • Get rid of the state’s “certificate of need” process by 2019, in which hospitals and medical centers need to make a case to state regulators for adding surgical or other specialized medical offerings, in favor of a more free-market approach that’s been a cause long championed by conservative groups in the state.
  • Extend the foster care age to 21, offering more help for children instead of cutting them off from state services at age 18.
  • Shut down the Wright School, a part-time residential facility in Durham County that provides inpatient help for children with severe disabilities and behavioral issues.
  • Get rid of the Office of Minority Health in DHHS (cut of $3.1 million). Senate Republican leaders said Monday the elimination would allow more money to flow through to actual services that affect minority populations including teen pregnancy and sickle cell programs, but Democrats argued an office dedicated to looking at overall health disparities between racial groups was important.

N.C. Health News has a great rundown as well about what’s in (and what’s not in) the budget. You can read that here.

 

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Falling Behind in NC, NC Budget and Tax Center, Raising the Bar 2015

A tax plan state Senate leaders presented this week would promote neither shared economic opportunity nor prosperity across North Carolina. Far from it.

The proposal would cost more than $1 billion in annual revenue loss as the tax plan continues down the path of handing out more costly tax cuts to large, profitable corporations at the expense of everyday North Carolinians. This approach won’t restore the state’s economy to a sound footing.

The proposed tax plan does nothing about persistent stagnant wages, an uneven economic recovery in which all gains are going to the wealthiest North Carolinians, and the lack of economic and job growth in many parts of the state. Senate leaders would pay for only a portion of the income tax cuts by having North Carolinians pay more in sales taxes, which hit people making relatively low incomes the hardest. And the state would continue to walk away from its responsibility to make much-needed investments in our public schools, public colleges and universities, repair the state’s eroding infrastructure, and other building blocks of a strong economy.

Key aspects of the Senate tax plan stand out as strong reasons why its adoption would fail to promote broad prosperity.

  • The proposal’s reduction of the personal income tax rate to 5.5 percent from 5.75 percent has no benefits to the state’s economy or its competitiveness. At the cost of much-needed public revenue, the tax rate cut won’t drive significant job creation, motivate businesses or people to locate in North Carolina or encourage local investment. Not only do income tax rates affect these factors negligibly, if at all, North Carolina’s personal income tax rate is already in line with the region’s, falling in the middle among southeast states.
  • While putting a limit on how much in itemized deductions a taxpayer can claim is good policy, using the added revenue this produces to reduce tax rates isn’t. Because this proposal would place all itemized deductions—mortgage interest, charitable contributions, medical expenses, etc.—under the cap, it creates greater equity in the treatment of taxpayers. Capping itemized deductions reduces revenue loss from these deductions and helps address inequities in the tax code, as wealthier taxpayers typically benefit more from deductions.
  • Increasing the standard deduction is a wasteful way to address the problem of too many North Carolinians struggling to make ends meet because it deprives the state of much-needed public resources that could boost public investments that promote economic growth. A better way to help hard-working taxpayers keep more of what they earn is to adopt a strong refundable state EITC to help offset not only income taxes, but sales and property taxes that fall hardest on those with lower incomes.

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The pay for presidents of public universities is rising, with the median salary for the president of a public university now $428,250.

That’s an increase of 7 percent, while two presidents in the nation (at Pennsylvania State University and Texas A&M) made more than $1 million, according to the Chronicle of Higher Education, which released its annual survey of public college presidents this week.

UNCsystemUniversity of North Carolina system President Tom Ross made $543,725 during the 2014-15 school year, according the Chronicle analysis. N.C. State University Chancellor Randy Woodson made $520,000, as did UNC-Chapel Hill Chancellor Carol Folt.

Scott Ralls, the outgoing head of the state’s community college system, made $286,954.

In an article about the Chronicle’s findings, the New York Times pointed out that not all college presidents want that higher pay.

The University of Texas’ incoming president turned down a $1 million base salary, asking instead for $750,000 out of concern of how the higher pay would be perceived by students, faculty and the state legislature.

The paycheck for the top job at UNC is likely to increase from Ross’ current salary, after the UNC Board of Governors moved in April to allow for salaries up to $1.1 million for the new president as well as increased pay for chancellors.

The board is in the midst of its search for a new president of the 16-campus system, after Ross was pushed out in January by the politically-appointed board for reasons that have still not been explained. Ross will stay in his position until January.

Pay, and the ability to offer more money to job candidates, has been mentioned by some board members as a necessary tool to recruit UNC’s next leader.

The decision to allow for more pay for top executives in the university systems comes after several years of deep cuts handed down to the university system by the state legislature, and as faculty and staff have seen little change in their salaries during the course of the recession.

There may be some salary increases for UNC employees, however. The House version of next year’s budget has a 2 percent raise proposed for university system staff and faculty.

The Senate is expected to release its version of the budget in coming days, though Senate leaders have said to expect a significantly smaller budget than what their colleagues in the House prepared.

So, what do you think? Should North Carolina be paying its top university leaders what it does? How much does salary matter when it comes to recruiting for top university jobs?

News

The N.C. House of Representatives released portions of its budget Thursday, and included several significant changes and some cuts for public higher education.

UNCsystemThe entire budget – which is expected to fill in gaps about whether raises are in store for state employees and teachers – is expected to be released Monday, and voted on by the Republican-led House that week.

Senate Republican leaders have not announced when their version of the budget will be done.

Several significant changes were trotted out by House budget writers this week for the state’s public higher education system.

The House did fund expected growth in the system but also calls for $44.3 million over the next two years in management cuts and would roll out a program that would push academically weak college students into a community college program before gaining entry into the state’s four-year universities.

Drew Moretz, the University of North Carolina system’s vice-president for government affairs, said the House calls for fewer cuts than what Gov. Pat McCrory’s budget proposed.

“It’s a better starting point than what the governor had given us,” Moretz said.

The system as a whole has had $658 million in management cuts since 2008-09, he said.

The House budget would also, for the first time, allow low-income students to get scholarships to virtually attend Western Governors University, an online education program that’s been touted as a low-cost education option by groups like the conservative John William Pope Center for Higher Education Policy.

House lawmakers also want to delay more than 1,000 prospective students from attending the state’s public universities by requiring the UNC system to defer admissions to students who meet admissions standards but don’t have strong academic histories

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