Archives

NC Budget and Tax Center

Legislators approved a third budget extension today as the House and Senate leadership continue efforts to iron out a final budget deal. The existing temporary budget, known officially as a Continuing Resolution, is set to expire on Monday. If signed by the Governor, the newest extension will keep public programs and services operating through September 18th, which is 79 days after the original budget deadline of July 1st.

The third budget extension will keep state government operating exactly as the second stop-gap measure approved earlier this month. I outlined those details in a previous blog post.

Leadership in the House and Senate chambers already agreed to a topline spending target of $21.735 billion for the 2016 fiscal year that runs through June 30, 2016. That means state investments as a part of the economy would remain below the 45—year average, impeding the ability to restore previous cuts and make progress in a significant way. Read More

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).

Chart 1

Read More

NC Budget and Tax Center

After enacting huge, costly income tax cuts in recent years that largely benefited the state’s wealthiest people and biggest, most profitable corporations, pursuing more tax cuts would threaten North Carolina’s economy – and yet it appears state lawmakers are doing just that.

Questions remain about what will or won’t be in the budget the Legislature passes. What is known, though, is that the spending target agreed upon by the House and Senate is $230 million less than what the state is projected to take in over the year from tax revenue.

If that turns out to mean a tax-cut proposal, it will come in the face of strong evidence that such a strategy doesn’t deliver widespread economic benefits.  North Carolina is experiencing a very uneven economic recovery. Many people still can’t find jobs and many who are working are being paid less than what it takes to make ends meet. Tax cuts aren’t going to create the jobs North Carolina needs and they take resources away from what the state should invest in to promote real growth – quality public schools, affordable higher education, modern infrastructure, and safe and healthy communities, for example.

A continued pursuit of failed trickle-down economics policies would occur as investments in those public services and others are still below pre-recession levels and insufficient to meet growing needs.

State lawmakers are pursuing two paths to usher in more income tax cuts.

One path builds more tax cuts into the state budget. Budgets passed by both the House and the Senate lower the corporate income tax rate to 3 percent from 5 percent over the next two years. These tax cuts will result in more than $450 million less available to the state for public services over the next two years. As we’ve highlighted previously, cutting corporate income taxes won’t boost North Carolina’s economy; taxes are but a fraction of a business’s costs. Furthermore, the Senate’s budget changes how corporations apportion their income for state income tax purposes and reduces the corporate franchise tax rate. In total, tax changes included in the Senate’s budget would result in nearly $1 billion in less state revenue over the next two years.

The second path, Senate Bill 607, would amend the state constitution to arbitrarily cap the state income tax rate at 5 percent. This would reduce annual state revenue for public investments by around $1.5 billion. The result would mean more erosion of vital services and probably other tax increases – most likely the state sales tax. In combination with other proposed changes to the state constitution, this path would hamstring state lawmakers in the years ahead from meeting the priorities of North Carolinians by restricting the overall level of investment in our public schools, public colleges and universities, and other important areas.

These two paths that state lawmakers are pursuing are troublesome, particularly at a time when investing in North Carolina’s future is important to the state’s economic prospects. Consequently, the continued pursuit of trickle-down economics fails to promote broadly shared prosperity and prevents the entire state from moving forward together.

Commentary
State Rep. Nelson Dollar

State Rep. Nelson Dollar

If you had any doubts about the kind of long-term damage to state government that would be wrought by the ALEC-inspired “Taxpayer Bill of Rights” constitutional amendment (aka “TABOR”) recently endorsed by the North Carolina Senate, take a look at yesterday’s new budget agreement between legislative leaders and the Governor.

As Colin Campbell of Raleigh’s News & Observer reported this morning, the new agreement would provide for growth in state spending of about 3.1% over last year — 0.4% more than the 2.7% that the story reports would have been possible (i.e. the rate of inflation plus population growth) were a TABOR amendment in place.

But here’s the rub: Even with a hike that’s above the TABOR threshold, the new budget will not be able to deliver even the modest and still inadequate pay increases and service improvements that were contained in the House’s version of the budget. This is from Campbell’s article

“While the House called for all state workers to get a 2 percent raise, House senior budget writer Nelson Dollar said that’s now unlikely with less money to spend.

‘It’s $420 million less, so obviously what the House was looking at in terms of raises and in terms of investing in education will not happen,’ said Dollar, a Cary Republican.”

A TABOR constrained budget would, obviously, be even more inadequate.

The obvious and incredibly sobering bottom line therefore: If North Carolina puts TABOR into the constitution,we are all but guaranteed that teachers and other state employees will never get another decent raise again unless the state literally does away with some major function of government to free up the necessary funds.

No wonder Colorado legalized pot. People need something to ease the pain of being the only Americans forced to live under such a disastrous amendment.

NC Budget and Tax Center

Amid major differences between the House and Senate respective budgets, public schools across the state wait to see what level of state support will be provided for public education. The final decision doesn’t just matter for the education of our children but the attractiveness of our communities and the long-term potential of our economy to grow together.

Funding may not solve every challenge in public education, but it certainly can make a difference in ensuring that a quality education for every child can be provided. As I’ve previously highlighted, smart allocation of public dollars can ensure that regardless of where they live in the state, every child receives a quality education, and in so doing an opportunity for them and in turn the economy to do well in the future.

Here are six trends that highlight the impact of state-level budget decisions on public education in North Carolina.

  1. Total state funding for public schools remains below pre-recession level

State funding for public schools has not yet reached its peak level for FY 2008 prior to the Great Recession. For FY 2015, total state funding for public education was $8.04 billion compared to $8.6 billion for FY 2008 when adjusted for inflation. This decline in state funding equates to $578 million in less funding for public schools.

Total Pub Ed Spending

Note: For this blog post, state funding for teacher pay increases are included in total spending for public education. BTC normally backs this particular funding out of the public education budget, as it has historically been included in the Reserves section of the state budget. Accordingly, figures in this blog post may differ from BTC’s other analyses of the state budget.

Read More