Archives

NC Budget and Tax Center

State Superintendent of Public Instruction June Atkinson recently proposed a 10 percent pay increase for public school teachers. In response, NC House Speaker Moore stated that he doesn’t think that’s a realistic goal because North Carolina can’t afford the price tag. Speaker Moore says he believes we must pay our teachers more than we do, but that this should be done in a responsible way.

The requested pay increase comes as North Carolina ranks among the very bottom of states for average teacher pay. State funding for pay increases in recent years has largely targeted early-career teachers, leaving more experienced educators wondering if they will ever get a meaningful pay increase.

The reason providing teachers a 10 percent pay increase is deemed a hefty, unrealistic task by state leaders is clear – costly tax cuts ushered through by state leaders in recent years. Tax cuts included in the current two-year budget, once fully phased in, will reduce annual state revenue by more than $1 billion. When you include the cost of the tax cuts passed in 2013, the combined reduction in annual revenue increases to more than $2 billion. These are dollars that would otherwise be available under the old tax code in place prior to the tax changes. The tax cuts largely benefited the already well-off and profitable corporations and shifted the tax load to low- and middle-income families and individuals.

State leaders have proven their ability to push through their priorities in recent years and tax cuts have certainly been a major priority. The self-inflicted challenge that North Carolina faces – providing all teachers a meaningful raise – is a result of state leaders’ dogged pursuit of more and more tax cuts. This challenge is not happenstance, but rather a consequence of choices made by state lawmakers.

North Carolina’s ability to make public investments that are crucial to promoting widespread prosperity and that support a growing economy requires a tax system that raises adequate revenue to meet the growing needs of our state. Tax cuts passed in recent years will increasingly challenge our ability to strengthen the foundation that ensures opportunity for all North Carolinians – quality public schools, affordable higher education, and healthy and vibrant communities, for example.

What is not realistic is for state lawmakers to continue cutting taxes, which reduces revenue for public investments, and expect our state to be able to compete for good-paying jobs and remain an attractive state to raise a family and operate a business. All North Carolinians lose as we are taken down this dangerous path of cutting taxes at the expense of investing in our people and our future.

NC Budget and Tax Center

News that revenue is up in North Carolina doesn’t mean that we have what is needed to meet our state’s growing needs. In fact, total state revenue for the second quarter of fiscal year 2016 was below the level of revenue raised for the same period prior to the end of the Great Recession, fiscal year 2008, when adjusted for inflation.

By contrast, a majority of states experienced state tax receipts (adjusted for inflation) that exceeded their respective peak levels before the end of the recession in the third quarter of 2015, based on BTC’s analysis of most recent state tax collections data provided by the U.S. Census Bureau.* North Carolina ranked 34th worst among states, with tax revenue below its peak quarter prior to the end of the recession. The recent revenue outlook report from the General Assembly’s Fiscal Research Division highlights that we still have not reached this peak revenue level.

News from state officials that as of December 2015 revenue was up over the year still does not signal that North Carolina is collecting revenue in line with our state’s growing needs.

State leaders’ insatiable appetite for tax cuts largely explains why state tax revenue for North Carolina has yet to return to its peak pre-recession level, despite an improving national economy. The huge, costly tax cuts passed since 2013 greatly reduced annual revenue that otherwise would have been raised under the old tax system. Once all tax changes are fully implemented, annual revenue loss will total more than $2 billion dollars.

The massive revenue loss from tax cuts challenges our ability to make investments in the foundation that help move our state forward. State leaders claim that providing all teachers a meaningful raise is unrealistic. State funding per student for public schools remains below its pre-recession spending level when adjusted for inflation. State funding for our public universities is 16 percent below pre-recession spending while tuition and mandatory fees increased by nearly 43 percent during this period. Tuition at community colleges has increased by 81 percent since 2009. More than 6,400 fewer state-funded slots are available for NC Pre-K than in 2009 despite more than 7,200 children being on NC Pre-K wait lists last year. State support to help promote economic development in rural and distressed communities across the state has been cut drastically in recent years. Inadequate state support to help unemployed and underemployed North Carolinians retool and retrain in order to secure better paying jobs to support their families persists. These are examples of foregone opportunities to invest in our people and our future. Read More

NC Budget and Tax Center

A report released today by Budget & Tax Center highlights that state support for early childhood development, public schools, and public colleges and universities remains below investment levels prior to the Great Recession. This trend will persist under the current budget passed by state lawmakers that North Carolinians must live through until July of 2017. The annual cost of tax cuts in 2015 balloons to over $1 billion each year within four years, and comes on top of costly tax cuts passed by state lawmakers in 2013.

Ensuring high-quality learning and education opportunities for all North Carolina children and students remains a challenge as the student population grows and best practices in the classroom evolve. The BTC report highlights areas of inadequate investment in North Carolina’s education pipeline.

  • State funding for NC Pre-K is 15 percent lower when adjusted for inflation than the 2009 budget year, when funding and the number of children served peaked. This year, more than 6,400 fewer state-funded slots are available in NC Pre-K than in 2009 despite more than 7,200 children being on NC Pre-K wait lists last year.
  • State support for the Smart Start program, which promotes school readiness for North Carolina children from birth to age five, is nearly 40 percent below 2009 when adjusted for inflation.
  • State funding per-pupil for public K-12 schools is nearly 9 percent below its 2008 pre-recession funding level when adjusted for inflation.
  • Compared to peak funding in the 2008 budget year, state support per student at four-year public universities this year is down nearly 16 percent while tuition have increased significantly during this time period.
  • Tuition at community colleges has increased by 81 percent since 2009.

The report highlights other areas of diminished and lagging support for public education – the decline in state funding for classroom textbooks, for example – and how state lawmakers shifted existing state dollars from one area to another to make state support for public education appear more generous than in reality.

Public investments in early childhood development, quality public schools, and affordable higher education are essential building blocks of long-term economic growth and shared prosperity. Yet amid an uneven and slow economic recovery, state policymakers chose to deliver greater benefits to the wealthiest few rather than boosting investments in its education pipeline to ensure access to opportunity for all North Carolina children and students, the report notes.

NC Budget and Tax Center

A report by the Tax Foundation, funded by the NC Chamber Foundation, gets it wrong in its assessment of the impact of tax changes made by state lawmakers in recent years. The plethora of charts and figures created by the Tax Foundation fails to detail the important loss of revenue that has hindered the state’s pursuit of important foundation-building for a strong economy—investments in schools, research and development, entrepreneurship and innovation. The assessment also masks the shift in tax responsibility to the majority of North Carolinians and away from the wealthy and profitable corporations.

Proclaiming that the state’s tax climate has leapt from one of the worst to now one of the best largely as a result of tax cuts provides no insight regarding the fiscal and economic health of North Carolina. Just as a good accountant understands that positive business earnings don’t equate to a financially sustainable enterprise, this reality also applies to tax policy and the economy. In fact, the Tax Foundation’s rankings reflect little more than the tax policies they and their corporate funders want to see rather than a robust body of evidence about what economies need to prosper. In fact, the pursuit of low-taxes has not been demonstrated to consistently deliver the economic returns promised.

Below are three notable takeaways from the Tax Foundation’s assessment of tax changes passed by state lawmakers since 2013. Read More