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Be sure to check out Tazra Mitchell’s excellent essay over on the main Policy Watch site this afternoon: “Governor McCrory’s flat budget proposal ignores research and reality.” As Tazra explains, the state is cutting essential services to provide enrollment growth increases in education and health care. As a practical matter, everything else remains frustratingly and destructively stuck in neutral:

“With his 2015-2017 budget, Governor McCrory chose to ignore the need for reinvestment in public education, health, safety, and the other programs that improve well-being for us all. Total state investments under his 2016 fiscal year budget proposal would be 6.1 percent below pre-recession levels, adjusting for inflation. North Carolina’s lived experience shows us this is the wrong way to go—in past economic recoveries, state investments returned to and exceeded pre-recession levels far more quickly. Our former leaders understood that investing in the infrastructure of opportunity spurs economic growth.

Governor McCrory’s spending plan, in large part, freezes state investments at a time when his priority should be to roll back harmful budget cuts enacted since the downturn. His budget for the 2016 fiscal year increases year-to-year spending by nearly $439.8 million, or two percent, but the costs of enrollment growth in public schools, the UNC system, and the Medicaid/Health Choice programs are estimated to slightly exceed that year-to-year increase. That means every new dollar, on net, is dedicated to funding enrollment growth rather than replacing budget cuts that stifle economic mobility or pursuing new initiatives to position the state competitively.

And despite promises that the 2013 tax cut for the wealthy would deliver a huge boom to the economy, North Carolina has experienced nothing of the sort. Job growth has largely followed national trends in recent years, but we still have not gotten back to the level of employment—when accounting for population growth—that was the norm before the recession. Wages in North Carolina have slipped further behind the national average and are not even keeping up with inflation, which means many people’s paychecks do not go as far as they did before the downturn.

So the promise of an economic boost from tax cuts has failed to pan out, but state leaders are sticking with those cuts rather than reinvesting in the long-term building blocks of opportunity and prosperity like schools and environmental protection.”

Click here to read the entire article.

NC Budget and Tax Center

As my colleague highlights in a recent blog, the governor’s proposed budget for the next two years fails to meaningfully reinvest in critical public structures, such as public education, that drive the state forward. This reality becomes much clearer when placing the governor’s budget into broader context.

Consider state funding for textbooks and other classroom-level resources for public schools. The governor’s proposed budget for FY2016 provides a small boost of $35 million in state funding for textbooks and other classroom-level resources. This spending increase partially restores harmful cuts state lawmakers have enacted since 2011 and is a step in the right direction. However, this is a textbook example of how the state can spend more but still fall short of what is needed to catch up and keep up with the needs of a growing student population.

Even with the proposed additional spending for textbooks, classroom materials, instructional supplies, and equipment, total state funding would be around half of the state’s investment level prior to the recession (see chart below). Furthermore, the proposed funding boost provided in the Governor’s budget is barely half of what the Department of Public Instruction requested on behalf of children in the classroom.

 

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When presenting his proposed budget last week, the governor acknowledged that his budget is “still extremely very tight” and that tough choices had to be made. This is the result of his decision to sign into law tax cuts that are costing upward of $1 billion per year – a self-inflicted reality that continues to drive underinvestment in public schools and other core areas of the state budget. North Carolina’s public schools play an important role in building a workforce that can compete for good-paying jobs in a dynamic 21st century. Failure to adequately invest in core public structures today will have a direct impact on the state’s future economic prospects.

NC Budget and Tax Center

Last week, Governor McCrory unveiled his two-year budget proposal for July 2015 through June 2017. He has since touted how his plan reinvests in the public services and programs that are essential for economic opportunity and quality of life. However, a close look at his 2016 fiscal year (FY2016) spending plan reveals that he fails to reinvest in a meaningful way in the critical public structures that benefit us all. Genuine progress will continue to be hampered until state lawmakers build a tax system that can adequately match the needs of a growing economy.

Governor McCrory’s proposed budget for FY2016 increases year-to-year spending by nearly $439.8 million, or 2 percent. This is in sharp contrast to past recoveries when state investments were far quicker to return to, and advance beyond, pre-recession levels. Enrollment growth in public schools, the UNC system, and the Medicaid/Health Choice programs is estimated to exceed the year-to-year increase in spending in the governor’s proposal, totaling nearly $442.6 million in FY2016. That means every new dollar increase, on net, is dedicated to funding enrollment growth (see chart below).

It also means that non-enrollment expansion items in the proposal are made possible by cutting or allowing spending to expire for other vital programs that are already stripped bare from previous underinvestment. That’s like rearranging the deck chairs on a sinking ship. Read More

NC Budget and Tax Center

This morning, Governor McCrory released his two-year plan to invest in education, health care, public safety and other priorities that are essential for economic opportunity and quality of life. He spoke of a “new paradigm” for state budgeting. A new paradigm indeed, one that abandons many of the practices that served North Carolina well in the past—like ensuring funding to maintain current service levels year-over-year or reinvesting in the recovery rather than locking in low levels of revenues by keeping the 2013 tax plan on the books.

A preliminary review of his budget plan shows that too many vital public services are at diminished levels, threatening their effectiveness, reach, and efficiency. No amount of “budget spin” will cover up how the budget baseline has been eroded from years of cuts or how the current tax system cannot sufficiently keep up with growing needs.

Below is a quick summary of how the Governor’s budget compares to pre-recession levels and also how the Governor chose to pay for his budget. Read More

Commentary
Paul Stam 2

Rep. Paul Stam

Faced with the hard reality of a growing state budget shortfall resulting from their ill-advised tax giveaways to wealthy individuals and profitable corporations, state legislative leaders have apparently opted to try to spin their way out of the mess.

House Speaker Pro Tem Paul Stam was the latest to try out a little song and dance step on the issue yesterday when he issued a statement claiming that there is no shortfall because “After controlling for population and inflation, we are likely to have just as much revenue in 2014-15 as we did in 2013-14.”

This is classic political double-speak.

The fact of the matter is that a budget shortfall exists when the state does not bring in enough money in a new year to pay for the level of services it provided in the previous year. It’s not about “growing government” as Stam alleges; it’s about sustaining the services we have — i.e. not raising class sizes, not cutting health care reimbursements for the disabled, not further decimating our broken courts system, etc….

Right now, it’s clear that the 2013 tax cuts have led directly to a situation in which the state will bring in hundreds of millions of dollars less than it needs just to keep things going at their already inadequate levels in the new fiscal year that begins July 1. Indeed, as a percentage of total state income, state spending during the current year is already at 1970’s levels.

The bottom line: Try as Stam and his allies might to lower the bar with talk of red herrings like inflation and population growth, they simply won’t be able to spin their way out of this situation. And absent some kind of dramatic ideological turnaround that would lead to the implementation of the kind of policy changes that would produce a truly responsible state budget, North Carolinians will soon suffer the consequences of this latest ill-conceived and destructive experiment in trickledown economics.