NC Budget and Tax Center

As we edge closer to the 16th anniversary of Hurricane Floyd, it is important to review the vital role that state emergency funds play when disaster strikes. Lawmakers in North Carolina tapped into state “rainy day funds” to help cope with the storm’s aftermath: the cost of providing assistance to families in need and rebuilding destroyed communities. Unfortunately, the North Carolina Senate is seeking to weaken access to our rainy day fund, even in times of true emergency.

Floyd, which hit about a week and a half after Tropical Storm Dennis, caused some Tar Heel families to lose loved ones, jobs, and all of their possessions in drowned cities. The storm caused $6 billion in damage and destroyed entire communities, including homes, farms, and businesses. Response efforts also put stress on the state budget, causing mid-year budget freezes and cuts totaling $504 million.

There is no doubt that the state’s response would have been far weaker in the absence of state and federal emergency funds. Then-Governor Hunt called a special session and North Carolina lawmakers approved nearly $286 million to be pulled out of the rainy day fund, which supplemented $838 million in federal emergency funds to support the response efforts. Read More

NC Budget and Tax Center

We still don’t know exactly what kind of tax and budget deal will emerge from the legislature when it wraps up business in the coming weeks, but it will likely include another round of tax cuts for large multi-state corporations. We’ve also seen an alarming push to bake further tax reductions and spending limits into the state constitution, called TABOR, which would constitutionally mandate policy that we’ve never even tested through regular legislation, and which has been a proven failure in Colorado. Against this backdrop, remember that there is no evidence that tax cuts can solve the economic challenges that we face.

Tax cuts have not improved North Carolina wages. Now that we have recovered from the worst of the Great Recession, many economists see a lack of wage growth our most pressing economic challenge. Wages in North Carolina are even more stagnate than for the US as a whole, a problem that has not been solved by tax cuts over the last few years. The average hourly wage in North Carolina is now roughly $3 less than the national average, a gap that has actually widened since the first major round of recent tax cuts passed in 2013. Tax cuts have not solved our wage problem, and there’s no reason to expect that change.

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taborThe latest warning about the proposed Taxpayer Bill of Rights comes from the editorial board of the Fayetteville Observer.

Editors warn in Friday’s paper that the proposed constitutional amendment (that must still pass the House) might sound alluring, but would have many unintended consequences:

The concept is a lot like mandatory sentencing, which took away judges’ discretion, resulted in overcrowded jails and took away opportunities to rehabilitate offenders before they became career criminals. The concept ignored unintended consequences, which have been costly.

There is similar naivete at work in the Taxpayer Bill of Rights. State Treasurer Janet Cowell says the measure could imperil North Carolina’s triple-A bond rating and boost the cost of borrowing.

But the fallout could be much worse than that. For hints, we can look at Colorado, whose voters approved a similar amendment more than two decades ago.

An official of the Colorado Fiscal Institute says his state has found the bill of rights to be “a complete and unmitigated disaster.” Tim Hoover told the Public News Service that “The only good news to come out of it is that Colorado has served as an example of what not to do.” One of the biggest problems there has been with education funding. The tax-increase limits have led to a decrease in per-pupil spending in education and dropped the state to 50th in spending on higher education. Doesn’t North Carolina already have enough problems with education funding?

Like many across-the-board spending limits (federal budget sequestration comes to mind), the formula in the bill of rights is simplistic and inflexible. It considers average population growth, but doesn’t consider growth in segments of the population, like children or the elderly, that might have more costly needs.

What we really need to do is let our lawmakers do the jobs we pay them to do – to run the state effectively and efficiently, and to appropriate what it takes to get it done. They stand for a performance review every two years and that’s where we should make decisions about their spending plans.

The full editorial can be read here.


A one-time, $750 “bonus.” That’s what most North Carolina state employees will get as a “pay increase” as a result of the new budget deal at the General Assembly. That’s about $10 per week after taxes.

Not much, we know, but if the state Senate has its way, such a “raise” may soon seem downright extravagant. That’s because the new constitutional amendments the Senate has proposed to place on the state ballot next year would actually make such a “raise” all but impossible.

As this morning’s lead editorial in Raleigh’s News & Observer explains thoroughly, the so-called “Taxpayer Bill of Rights” or “TABOR” would all but end state government’s ability to address the needs of the citizenry — much less provide meaningful raises to public employees. Indeed, even with this year’s pathetic pay bonus, spending will actually exceed the limits that TABOR would put permanently in place.

As the N&O editorial  puts it:

“It’s absolutely astonishing that despite the failure of TABOR in Colorado, stubborn state Senate Republicans have pushed on with it, almost defiantly ignoring common sense and the business community. Why have many other states considered it and then reconsidered it? Because, after that first flush of thinking it’s a great conservative idea and run-on issue, cooler heads realize it hasn’t worked.”

Let’s hope the cooler heads emerge and take charge here in North Carolina very soon.
NC Budget and Tax Center

State lawmakers would like to amend North Carolina’s state constitution in ways that would undermine our ability to adequately meet the needs of a growing and changing state and impede our ability to build today for a strong economy for the future. These amendments would reduce annual state revenue by nearly $2 billion if implemented in 2015, meaning state funding cuts to important public investments that drive the state forward – our public schools, affordable higher education, safe and healthy communities, and modern infrastructure.

Colorado, which enacted TABOR in 1992, serves as a cautionary tale regarding the perils of taking such a path. The state suspended the law for five years in 2005 in response to a sharp decline in public services. As a result of TABOR, Colorado went from the middle of the pack to the bottom among states in regards to state support for public education and initiatives that serve children. Regarding Colorado, an updated 2015 report by the Center on Budget and Policy Priorities highlights:

  • Colorado fell from 35th to 49th in the nation in K-12 spending as a percentage of personal income.
  • College and university funding as a share of personal income declined from 35th in the nation to 48th.
  • Colorado fell to near the bottom of national rankings in providing children with full, on-time vaccinations.
  • The share of low-income children in the state who lacked health insurance doubled, making Colorado the worst in the nation by this measure

North Carolina has ALREADY experienced erosion in state support for public schools, higher education and early childhood programs in recent years and currently ranks near the bottom among states in many areas. The implementation of these constitutional amendments would all but guarantee a last place finish in every race, every year.

  • North Carolina already ranks 43rd in average pay for our teachers.
  • North Carolina had the largest decline among states in average teacher salaries from 2003-04 to 2013-14.
  • North Carolina ranks 41st in change in state spending per student at 4-yr public universities since 2008

TABOR would make sure that we are unable to boost investments in early childhood initiatives, public schools, and public colleges and universities at a time when doing so is important to North Carolina becoming a more competitive and attractive state.

Contrary to the saying that if you’re at the bottom the only way to go is up, if TABOR comes to North Carolina, the only fate for the Tar Heel State is a permanent place at the bottom in regards to our commitment to public education.