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taxcutBThere have been multiple stories in recent days detailing the destructive impact that conservative budget and tax policy is having on essential public structures and services in North Carolina. During a time in which most states are rebounding and expanding public investments, North Carolina continues to muddle along and scrimp by like one of Art Pope’s weathered, low-rent chain stores.

Just yesterday, Chris Fitzsimon reported on the disgraceful situation in the Rockingham County public schools (home to Senate leader Phil Berger) while Cedric Johnson highlighted the self-inflicted budget crisis afflicting our courts system.

Now, this morning, comes an excellent editorial that sums up the absurd situation and the driving force behind it: destructive and unnecessary tax cuts. As this morning’s lead editorial in Raleigh’s News & Observer explains:

“The General Assembly’s Republican leaders appear remarkably calm about what is shaping up to be either a serious budget shortfall or an income tax shock for those who have not had enough state tax withheld.

Tax revenue flowing into the state is running about $190 million below projections following tax cuts that took effect in January. That is worrisome because state spending already is at a spartan level. There’s no slack for filling the budget hole with easy cuts. The state could dip into its rainy day fund (even though it’s not a rainy day), but that simply puts off the budget reckoning for a year.

State Rep. Skip Stam, a Wake County Republican and House speaker pro tem, said the budget shortfall isn’t much given the state’s $21.1 billion budget and the federal government’s spending on North Carolina’s Medicaid and transportation projects. He told Time Warner Cable News, ‘The difference is hardly even a rounding error.’ A rounding error? It seems like more than that to state agencies that are trying to meet the needs of a growing state. Their budgets have been tightened first by the Great Recession and then by Republicans taking control of the General Assembly in 2011.”

The editorial concludes this way:

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NC Budget and Tax Center

The Charlotte Observer reports of the strain on the state’s court system in the wake of state budget cuts in recent years. The state’s court system is expected to run out of funding for juror pay by April of next year, the Charlotte Observer highlights.

The ability of the state’s court system to operate effectively has been increasingly challenged amid cuts in state funding over the years. While other states have adopted technology and incorporated electronic filing systems, North Carolina continues to use a paper-based system, which slows down the judicial process. The time taken to complete civil and criminal cases has increased in recent years, the Charlotte Observer article notes, resulting in a judicial system that is inefficient, more costly, and less customer-friendly.

State lawmakers quoted in the article note their unawareness of the pending funding shortage for juror pay and state that the General Assembly is being asked for money that it doesn’t have. This is increasingly clear as stories throughout the state have highlighted yet another announcement that the state’s revenue collections are below projections.  Official estimates now put the revenue shortfall for the current fiscal year at $190 million.

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Commentary

Tillis_McCrory_Berger-400It seems like a long time ago, but it was just the beginning of last year that North Carolina’s newly-elected governor promised state “tax reform” that would be “revenue neutral.” In other words, while the Guv was promising tax cuts, he was also calling for tax modernization that would enhance revenues in other areas — thus assuring that government would have the money it needed to fund core services in a fast-growing state. So, while it was always clear that a McCrory plan would enact regressive changes that favored the well-off, there was at least some hope that the state could at least avoid going backwards in the provision of basic services that undergird the middle class

We all know what happened next. Legislative leaders deep-sixed McCrory’s revenue neutrality idea in a New York minute and, instead, quickly acted to make big tax cuts for the wealthy and profitable corporations a vehicle for slashing core services like education, environmental protection and the courts system.

Now, less than a year since the Tillis-Berger tax package went into effect (with full McCrory approval), the chickens are coming home to roost. As this Public News Service story highlights this morning, 2015 is almost certain to bring North Carolina yet another damaging and wholly unnecessary budget crisis: Read More

NC Budget and Tax Center

North Carolina officials will soon have spent all available financial incentives the state offers to businesses that are considering locating or expanding in the state. Each year the state awards millions of dollars in subsidies to businesses through its Jobs Development Investment Grant (JDIG) program.

The state is now one project announcement away from spending all of the $22.5 million in funding allocated to JDIG for the current year, accordingly to state Commerce Secretary Sharon Decker. Governor McCrory is being urged by proponents to call a special legislative session before January 2015 to increase funding for the JDIG program. Yet, this is coming at a time when state revenue collections are $62 million below projections for the first quarter of the current fiscal year as the cost of the tax plan passed last year continues to increase. The reality is that absent additional revenue, increasing funding for the JDIG program means cuts in other areas of the state budget to pay for the additional spending.

Secretary Decker states that “Tax reform has helped us because we are no longer the highest in the Southeast, and that is great” and goes on to assert “But, we will not be competitive for those jobs without JDIG.” Yet, it is tax reform that was supposed to spur job creation and boost the economy, but is nevertheless hindering our ability to invest in JDIG and core public services that are stronger determinants of sustainable job creation and economic growth. State revenue collections are $62 million below projections for the first quarter of the current fiscal year and as we have written elsewhere, the cost of the tax plan for the current fiscal year could be more than $1 billion. The tax plan passed last year, sold as a job-creation package, reduced the state’s personal and corporate income tax rates to largely benefit the wealthy and profitable corporations. Still, more corporate subsidies are being asked for in the name of job creation.

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NC Budget and Tax Center

Voters in Mecklenburg, Guilford, and Rockingham counties each rejected a ballot initiative to increase its local sales tax by one-quarter cent. Under these referendums, consumers would have paid 25 cents in additional sales tax per $100 spent on goods and services subject to sales tax. The sales tax increase was expected to generate around $32 million for Mecklenburg County, $14 million for Guilford County, and $1.5 million for Rockingham County in additional local revenue each year.

This rejection of a sales tax increase highlights the tenuous reality of funding for public education in North Carolina. Last year, state lawmakers passed a tax plan that significantly reduced revenue available for public schools and other important public services. The tax plan has proven to be more costly than state policymakers’ initial estimate and the implications of this self-imposed revenue crisis will reverberate across the state in the years ahead. Meanwhile, some local governments are bracing for the revenue losses associated with the elimination of the local privilege license tax, which goes into effect next July.

Of the three counties rejecting a proposed sales tax increase, Mecklenburg County has experienced significant growth in its student population in recent years. Charlotte-Mecklenburg Schools (CMS) is the second largest, and one of the fastest growing school systems in the state. For the most recent 2013-14 school year, more than 144,000 students were enrolled in CMS, with nearly 10,000 additional students entering CMS classrooms since 2008. Guilford County has experienced modest growth in its student population (1,326 additional students) while the student population for Rockingham County has declined (990 fewer students) since 2008. Read More