NC Budget and Tax Center

Revenue bump doesn’t mean NC has what’s needed to meet growing needs

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

Commentary

These two graphs show why June Atkinson is right and Tim Moore is wrong about teacher pay

As reported here on Wednesday by N.C. Policy Watch Education Reporter Billy Ball, North Carolina Superintendent of Public Instruction June Atkinson is calling for state teachers to receive a 10% raise. Yesterday, in response, House Speaker Tim Moore shot down the idea, saying it was unrealistic.

Here, in two simple graphs, is an explanation of why Atkinson is right and Moore is wrong. The graphs come from Altered State: How 5 years of conservative rule have transformed North Carolina, the special N.C. Policy Watch report released late in 2015.

The first shows how teacher pay in North Carolina has been falling further behind the national average.

Teacher pay 2

 

 

 

 

 

 

 

 

 

 

The second shows where the overwhelming majority of the massive tax cuts enacted by the Governor and the General Assembly in recent years have gone — i.e. the wealthiest North Carolinians.

Tax cut winners

NC Budget and Tax Center

Costly tax cuts drain resources for investments in NC’s education pipeline

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

Looking beyond the surface regarding news that revenue is up in NC

Revenue is up in North Carolina—which is no surprise because the national and state economies are growing. But before jumping to the conclusion that tax cuts are the reason why, take a look at the numbers. Revenue collections for the first half of this 2016 fiscal year are higher than the same period last fiscal year, a report from the state’s controller’s office highlights. However, when compared to the same period for FY 2013, receipts from the personal income tax are down and receipts from the sales tax, which now applies to more goods and services, are up (see table below). This is the tax shift that state lawmakers put into motion in recent years.

Slide1

This tax shift – less reliance on revenue from the income tax and more from the sales tax – is an expressed desire of state leaders. Read more

NC Budget and Tax Center

Hypotheticals continue to trump reality for some state lawmakers

Today the General Assembly’s Revenue Laws Committee held its first meeting for 2016. The meeting’s agenda included presentations to state lawmakers on the committee from state officials regarding tax changes passed last year as well as proposed tax changes that state leaders would like to pass this year. Also included on the agenda was a presentation from a representative of the Tax Foundation (TF), tax policy research organization that favors tax cuts for profitable corporations and the wealthy, and recently released analysis that fails to acknowledge the cost of such an approach to North Carolina’s ability to fund public schools, infrastructure like roads and water/sewer, state parks or public health initiatives.

Here are three takeaways from today’s meeting.

  • Despite the TF spokesman informing that his organization’s assessment of the impact of tax reform in North Carolina uses hypothetical (a.k.a. made up) taxpayer scenarios, some lawmakers still pointed to these scenarios during the meeting to support their claim that the tax changes benefit all North Carolinians. This is not true. The TF spokesman even acknowledged during his presentation that all NC taxpayers do not come out ahead under tax changes since 2013.

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