The conference budget released by the NC General Assembly on Monday night puts business interests and politics ahead of people while bringing North Carolina to a new low in terms of spending as a share the economy (with the exception of the prior year, FY 2020-2021, when prior state spending commitments were maintained and no legislative budget was enacted).
This plan — which was crafted by General Assembly leadership and legislators appointed to the conference committee with input from the Governor’s office, all behind closed doors — will lock in changes to the tax code, including elimination of the corporate income tax and reduction of the personal income tax rate, that will permanently reduce revenue that the state has available to pay for every area of the budget. It will overwhelmingly benefit the wealthiest North Carolinians as well as out-of-state corporations. The plan also kicks the can down the road yet again for Medicaid expansion, instead creating a legislative study committee on the topic, and flies in the face of more than two decades of litigation urging the state to comply with the state constitution and fund the baseline funding to provide each child with a sound, basic education.
The conference budget outlines proposed state spending through the remainder of the biennium, which began 5 months ago in July. The budget will commit the state to spending marginally above the arbitrary spending limits that House and Senate leadership agreed to at the outset of the budget process – spending $25.9 billion instead of the $25.7 billion previously agreed upon in June.
Once enacted, this conference budget will become the final budget that the state will operate on for two years, but with additional changes to be considered next year for the second year of the budget.
A new low point for state spending based on enacted budgets
The conference budget outlines how the General Assembly proposes to spend $25.9 billion in Fiscal Year (FY) 2021-2022 and $27.0 billion in FY 2022-2023 in General Funds. Similar to the House and Senate proposed budgets earlier this year, the conference budget will bring North Carolina’s investments to a 45-year low of 4.59 percent of the state’s economy in the first year and 4.60 percent in the second year. The only exception is in FY 2020-2021, which was the second year of operating on a continuation budget plus piecemeal budgets. This budget will continue operating the state on funding levels that fall $7 billion short of the 45-year average spending as a share of the economy (as represented by the dotted blue line in the chart).
Major tax changes ensure even greater austerity in the future
As first seen in the Senate plan released in June, legislative leaders and the Governor have agreed to eliminating the corporate income tax, paid by corporations on their profits and thereby largely benefiting out-of-state corporations, by the end of the decade. The final budget will also reduce the personal income tax rate, which will provide the greatest benefit to the wealthiest North Carolinians because of its flat structure.
This permanent upheaval of the state’s tax code will eliminate $8 billion in state revenue annually once fully implemented, ensuring that the state will not only fail to keep up with what people need but also will have to make cuts across areas currently funded by the budget. Read more