NC Budget and Tax Center

Conference budget is a disappointment for North Carolina

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19 days ago
In NC Budget and Tax Center

The conference budget passed this past week by both legislative chambers misses a whole host of opportunities to provide adequate, basic services and improve the lives of everyday North Carolinians. Legislative leaders describe this budget as a compromise that maximizes the use of limited dollars, yet those very legislators have prioritized tax cuts over investments in the services and programs that strengthen our growing state.

The false choices represented in this budget — innovations waivers versus closing the coverage gap, teachers versus early childhood programming — are largely the result of these tax cuts for the wealthy, which began in 2013. With $3.6 billion in lost revenue each year since then, General Assembly leaders have proposed additional cuts for the richest North Carolinians that worsen the already upside-down tax code that places a greater tax burden on those with the lowest incomes.

Here are just a few of the ways that the conference budget fails to make proper investments in our state:

With Friday’s veto from the Governor, we will look to legislators on both sides of the aisle for a sustained veto so that our elected leaders can start over on a new budget that reaffirms our collective values and better addresses the needs of all in our state.

Suzy Khachaturyan is a Policy Analyst at the Budget and Tax Center, a project of the North Carolina Justice Center.

NC Budget and Tax Center

Report: Most U.S. citizens would likely fail Trump administration’s “public charge” proposal for immigrants

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24 days ago
In NC Budget and Tax Center

A new report released by the Center on Budget and Policy Priorities describes the widespread harm that would be caused if the proposed rule released last year by the Department of Homeland Security (DHS) — that would substantially change the way some immigrants are assessed as a public charge — if it becomes a final rule. Specifically, the rule would negatively affect many immigrants’ ability to apply for admission to the United States or for current lawful immigrants to seek an extension of stay or change of status.

To illustrate the widespread harm the rule would impose, the report details the number of U.S. citizens that might be deemed a public charge if the rule applied to them, using data that captures public benefits use by U.S.-born citizens over a 19-year period. Researchers approximate that more than half of the U.S.-born population participates in a benefit program over the course of their lifetime that may result in them being deemed a public charge, if the proposed rule was applied to U.S.-born citizens.

In addition to observing the use of public benefits in public charge determinations, the proposed rule introduces an income test among other additional criteria for making an admissibility determination. If implemented, immigration officials would be asked to make a prediction as to whether an immigrant below 125 percent of the federal poverty level may, at some point in the future, use one or more public benefits, or otherwise become dependent on the government for support. This broadening would subject immigrants to the biases of immigration officials and, as the report describes, would have a racially disparate impact on the immigrants allowed in the United States. Read more

NC Budget and Tax Center

Ten slides that explain the differences in the House and Senate budget proposals

By
27 days ago
In NC Budget and Tax Center

The budget is ultimately about priorities and the choices that our elected leaders make about where tax dollars will go. Legislative leaders have already severely restricted the range of choices available artificially by continuing to cut taxes for the wealthy and big companies. When the latest round of tax cuts are in full effect, the state will have an annual loss of nearly $3.6 billion. And the two current budget proposals include additional tax cuts that will result in fewer dollars for the public good than would have otherwise been available.

As the conference budget process continues through the weekend, here are some select items that are important to the well-being of North Carolinians and our communities.

Once the conference report is released, we will analyze how the conference budget decides between these two proposals.

Suzy Khachaturyan is a Policy Analyst at the Budget and Tax Center, a project of the North Carolina Justice Center.

NC Budget and Tax Center

Four important ways in which the Senate budget proposal comes up short

By
May 29, 2019
In NC Budget and Tax Center

Yesterday, the North Carolina Senate released its proposed biennial budget for the next two years. The budget falls in line with the spending target that leaders in both chambers agreed to earlier this session, but includes tax law changes that the House proposal did not.

Together with funds statutorily committed to the State Capital and Infrastructure Fund, which are not reflected in the total budget amount, the $24.6 billion budget is nearly three percent higher than the FY 2019 budget that runs out this July. By at least three key measurements, however, the proposal comes up woefully short in meeting basic state needs.

  1.  Senate budget proposal shows a decrease in spending from pre-recession levels.

Despite North Carolina’s rapidly growing population — one of the fastest in the nation — the current proposal is 5.5 percent less than the pre-recession budget. This is reflected in our abysmally low rankings for per pupil spending, among other areas, despite the small year-over-year increases that legislative leaders tout.

 

  1.   Spending as a share of the state’s economy continues to decrease.

With an expanding economy (frequently and mistakenly cited by legislators as a tax cut success), we would expect spending to increase to keep up with the growing population in our state and to help fuel growth as our state continues its slow recovery from the recession. But with fewer dollars as a result of the General Assembly’s commitment to tax cuts since 2013, insufficient dollars are available for areas like early childhood education, protecting natural resources like water, and ensuring that our most vulnerable have access to even the most basic resources.

  1.   The Senate budget proposal shows increasing reliance on over-collection of revenues and agency reversions.

Tax provisions included in the budget, while resulting in slightly more revenue on net each year, would continue to cut taxes for most businesses and individuals while expanding the sales tax and raising a gross premium tax on Prepaid Health Plans. The result is that the budget relies less on General Fund revenue for expansion and instead on revenues coming in ahead of projection and agencies not expending all funds allocated to them.

This reliance on unsustainable, one-time funds raises concerns for North Carolina’s future, particularly as the state takes on the significant transition of major public systems like the transition to Medicaid managed care. It is even more concerning given the growing need to plan for climate change-related disasters and the potential of an upcoming recession.

  1.   The Senate budget worsens the already upside-down tax code, placing a greater burden on those with low incomes.

The tax changes included in the Senate budget will not fix the upside-down tax code. The changes raise the standard deduction for taxable personal income subject to the income tax (a benefit to all who don’t itemize) and provide windfall to corporations through franchise tax cuts. In so doing, the budget proposal misses the opportunity to deliver a more targeted bottom-up tax cut to working families and stop cutting taxes that flow primarily to (mostly out-of-state) corporate shareholders.

North Carolina could better meet the needs of a fast-growing state and render its tax structure less regressive by re-introducing a graduated personal income tax rate that features marginal tax rates which increase based on increased ability to pay and lifting corporate tax rates back up to better match rates in neighboring states.

Suzy Khachaturyan is a Policy Analyst at the Budget and Tax Center, a project of the North Carolina Justice Center.

Commentary, public health

N.C. House budget underestimates funding needed for Medicaid

By
May 20, 2019
In Commentary, public health

Budgeting for anticipated expenses is a key element to fiscal responsibility, just as ensuring that the tax code is adequate to meet those expenses and the needs in communities.

Unfortunately, the N.C. House of Representatives’ budget has failed to pursue this approach in the area of providing quality, affordable health insurance to low-income North Carolinians with disabilities, the elderly, children, and pregnant women.

The budget proposal they approved earlier this month introduced a Medicaid rebase nearly $40 million lower than the Governor’s budget. It also includes a management flexibility cut of $15 million that may result in the need for reductions in administrative oversight at a critical moment in the transformation of the Medicaid system in our state. Last year, the General Assembly underfunded the rebase by nearly $28 million.

While rebase adjustments are only cost estimates based on anticipated changes to enrollment, utilization, costs, rates, and more, there is no advantage to underestimating these costs and, in fact, it compromises the budget process altogether by failing to show the true expenses the state should be meeting.

In years past, inadequate rebase allocations have meant that the General Assembly has to come up with funds at a later date in order to make up the difference, leading to challenges when balancing the state’s budget with available revenue. This is because Medicaid is an entitlement program, meaning that people who apply and meet eligibility criteria are entitled to receive services.

November will also mark the start of North Carolina’s shift to Medicaid managed care, which will involve paying private insurance companies on a per member per month basis to manage the physical and behavioral health needs of those enrollees. While the thinking is that Medicaid transformation will create savings for the state, this expected net savings will take place over time, and it would therefore be prudent for state lawmakers to carefully allocate funds to this area.

Of course, there are also limitations in the state budget thanks to tax cuts introduced since 2013, which have severely limited North Carolina’s ability to generate revenue and invest in our state.

This year alone, the tax cuts that took effect in January resulted in $900 million loss to expected revenue for the upcoming fiscal year, and a current proposal in the Senate would be another blow to the state’s dwindling revenue, worsening the structural deficit.

Suzy Khachaturyan is a Policy Analyst at the Budget and Tax Center, a project of the North Carolina Justice Center.

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