By Chris FitzsimonÂ
One week after North Carolina voters head to the polls in the May primary, the General Assembly will convene for its summer session. Lawmakers are likely to spend much of their time in Raleigh struggling to pass a budget based on lower revenue projections and balancing expectations about the session with their November general election campaigns.
The news about North Carolina’s state budget is growing grimmer thanks to the national economy, though the state remains far better off than most. Many states are facing huge shortfalls and are considering major cuts to essential programs or tax increases or a combination of both.
But the end-of-the-year budget surplus in North Carolina that was once forecast to be as much as $200 million may now be less than a tenth of that. The latest report from the economists at the General Assembly finds that revenues for the first nine months of the state’s fiscal year are roughly $20 million ahead of projections.
The fiscal staff is now considering a reduction in the projected revenue growth in next year’s budget, which is far more than an academic exercise. The revenue growth provides the money that lawmakers use to fund increases in ongoing expenses, like teacher salary hikes; enrollment increases at public schools, universities and community colleges; and increases in the cost of health care programs like Medicaid.
The General Assembly is not passing a new budget this summer, just making adjustments to the two-year spending plan approved last session. The North Carolina Budget and Tax Center’s analysis shows lawmakers begin the session with barely enough money to pay for things like enrollment increases that have to be funded and a modest two to three percent salary increase for teachers and state employees.
And that’s only if revenue forecasts are not lowered, which now seems likely. That best-case scenario includes no new money in areas in which legislators and the public are demanding more investment: mental health and the probation and parole system.
Recent scandals in both areas have created strong support for more funding and higher pay for staff whose performance is directly tied to public safety and the lives of some of the state’s most vulnerable people.
The 21st Century Transportation Committee is all but certain to recommend ending at least part of the annual $172 million transfer from the Highway Trust Fund to the General Fund to free up money for transportation needs. This is not the year to do that, but all but one candidate for governor supports it.
Lawmakers will also face pressure from corporate lobbyists to have North Carolina track federal legislation that provides a bonus depreciation allowance for businesses that could cost the state between $170 million and $280 million. There goes the pay raise for teachers.
The Revenue Laws Study Commission is now considering a proposal that would allow the state to keep 85 percent of that revenue, but it will take legislation to do it. If lawmakers do nothing, the state tax code will also include the windfall for businesses, and the budget picture will be significantly worse.
Then there are the needs that lawmakers have either completely ignored or barely noticed during the recent years of budget surpluses. There are now 27,000 kids on a waiting list for a daycare subsidy to allow their mothers to go back to school or take a low-wage job. Two million people in the state face a housing crisis, living in substandard housing or a home they can’t really afford.
Fifty million dollars a year in the Housing Trust Fund would build 6,000 housing units, create several thousand jobs and bring in as much as $30 million in state and local revenue. The state has yet to provide the full funding to respond to the ruling in the Leandro lawsuit that established that every child has a constitutional right to a sound, basic education.
There are plenty of other compelling needs that lawmakers must consider how to meet with a shrinking state budget pie. It makes last year’s decision to cut taxes on the state’s 60,000 wealthiest taxpayers even more absurd.
Economists will have a much clearer view of both this year’s surplus, if any, and the projections for next year’s revenue growth at the end of this month, when April’s tax collections figures are final.
But no matter what those April figures show, this will be a challenging summer on Jones Street. The question is a familiar one. Will the people least able to pay be once again forced to bear the brunt of tough budget times?
Chris Fitzsimon is the director of NC Policy watch.