Fitzsimon File

Budget realities and talking points

This might be the biggest fiscal crisis in North Carolina's history, but the debate Tuesday on the House and Senate floor about how to address it was very familiar. It's not only been repeated every year, it has been heard every day in the legislative halls since the current session began as lawmakers have struggled to fill a $4.6 billion budget hole.

House Speaker Joe Hackney pointed out Tuesday morning that the final budget compromise addressed the shortfall with a balanced approach, 40 percent with budget cuts, 30 percent with federal recovery money, 8 percent with higher fees and 22 percent with new taxes in the form of a $990 million revenue package, which though disappointingly regressive, helped budget writers avoid the most draconian cuts to education and essential state services.

The Republicans argued what they always argue, that state government is too big and there's no need to raise taxes in the worst budget shortfall in a generation, even if means laying off teachers and ending services to the most vulnerable people in the state.

Many of them claim that lawmakers didn't need to cut essential programs either, a position Hackney understandably calls irrelevant.

The lawmakers who seem more comfortable complaining about the state's budget woes than participating in fixing them used their typically flawed logic and incorrect information to back up their claims.

House Minority Paul Stam continues to insist that Democrats are overstating the shortfall and that the state can operate fine with no new revenue.  The budget lawmakers authorized last summer was $21.35 billion. Add normal inflation, rising health care costs, and increased enrollment at universities and community colleges and it would take more than $22 billion to keep state services at the same level as the General Assembly intended last year.

State revenues are expected to be $17.6 billion dollars this year.  There's your shortfall, whether Stam wants to admit it or not.

Several Republicans in the House and Senate told their colleagues during the debate that no economist believes that raising taxes in a recession is a good idea.  But in fact many do, and they believe that making deep cuts to state services is far worse for a struggling state economy than asking some people to pay slightly higher taxes.

Rep. Jonathan Rhyne said that North Carolina was already overtaxed with higher overall taxes than every other state in the South and a "Tax Freedom Day" that is later than every other state in the region.

Tax Freedom Day is a concoction of the conservative Tax Foundation and is supposed to reflect how long into the year people in each state have to work to earn enough to pay all the taxes they owe. The whole idea is based on flawed methodology, but even the Tax Foundation says Rhyne is wrong.

North Carolina has nowhere near the latest tax freedom day in the South. Georgia and Virgina's days are later, for example. As for what Rhyne calls the highest overall tax burden in the region, North Carolina is not at the top in South in that category either.

The Tax Foundation's 2008 report shows that people in Arkansas, Georgia and Virginia pay a higher percentage of their income in state and local taxes than people in North Carolina.

But the arguments from the dissenters aren't really about the facts. The speeches and the misleading claims are really previews of the 2010 campaign when Republicans will try to convince voters that lawmakers didn't have to raise any taxes and should have simply slashed enough out of state government to balance the budget.  

Legislative leaders didn't do themselves any favors by waiting until almost June to start making the case for more revenue and the Senate's largely secret budget process didn't help either.  And there is plenty to complain about in the final budget including a regressive tax package, unwise cuts in human services while the university budget expanded, and protection of programs in key lawmakers' districts.

Hackney says there's no pork barrel in this year's budget, but there is. It is simply defined a different way in a budget crisis. It is not which pet projects receive new funding, it's which ones are not cut. More about that in the next few days.  

The subsidy for the athletic booster clubs remains in the budget at a cost of $12 million dollars a year. That would pay for a lot of services for people with disabilities that were sharply reduced in the final spending package.

The budget passed both the House and Senate Tuesday along mostly party-line votes and is up for final approval Wednesday. No doubt the naysayers will have more of their misleading talking points ready.