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Budget process enters final stages

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The North Carolina House approved a budget last week that would chart the wrong path for North Carolina, according to a new brief released by the NC Budget and Tax Center. Similar to their colleagues in the Senate, the House leadership was intent on including tax cuts for the wealthy and profitable corporations in their budget at the expense of everyone else. The result is a budget that falls far short of meeting the needs of children, working families and communities across major budget areas.

In the House tax and budget plan, these tax cuts will cost $528.6 million in lost revenue over the next two years, with the cost ballooning to $651.1 million annually once the plan is fully implemented in the 2018 fiscal year. These figures represent the net tax changes of the House tax plan plus the repeal of the estate tax. Even worse, 95 percent of taxpayers, on average, would see their taxes go up in addition to cuts in vital public services under the House’s formula for “prosperity.”

Monday night the Senate voted not to concur with the House-passed budget, triggering the conference committee process where legislators will iron out their differences behind closed doors.  As illustrated in this side-by-side chart, both budgets spend roughly the same amount of dollars but there are wide and varying differences across major areas of the budget, especially in education.

Conferees have yet to be announced. And also Monday night, the Governor—who will have a seat at the table due to his veto pen—said it is uncertain whether they will be able to enact a budget before the start of the new fiscal year that begins on July 1st.

The major driver behind the delay will likely not be the spending differences in these budgets. Rather, it will likely all come down to what is in the General Fund availability statement—which is the often overlooked but very important single-page summary of how legislators will raise and adjust the billions of dollars that fund the budget. It is this page where the revenue loss associated with the tax plan will appear, and we know that the Senate and House tax plans represent respective revenue losses of more than $1.3 billion and $650 million annually once fully implemented.

In the end, leadership must agree on a tax plan before they can pass a final budget.

Strengthening state investments in public priorities requires state policymakers to make the right balance of budget and tax policy choices. Neither the Senate budget nor the House budget meets this criterion. Much better options exist.