Two-year budget will hamper state’s full recovery from Great Recession

Two-year budget will hamper state’s full recovery from Great Recession

- in Must Reads


The recently enacted state budget falls far short of what is needed for our state’s children, working families, and communities, according to a new report from the Budget & Tax Center, a project of the North Carolina Justice Center.

This budget puts North Carolina on a path towards mediocrity and will only continue to hamper the state’s full recovery from the Great Recession, the report finds. Instead of investing adequate resources in schools, health care, public safety and the other building blocks of a strong and enduring economy, state lawmakers chose to make room for tax cuts for the wealthy and profitable businesses that will cost $683.8 million in lost revenue over the next two years, and $2.8 billion over the next five years. To balance the budget, lawmakers relied on millions of dollars that were unspent during the previous fiscal year, budget gimmicks, and increased fees, the report said.

Previous cuts to investments in services since the start of the Great Recession, combined with a growing population, mean that North Carolina has fallen behind where it should be economically, the report said.  Although the 2014 budget represents a 1.9-percent increase over the continuation budget (or what was needed to maintain current service levels), funding for four of the six major areas of spending falls short. It also spends 8.3 percent less than the last state budget approved before the onset of the Great Recession (2008 fiscal year) when adjusted for inflation.

“State lawmakers could have made better choices by pursuing true tax reform that would have strengthened revenues and allowed the tax system to grow with the economy,” said Tazra Mitchell, a Policy Analyst with the Budget & Tax Center and author of the report. “This would have put North Carolina on a stronger path to recovery.  Instead, they chose to go in the opposite direction.”

The budget fails to keep up with the state’s changing needs, weakening a number of vital services that directly benefit families and the state’s economy. According to the report, the budget:

  • Makes harmful cuts in K-12 education by reducing funding for teachers, which could increase the number of students in each classroom, and by eliminating funding for 1 in 5 teacher assistants.
  • Provides $10 million for children to attend private and religious schools through a voucher program.
  • Funds 2,400 fewer slots for at-risk students in  pre-Kindergarten education.
  • Increases funding for Medicaid to cover enrollment growth and higher drug prices, but cuts the number of doctor visits it will pay for to 10 from 22, increases co-payments, and lowers reimbursement rates for providers.
  • Shifts economic development investments from low-income, distressed populations and communities and directed toward more broad-based efforts that appear focused on attracting more businesses to North Carolina.

Lawmakers chose to enact deep tax cuts at the expense of broadly shared public investments that give all families a chance to prosper. Such cuts will make it much more difficult for North Carolina to rebuild the vital public services that are the foundation of a strong economy and enable children, families, and communities to thrive.

To to read the full report by the Budget & Tax Center, click here.