Report: Gov. McCrory’s budget proposal hampered by last year’s tax plan

Report: Gov. McCrory’s budget proposal hampered by last year’s tax plan

- in Must Reads

Governor McCrory’s 2015 budget proposal makes progress in certain areas but overall fails to meet the needs of North Carolinians, while also being hampered by the tax plan legislators passed last year, a new report finds.

The proposal leaves too many vital public services operating at diminished levels, said a new report from the Budget & Tax Center, a project of the NC Justice Center. Although it includes a small pay raise for teachers and state employees, further progress is impeded due to the revenue shortfall of $446.5 million the state faces in the current budget in addition to the projected shortfall for fiscal year 2015.

Last year’s tax plan, which gave a substantial tax cut to the state’s wealthiest households at the expense of low- and middle-income residents, will drain hundreds of millions of dollars in 2015 from the very resources that could be used to invest in the building blocks of a strong economy, the report said.

“Despite scaled-back revenue projections, the Governor chose to move forward with the next phase of tax rate cuts that will go into effect next January, rather than stopping these costly cuts,” said Tazra Mitchell, a policy analyst with the Budget & Tax Center and author of the report. “As a result, North Carolina will find it more difficult to regain lost ground.”

While the Governor’s proposal would take some small steps toward getting North Carolina back to pre-recession levels of spending, most of the spending increase is targeted to Medicaid and pay raises for teachers and state employees, leaving little for education and other pressing needs. In the fiscal year starting on July 1, the state would invest $1.6 billion—or 7 percent less—in schools, health care, and other public services than it did prior to the Great Recession, adjusting for inflation.

“Overall spending would still be well-below the 45-year average as a share of the state’s economy,” Mitchell said. “As such, the Governor’s budget would not keep up with growing needs across a number of vital services that directly benefit North Carolina families and the state’s economy.”

The Governor also breaks from precedent in his budget, employing his own form of smoke and mirrors: he provides pay raises to teachers and state employees but places these expansion items in the agency sections of his proposal, rather than in the salaries and reserves section of the budget. Doing so artificially inflates spending levels for core areas of the budget like public education.

Read the full report at this link.