The conservative budget wars

The conservative budget wars

- in Progressive Voices

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Let’s admit it – we were fooled. We never realized that the N.C. House of Representatives, with Republicans firmly in charge, was a nest of liberals.

At least that must be how Bob Luddy sees it.

Luddy, a highly successful Wake County businessman (his company makes commercial kitchen ventilation equipment), is an outspoken advocate for smaller government and lower taxes. He also is a heavy contributor to conservative political campaigns and causes. But he finds the state budget now being crafted in the House so full of left-leaning baloney that he intends to stiff House Republicans on a planned gift.

I had planned to donate $25,000 this year to the House Republican Caucus to help re-elect a conservative super-majority,” writes Luddy in a May 19 blog post for the Civitas Institute, where he happens to be the board chair.

Unfortunately, after seeing the $1.3 billion in additional spending and no across the board tax relief in the proposed House budget I had to reconsider.

Today, I decided to give the $25,000 intended for the House Caucus to Americans for Prosperity NC to fight the Liberal House spending plan.”

So, let the latest North Carolina budget battle begin: Republicans on one side, Republicans on the other! If Luddy and his allies can’t carry the day in the House, they’ll expect a warmer reception from soulmates who rule the Senate when the action shifts to that chamber.

When the  House budget came up for a final vote in the wee hours of May 22, after hours of debate, leaders of the GOP majority engineered a 93-23 win. Among the opponents were 11 Republicans who operate on Luddy’s far-right wavelength. They can expect their concerns to get a warmer reception from soulmates who rule the Senate as the action shifts to that chamber.

Meanwhile, legislative Democrats – including those who might actually be liberals of the traditional kind – will have to settle for the minority party’s cold comfort of choosing the lesser of various evils. That explains why the budget drew 32 Democratic supporters.

Liberals, or progressives if you will, are inclined to put this year’s budget debate in context. They’re mindful of several years of painful spending cuts to keep the budget in balance, as required, while tax revenues lagged amid the Great Recession. They’re mindful as well of the tax cuts enacted by conservative Republicans in keeping with their belief that lower taxes and a lower government profile are keys to an expanding economy.

In combination, these trends have made it harder – let’s say impossible — for the state to meet core responsibilities in education, health care, transportation, the justice system and environmental protection. Now, with the revenue flow improving as the economy has revived, House leaders with a pragmatic streak figure it’s time to loosen the spending belt a few notches.

A little reinvestment

The budget bill now headed to the Senate would in fact raise spending from the state’s General Fund by the $1.3 billion that has Bob Luddy so irritated – from $20.8 billion to $22.1 billion, or 6.3 percent.

Some of the money would go toward fulfilling a pledge by legislators and Republican Gov. Pat McCrory to raise the starting salary of new teachers from $33,000 to $35,000 – still a lackluster sum by national standards – and to give veteran teachers who had been left out of last year’s raises at least a 2 percent pay boost. Other state employees would get the same 2 percent. That’s hardly extravagant, given that most state salaries have been allowed to stagnate for several years.

After a stretch when North Carolina’s per-capita spending for K-12 education plummeted to the bottom of the national barrel, it has to be encouraging to see House budget writers angling for a $350 million increase. It may be true, as the N.C. Association of Educators says, that the teacher pay raises won’t make much of a dent in the state’s persistent underfunding. But they point in the right direction.

The critique from Luddy et al doesn’t focus on extra money for public schools (although Luddy, founder of several private schools, can hardly be described as a fan of traditional public education). It singles out public funding via tax breaks for “special interests” – solar power companies, the Wilmington-based film industry, owners who want to rehabilitate historic properties. The complaint is that government is backing some well-connected businesses at the expense of others.

That argument may have some merit, but it has to be evaluated case by case. Certainly the environmental and health benefits of solar power, versus traditional power from fossil fuels, make it reasonable to offer some public support. And North Carolina’s expanding solar industry strengthens the economic case. The same can be said for historic preservation projects that help preserve the fabric of our state’s older communities.

Rosier revenues

Gov. McCrory had the first move in the budget process, proposing a spending hike of 2 percent. But that was before the April tax filing deadline, and before it became clear that the state would enjoy a revenue surplus during the fiscal year ending June 30 of some $400 million beyond what had been expected. Forecasts for the next year look positive as well.

It’s not hard to imagine what McCrory, who faces a 2016 reelection contest, may have told House leaders if they asked him whether he’d like to see spending ratcheted up in light of the newfound surplus: “Heck, yes!” The governor, good conservative though he is, must understand that his prospects for a second term won’t be improved by siding with the Luddy-ites, whose conservatism is so doctrinaire it would deprive state government of essential resources just to make a point.

Unfortunately, that description fits Senate chiefs such as Sen. Phil Berger of Eden, the president pro tem, and Sen. Bob Rucho of Matthews, chair of the tax-writing Finance Committee. Having pushed through tax cuts and having seen the economy improve, they insist that more tax cuts are just what the state now needs, even though any cause-and-effect link is dubious at best. Rucho dismisses the House budget plan as “not sustainable.”

Income tax cuts may have helped wealthy folks such as Luddy. But by the time April 15 rolled around, many North Carolinians of lesser means saw their bills actually rise. Notably, they included people who no longer could deduct large medical expenses, and whose protests were hard to ignore.

The House plan would restore that deduction, at a cost of $54 million yearly. If that change makes it to the Senate, expect Rucho – who wants to see tax breaks eliminated as overall rates are lowered — to be among those giving it a cold shoulder. Unless, that is, Berger decides that the “optics” of stripping a tax break from sick, elderly folks call for a little compromise.

Enough cuts, already

Luddy complains that the House budget calls for no additional across-the-board tax cuts, but further cuts in the corporate income tax would proceed as scheduled, in line with higher revenue collections. With that in mind, the critics would do well to just take yes for an answer. There’s no good reason to continue whittling away at the state’s tax base, with so many needs still unmet in the wake of a recession whose effects are still being felt.

As to Luddy’s now-pending gift to Americans for Prosperity, there’s some irony in play. That’s the organization chiefly bankrolled by small-government advocates extraordinaire Charles and David Koch – with a helpful assist from North Carolina retail executive Art Pope. And that’s the same Art Pope whose family foundation is the Civitas Institute’s chief backer and who served as McCrory’s first budget director.

So could Pope, even if indirectly, be aligned with folks who want to push through a state budget so conservative that it could amount to a kiss of death for McCrory’s reelection hopes? Might the governor end up feeling compelled to cast a veto? Republicans, shake hands – and come out fighting!

Steve Ford, former editorial page editor at Raleigh’s News & Observer, is now a Volunteer Program Associate at the North Carolina Council of Churches.