Legislative budget proposal would lock in a formula for failure

Legislative budget proposal would lock in a formula for failure

moore-berger-15Just a few weeks into the 2016 state legislative session, North Carolinians already are seeing how limited policymakers’ aspirations are for the future of the state’s communities and families.

First, the Governor proposed a state budget that fell far short of what North Carolina needs to sustain thriving communities and build broad prosperity.

Then, last week, leaders of the House and Senate agreed to set their sights even lower.

As if the limitations forced by tax cuts from recent years that mostly benefit the wealthy weren’t enough, legislative leaders went a step farther in the wrong direction by tying their 2017 spending targets to a flawed formula that replaces judgment with rigid numbers.

In deciding that what the state spends in a year can’t increase by more than the percentage growth in population and inflation, legislative leaders set a state budget target for the coming year at a little over $22 billion – a number even less than the Governor’s.

Such a formula is similar to one that has been severely reducing the quality of life in Colorado for several years. Indeed, a recent report from Colorado found this inflexible policy is seriously diminishing educational opportunity. Students are trying to learn with outdated technology, and schools are having a hard time attracting or keeping the best teachers. The state’s ability to compete in the global economy can only suffer as a result.

Tragically, that’s the sort of fate that awaits North Carolina in years to come if state leaders continue to rigidly craft budgets without taking into account economic realities or the needs of our communities. Because legislators are using this flawed concept of population plus inflation, they will fail to build the foundation of an economy that works for everyone and that promotes future growth.

Consider some of the following illustrations as to why this is so: North Carolina’s elderly population is growing faster than the state population as a whole, creating the need for services that people won’t get because the formula doesn’t take that into account. The same is true for school children, whose opportunities will be limited. And the formula will shortchange the public employees we rely on — teachers, highway patrol, park rangers and case managers. What’s more, as their wages erode, local businesses will feel the pain too.

State and local government spending in North Carolina is already at historic lows in terms of our ability to pay (i.e. the overall size of the state economy) and the proposed target would keep spending below pre-recession levels when adjusted for inflation, despite large and growing needs. The major metro areas may have been able to hold on for now, even as neighborhoods within those areas see increased hardship. In rural communities like Washington and Eden that are actively pursuing new economic development and needing support as their economy transitions, however, opportunities to thrive will fall away.

What it boils down to is that North Carolina’s legislative leaders want to turn the job of making public investments that should strengthen our state over to an inflexible formula. Indeed, they set their spending target for the coming fiscal year before they had even heard public comment in the legislative appropriations committees about the realities communities and families are facing throughout the state.

Had legislative leaders taken the time to assess the facts on the ground, they would have had to contend with the crushing constraints already generated by their past decisions to slash taxes and public services: Classrooms without enough textbooks for children and unable to keep up with the demands of digital learning; Teachers faced with wages that make it difficult to continue the profession without taking on second jobs to make ends meet; People in neighborhoods without grocery stores unable to find fresh, healthy food. The list of unmet needs and missing investments goes on and on.

North Carolinians have had good reason in recent years to be gravely concerned about the decisions of state leaders to slash public investments and enact a series of tax cuts that primarily benefit the wealthy. Unfortunately, if the new and rigid spending formula announced by legislative leaders last week is any indication, things are going to get even worse in the years to come.

Alexandra Forter Sirota is the Director of the North Carolina Budget and Tax Center.