Five basic truths to remember this week about the state budget

Five basic truths to remember this week about the state budget

- in Top Story, Weekly Briefing

It’s one of the great and maddening ironies of the state lawmaking process in North Carolina that the single most important piece of legislation each year is perhaps the most poorly reported and one of the least well-understood.

Every year, as the fiscal year winds down toward its June 30 conclusion, state lawmakers birth a new state budget bill that runs to hundreds of pages and includes all sorts of fundamental decisions about state funding priorities and tax policy, not to mention scores of so-called “special provisions” (i.e. law changes unrelated to the budget that may or may not have been debated previously as the subject of another bill).

And given that the leaders of both the House and the Senate have taken to a process in recent years in which they unveil the budget bill, debate it and pass it in just a matter of days or hours, journalists trying to report on it and citizens trying to follow it usually find themselves flummoxed – especially when it comes to the bigger picture.

Here, therefore, are five basic truths to remember about the state budget bills that Republican leaders at the General Assembly have been passing in recent years and that will, no doubt, apply to the new version that Senate leaders will unveil today:

#1 – The budget is too small – North Carolina is a fast-growing state with myriad dire needs – in education, environmental protection, physical infrastructure, the courts and corrections, mental health and numerous other basic areas. Unfortunately, thanks to the sustained disinvestment of GOP leaders in recent years, state spending is simply not keeping up.

During the latter decades of the 20th century (a time during which North Carolina was outpacing its southeastern neighbors in most important categories and rapidly catching up to rivals in other regions of the country), total state and local government spending combined was typically around 6-7% of the state’s total personal income – a moderate figure that was still below many other states. In recent years, however, this rate has fallen dramatically and now stands below 5%. If the state had but adhered to the moderate investment path of past, high-growth decades, there would be billions of additional dollars available each year to support core public structures and services.

#2 – The budget is unfair and unjust – North Carolina has always relied upon a regressive tax structure that takes more from the incomes of the poor and middle class than from the wealthy. But this pattern has grown significantly worse and more unfair in recent years as the personal income tax was flattened and cut and corporate taxes were slashed. In its most recent “Who Pays?” report, the Institute on Taxation and Economic Policy calculated that poor and middle income North Carolinians pay around 9.5% of their incomes in state and local taxes. The wealthiest 1%, in contrast, pay only 6.4%. New GOP tax cut proposals would almost certainly worsen this inequity.

#3 – The state’s current approach isn’t working – GOP leaders like to claim that the state’s economy is doing great and that it’s all attributable to the tax cuts of recent years, but the truth is quite the opposite. The fact is that large swaths of the state – both geographically and socioeconomically – are not enjoying good economic times and, indeed, are falling further and further behind. Meanwhile, as a general matter, North Carolina’s overall performance during the national expansion that dates back to the early years of the Obama administration, lags behind many other states that have not slashed taxes and has been, as one economist put it, “remarkably unremarkable.”

#4 – The state is failing to prepare for the next recession – As N.C. Budget and Tax Center Director Alexandra Sirota explained in a “must read” essay last week, the ongoing failure to strengthen our state’s physical and human infrastructure constitutes a missed “golden opportunity” and is likely to cause much bigger-than-necessary problems when the next national recession arrives.

#5 – The budget process is lousy – Many people – reporters, lobbyists, lawmakers and other Raleigh insiders – have gotten used to the current regime in which the budget is written in secret and rolled out all at once, but it hasn’t always been this way and doesn’t have to be. Unfortunately, the pattern continues. State Senate leaders will unveil their budget bill today even though the Senate Appropriations Committee hasn’t met in public since mid-April. This ought to be unacceptable.

The bottom line: The most important piece of legislation passed by the state legislature each year ought to represent our state at its best. Sadly, for years now, this has not been the case and 2019 will be no different.