Fitzsimon File

The positive news about the state budget continues. The latest figures show the end of the fiscal year surplus will top $200 million. Combined with the roughly $500 million the lawmakers left unspent last session, that leaves quite a pot of money for lawmakers to figure out what to do with in an election year.

 

The anti-tax crowd is already clamoring for the General Assembly to use the money for tax cuts and in their minds any tax cut will do.  The business lobbyists want taxes reduced on corporations and the state’s wealthiest individuals. 

 

Likely gubernatorial candidate Bill Graham is still running television commercials urging legislators to lower the state gas tax. That may result in lawmakers ending the 17-year-old agreement to transfer money from the Highway Trust Fund to the General Fund, which would mean some of the surplus would be needed to hold current programs harmless.

 

Unless lawmakers act to prevent it, two tax reductions will take effect July 1 when the temporary half-cent increase in the sales tax expires and the top personal income rate falls back to 7.75 percent from 8.25 percent.

 

There is also the possibility that lawmakers will realize a windfall of as much as $500 million by picking up the county share of Medicaid in exchange for the $1 billion in revenue currently raised by the one-cent local option sales tax.

 

Candidates for the General Assembly, incumbents as well as challengers, are already promising more funding for education and economic development, like they do every election season, and more candidates than usual are talking tax cuts too.

 

Taken as a whole, the conventional wisdom is that the state revenue picture has turned around and it is time to cut taxes and continue increasing funding for education initiatives, like reducing class sizes and increasing teacher pay.

 

But as the North Carolina Budget and Tax Center says in its latest report, the surplus is misleading. Most of it is one-time money that should not be used to pay for tax cuts or ongoing programs. Doing so would create a huge budget hole for next year.

 

The Budget and Tax Center also points out that even building in this years higher revenue projection into next years budget, lawmakers still barely have enough money to keep programs at current levels and give teachers and state employees a two percent raise, which is not enough for either group.

 

Maybe most importantly, the budget projections include no funding to address the growing investment deficit in the state, created by the combination of deep cuts in human service programs for the last four years at the same time the need for services has exploded.

 

The Budget and Tax Center report mentions the massive waiting list for a child care subsidy, which has reached 35,000 kids. But there is also a crisis in funding for the court system. The mental health system is in chaos, largely because community programs are not receiving the resources they were promised as part of mental health reform.

 

Programs addressing the shocking high school dropout rate and the affordable housing crisis need money and the state has a moral obligation to finally pay for medication for people living with HIV/AIDS. That’s just the short list.

 

Saying the state has a surplus in the face of those needs is like saying your family is flush with money if you don’t count what you have to spend on food and rent. 

 

The state budget numbers may look better than in previous years, but let’s hold off on all the tax cut talk until we address the investment deficit that threatens the quality of life for thousands of people in North Carolina.

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This entry was posted on Tuesday, February 28th, 2006 at 2:26 pm and is filed under Fitzsimon File. You can follow any responses to this entry through the RSS 2.0 feed.