Fitzsimon File

House budget writers are busy putting together the House spending plan, but they ought to stop and take a long look at two documents that raise serious questions about the budget the Senate passed past week.

One is the latest BTC Reports from the NC Budget and Tax Center, the other an internal memo prepared by Fiscal Research Division of the General Assembly and obtained by NC Policy Watch that shows big trouble ahead if lawmakers cut taxes this year and let the remainder of the 2001 tax increases expire next year.

The BTC reports points out that while the Senate budget does make needed investments in education and human services, it creates a certain budget problem next year by using one-time revenue for ongoing programs.

The report finds that the Senate budget increases recurring spending by $910 million but there is only $499 million in recurring revenue available. That means the budget is actually $411 million out of balance, a hole that the next General Assembly must fill unless it wants to repeal teacher raises and mental health improvements and other investments made this year.

But that’s not the biggest problem. The Senate budget also reduces the state sales tax by one-fourth of a penny and cuts the income tax rate on the wealthiest taxpayers by one-quarter of a percentage point.   The BTC Reports finds under the Senate plan that the average taxpayer would get a $19 a year break and taxpayers who earn $800,000 would get a windfall of $1,302.

Worse than that, the two tax cuts combined with another $55 million of tax reductions in the Senate budget that have yet to be identified cost $225 million in recurring money that could be used to avoid problems next year.

The internal legislative staff memo is even more disturbing.  It finds that if revenue and expenses of ongoing programs grow at predicted rates and lawmakers follow through on their promise to completely end the 2001 tax increases, the state will face a $1.04 billion budget hole next year.  You can find that figure beside the red arrow on the document.

The only thing more troubling than the forecast is the total lack of discussion about it by legislative leaders. Reportedly, some budget writers have said they don’t agree with some of the assumptions built in to the forecast, but it was prepared by the same professional staff that lawmakers are trusting for this year’s budget numbers.

It is hard not to suspect that legislative leaders don’t want to discuss a potential billion dollar budget hole because it clearly shows that the General Assembly should not cut taxes this year or next. That’s not the message the political consultants want to take to the voters in November. 

The two documents could not be clearer about the Senate budget. The average North Carolinian gets $19 dollars a year. The richest people in the state get a $1300 break and the state budget gets a billion dollar hole that threatens the programs and services that educate our children and help millions of people make ends meet.   

That’s a reality that deserves an honest debate immediately, election year or not.

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This entry was posted on Wednesday, May 31st, 2006 at 12:16 pm and is filed under Fitzsimon File. You can follow any responses to this entry through the RSS 2.0 feed.