Fitzsimon File

This was tax and revenue day in the House, as the members of the House Finance Committee got their first look at the revenue plan House leaders put together to pay for the spending package that will be debated Wednesday and Thursday.

The budget itself was released Monday night and news outlets reported some of the details, though precious few copies of the budget were available Tuesday. The document was instead on the General Assembly website and shows that the House budget writers want to spend $20.3 billion in General Fund Revenue in the next fiscal year.

That is 7.6 percent more than last year, a fact Republicans in the House and Senate say proves that the state suffers from mismanagement or wasteful spending or both.  That rhetoric marked the debate in Finance Committee, as Republicans repeatedly tried to end temporary increases in the state sales tax and income tax on the wealthy that were scheduled to end this year.

The House revenue plan continues both tax increases that would cost $300 million to end.  Amendments to let the tax increases expire were rejected along partisan lines and the Finance Committee approved the tax package. It also includes a State Earned Income Tax Credit to help the working poor that will go into effect in the 2008-2009 fiscal year and roughly $100 million in various tax credits for businesses.

The Finance Committee vote sets the stage for a heated battle over the full budget Wednesday morning, but also raises a question about the public relations strategy of House leaders. Debating only the revenue package made it easy for Republicans and the anti-government think tanks to talk about tax hikes and broken promises, and to rail against the size of the budget because the popular things the budget pays for were not center stage, only the taxes were.

The spending priorities are a mixed bag, some needed investments in education and infrastructure, a slight improvement in affordable housing money, woefully inadequate funding for mental health services and the troubling decision to raise tuition at community colleges and use much of the money it raises to pay for other programs in the budget.  

But those debates were pushed aside by the tax plan that dominated the legislative day. Only a rally by state employees focused any attention on what the taxes pay for and it wasn’t a positive message. State workers are unhappy with the 2.5 percent raise the House proposes.

The 7.6 growth rate in the budget is a number hammered home by some lawmakers and the free market fundamentalists who rail against the growth of government, no matter what that growth pays for. The day’s events made it tougher to expose the flaws and misleading assumptions in their claims.

The House budget would increase spending 7.6 percent or $1.4 billion. Sounds like a massive increase, until you look behind those numbers. Simply adding up the cost of programs that have wide support is the simplest way to counter the overspending claims.

Paying for increased enrollment at public schools, universities, and community colleges will cost $230 million next year and no one wants to turn students away. Salary increases for teachers and state employees add up to $464 million and that is with the inadequate 2.5 percent raise for state workers. That totals $694 million in new spending

The increased cost of the state employee health plan is another $133 million and that assumes higher premiums for state workers. Repaying the state retirement system money that was borrowed and giving retirees a small cost of living increase comes to $80 million. Now you are at $907 million.  Add in the $100 million for business tax credits and $60 million to cap the county share of Medicaid and the total is $1.06 billion.

The House also puts $315 million in the state’s savings account and another $145 million aside for repair and renovations for state buildings, two ideas always applauded by fiscal conservatives.  Now you are at $1.57 billion, already more the much ballyhooed $1.4 billion increase over last year.   Then there are ABC bonuses for teachers that cost $70 million and need based financial aid at UNC for $27 million.

Now the total for new spending is $1.66 billion and that includes nothing for children’s health care, mental health, child care, affordable housing, the overcrowded court system, and other investments that should not be ignored this year.

The state budget is growing rapidly because the state is growing rapidly.  The truth is that the Republican leaders and the out-of-touch think tankers are half right. The House budget does have a spending problem. It does not spend enough. Investments in human services create jobs and help people in the state who need help. That should be the focus of this week’s budget debate, not misleading soundbites using percentages and growth numbers out of context.

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This entry was posted on Tuesday, May 8th, 2007 at 4:26 pm and is filed under Fitzsimon File. You can follow any responses to this entry through the RSS 2.0 feed.