New Report: Most states are raising revenue to protect public investments
Thursday, June 4th, 2009
By Jeff Shaw
The vast majority of states facing budget gaps comparable to North Carolina's are raising revenues to protect their economies, a new report finds.
In fact, not a single state with a budget gap that size is adopting a cuts-only approach. Even traditionally conservative states such as Georgia are adopting balanced budget strategies that include tax increases. Despite anti-tax rallies being held by a vocal minority, the evidence indicates that taking a balanced approach is increasingly the mainstream approach.
"The experiences in other states send us a clear message: balancing the North Carolina budget with cuts alone simply isn't practical," said Jonathan Palmer, a research assistant with the NC Justice Center's Budget & Tax Center and the author of the report.
North Carolina not only faces one of the steepest current year budget gaps, but is also among the worst for next year's shortfalls .The recession and rising unemployment have had serious implications for state revenues, not only in North Carolina, but across the country. State legislatures are struggling to close budget gaps for the current, as well as next fiscal year.
Yet as the deadline to balance budgets nears, states with large budget gaps are turning to the balanced approach — a mix of cuts and increased revenues — to close budget gaps. Thirty-three states have passed or are considering a revenue increase to fill a portion of their budget gap.
History, Palmer writes, bears out this approach. Raising revenues is consistent with the policy that 44 states took during the recession in the early 1990s, and 30 took during the 2001 recession. North Carolina is among the states that raised revenues during both recessions.
"Incredibly, some still think we can balance the budget with cuts alone," said Palmer. "But the lessons of history, the experience in most other states, and the opinions of well-respected economists tell us that this isn't the best choice. Even if it were possible to balance the budget with cuts alone, it would devastate families and the economy."
The report, Peer Pressure: Lessons for North Carolina from How Other States are Addressing Budget Gaps is available online.
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