Fitzsimon File

State lawmakers are expected to pass a continuing budget resolution by Tuesday, the last day of the fiscal year, to keep state government operating while House and Senate leaders continue their negotiations on a final spending plan and revenue package for next year.

The continuing resolution sets state spending at 85 percent of the $21.35 billion budget passed last summer, or $18.15 billion. But state agencies can't operate under the resolution for long, as projected revenues next year are projected to be $17.5 billion, leaving a $650 million gap that must be filled with new taxes or more budget cuts.

Elaine Mejia with the N.C. Budget and Tax Center points out that federal stimulus money changes the totals, but not the shortfall. The state will end up spending $19.5 billion in the current year when federal funds are taken into account. Adding stimulus funds to next year's projected revenues means $18.9 billion will come in.

The numbers refute claims by House Minority Leader Paul Stam that Democrats wouldn't have to raise taxes if they froze spending at the current year's level.

And that's not the only misleading rhetoric flying around in the General Assembly and market fundamentalist think thanks. 

The most common argument against raising taxes at all is that it will cost the state jobs. Senate Minority Leader Phil Berger describes the current tax proposals as job destroyers. The evidence proves the opposite is true.

Even after including almost $800 million in new tax revenue, the House budget will eliminate more than 6,000 state jobs. The alternative budget proposed by Raleigh's leading conservative think tank calls for abolishing more than 7,000 positions. 

The budget proposals are the job killers, not the tax plans. Another 7,000 people out of work would increase North Carolina's unemployment rate significantly and increase the demand for the very state services the budget proposes cutting.

An announcement that a company in North Carolina was shedding 7,000 jobs would set off a panic in the halls of the Commerce Department. That's a lot of people unable to spend money that supports other jobs.

Even with the extra Medicaid funding from the federal government, the House budget slashes Medicaid funding by more than $500 million. Medicaid pays for services and the jobs of the people in the private sector that provide them.

A 2003 study by Families USA found that for every million dollars a state cuts from Medicaid, it loses $3 million in business activity, $1.2 million in wages, and 37 jobs. The impact is certainly higher today, but even using those out-of-date numbers, the proposed Medicaid cuts would result in the loss of thousands of jobs in the next two years.

Then there are the claims about raising income taxes on the wealthy, that asking people who earn a million dollars to pay one fourth of one percent more in taxes will drive them out of the state in droves and cost the state thousands of jobs.

A recent by the Center for Budget and Tax Accountability in Illinois, another state facing an unprecedented shortfall, found that balancing the budget with cuts alone could cost the state to lose a minimum of 56,000 jobs.

The Center's study concluded that a much wiser budget solution was to raise taxes progressively, including on the wealthy, and maintain or increase spending on state services.

It would be much wiser in North Carolina too. House and Senate leaders seem to understand that. Let's hope they keep ignoring claims from lawmakers whose numbers don't add up and whose push to sharply slash services would throw thousands of people out of work.

There is a job-destroying proposal making the rounds in the General Assembly, but it's not the revenue package under consideration, it's the plea by Rep. Stam and others to balance the budget with cuts alone.

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This entry was posted on Monday, June 29th, 2009 at 6:43 pm and is filed under Fitzsimon File. You can follow any responses to this entry through the RSS 2.0 feed.