HB2: Not the only area in which NC will soon trail the field

HB2: Not the only area in which NC will soon trail the field

- in Weekly Briefing

WB-1040State lawmakers are preparing to make poor services, crumbling structures and regressive taxes permanent

The ongoing crisis surrounding North Carolina’s embattled governor and his controversial, all-purpose discrimination law (HB2) grew more serious yesterday as state and federal officials turned to the courts to sort out their dispute. What started out two months ago as a skirmish over a public restroom access policy in one city has now morphed into a national (and even international) conflict over LGBT equality.

Whatever the initial intentions of the various parties to the dispute, North Carolina is now clearly understood by millions of people around the nation and the world to be the torch bearer for those who would deny full equality to LGBT people. As columnist Ned Barnett of Raleigh’s News & Observer noted this past Sunday:

North Carolina’s reputation is being stained by the fight over HB2. The damage is hard to put a number on, but it’s real, it’s personal and it will last even after the feds, the courts or the voters put an end to the discrimination against LGBT people that the General Assembly and Gov. Pat McCrory have put into law.

People want to be proud of where they live. They want to talk to relatives, customers, clients, vendors and strangers about their state’s virtues. They don’t want to have to explain the behavior of its lawmakers or stress that the representatives really aren’t representative.”

Meanwhile, as was the case in the mid-20th Century under Presidents Eisenhower, Kennedy and Johnson, the Obama administration is widely understood to be the only force capable of compelling North Carolina’s elected leaders to back down from their hateful and backward looking stance. We will know soon enough which side the federal courts will back, but if there’s any justice left in this old republic, things will end up a lot like they did back in the 1950’s and 60’s when federal officials successfully compelled Arkansas, Alabama and Mississippi to cease their discriminatory ways.

When no federal rescue is available

Unfortunately, while the feds seem poised to compel North Carolina to stop discriminating against a large segment of its citizens, some areas of state government malfeasance do not lend themselves to federal intervention and rescue. Take, for instance, the abysmal budget and tax policies that the state has implemented in recent years. Sadly, in areas such as these, state governments remain free to race to the back of the national pack as quickly as they choose.

And make no mistake: that’s exactly what North Carolina has been doing in recent years. Between the devastating impacts of the Great Recession that commenced near the end of the George W. Bush administration and the repeated failures of conservative leaders to even attempt to repair the damage to public structures and services during the gradual economic recovery of the Obama years, North Carolina is a demonstrably and dramatically diminished state.

The examples of our reduced status abound, but few areas stand out more painfully and obviously than public education. In the 2008-09 fiscal year, North Carolina spent a little over $3.86 billion in inflation-adjusted dollars on classroom teachers and teacher assistants. The 2015-16 budget for these items was a little over $3.44 billion. That’s a drop of more than $400 million or around 10.8%.

Other K-12 education line items suffered even more damaging declines. Textbooks went from just under $111 million in 2008-09 to $52 million in 2015-16 – a decline of 52.8%. Instructional supplies fell from $96 million to $44 million – a decline of 54%. Instructional support (librarians, counselors, etc…) went from $401 million to just under $353 million – a decline of 12.1%. Professional development ($13.8 million), literacy coaches ($13.4 million) and mentor teachers ($12.3 million) were eliminated entirely. Meanwhile, the number of public school students in the state rose by more than 4% during this period.

Similar cuts and funding declines are to be found throughout North Carolina government in recent years – including in such areas as:

  • higher education, where students and their parents face a combination of ever-rising charges for tuition and fees and shrinking faculties,
  • environmental protection, where program after program has been completely eliminated,
  • courts and the administration of justice where many areas have seen cuts of up to 40% since 2008, and
  • the social safety net, where programs like basic childcare have endured big reductions.

And, of course, these figures don’t even account for the billions in federal dollars the state has intentionally turned away. As was noted on The Progressive Pulse blog last week:

Had North Carolina expanded Medicaid like dozens of other states when it first had the opportunity three years ago, we would have already drawn down more than $4 billion in federal dollars. Indeed, we’re losing more than $4 million per day. Click here to see the running total….

North Carolina also flushed away hundreds of millions of federal dollars in the realm of unemployment insurance by defying federal directives to maintain benefit and eligibility levels.

Meanwhile, state tax cuts for the wealthy and profitable corporations have and will cost state government billions more.”

Making our diminished status permanent

The ultimate driving force behind North Carolina’s incredible shrinking public structures and services – aside from an ideological aversion to their existence in the first place – is fiscal policy. As Cedric Johnson of the Budget and Tax Center explained yesterday:

Tax changes passed since 2013 have not only significantly reduced revenue available for public investments, but also shifted the tax load to low- and middle- income taxpayers and away from the wealthy and profitable corporations. The tax burden on low income taxpayers increases on average by $30 while it decreases by around $15,000 on average for millionaires once all tax changes are fully in place.

These tax changes mean the amount of revenue raised through the state’s three main tax revenue sources – the personal income tax, the corporate income tax and the sales tax – was reduced by billions of dollars. Simply put, state leaders lowered the bar of possibilities for North Carolina. Thus, better-than-projected revenue of $330 million above projections [this year] still means we have less than we would have had and less than we need to build a solid foundation for prosperity for North Carolina.”

Now, to make matters even worse, the latest proposed spending targets agreed to by state legislators would lock in what Johnson’s colleague, Alexandra Sirota, rightfully described yesterday as a “formula for failure.” Legislative leaders have decided on a Fiscal Year 2017 budget figure of just over $22 billion – a number that’s even lower than the Governor’s inadequate proposal. Their explanation: North Carolina should limit any spending growth to a rate that reflects the combined rates of inflation and population growth.

Unfortunately, as Sirota also explained, the use of such a formula will lock in the state’s already inadequate investments in perpetuity. This means that as the state’s demographics shift and, for instance, the population ages, North Carolina will still be unable to supplement services for seniors unless it cuts somewhere else. It also means that, barring major cuts, public school teachers and state employees will, quite literally, never receive another significant raise.

To make matters worse still, Senate Finance Committee Chairman Bob Rucho has proposed a constitutional amendment in recent days that would permanently cap the state income tax near current reduced levels so that it could never again rise to meet service needs – a change that would also force state and local government to raise sales and property taxes in years to come.

A path forward

The experience with an artificial spending cap of the kind being used and promoted by lawmakers has been a disaster in Colorado — the only state to make rigid use of such a cap in recent decades. Let’s hope this hard lesson gets through to North Carolina leaders before they make a similar mistake and send North Carolina to the bottom of the national pack in yet another important category – a category, unlike violations of the Civil Rights Act, in which the state will sink or swim on its own, without any hope of federal rescue.