The North Carolina House finally approved a proposed budget bill last week for the fiscal year that began July 1 — six weeks ago. Now comes a period of negotiation with the Senate, which passed its version a few weeks before, and after that one hopes, some measure of legitimate give and take with Gov. Cooper.
Whether a final agreement can ultimately be reached – something that has eluded state leaders in recent years – remains very much an open question.
Unfortunately, at this point, the parties don’t have much to work with, as both proposals are deeply flawed and inadequate.
At a time when our state needs to confront and tackle a host of enormous and unprecedented challenges and, thanks largely to the federal government, has unusually plentiful resources at its disposal, both budgets would leave core services and structures disastrously underfunded.
Indeed, as a share of the economy (the best measurement for calculating a state’s ability to afford public investments) state general fund outlays under both proposals would sink to a depth (just over 4.5%) not seen in at least a half-century.
It’s hard to overemphasize what a precipitous drop this represents. Even when one factors in more than a decade of massive GOP budget cuts, the House figure of $25.7 billion is more than 21% below the 45-year average. Compared to the more reasonable, but still modest, budgets of the 1970s, ’80s, ’90s and 2000s, the decline is closer to 30%.
Think about that for a moment.
Imagine what a 30% cut in core investments would mean for any large and rapidly growing institution – especially after such enormous underinvestment is compounded over a period of several years.
And it’s not like North Carolina was some kind of Scandinavian social democracy when state budget outlays hovered between 6% and 7% of the economy at the turn of the century. The original Leandro court ruling that directed the state to overhaul and upgrade its woefully and unconstitutionally inadequate K-12 school system was handed down during that time period.
Today, a quarter of a century later, the situation is just that much further down a dead end road. And the fact that GOP budget writers in both houses have quite blatantly and intentionally refused to comply with the expert-crafted and court-approved Leandro settlement – an eminently reasonable and affordable plan that has the potential to, at last, address the myriad needs in our torn and threadbare education system – only makes the present situation that much more egregious.
But wait – it gets worse.
Not only do both the House and Senate budgets shortchange a huge list of essential structures and services at a time of profound societal need, but both would also incorporate still more self-inflicted wounds by enacting yet another round of unnecessary and deeply regressive tax cuts.
As the N.C. Budget & Tax Center reported last week:
Much like the Senate plan, the House proposes a suite of tax changes that together would reduce annual revenue by $2 billion once fully implemented in FY 2025. The plan would reduce the flat personal income tax from the current 5.25% to 4.99%, and the corporate income tax from the current 2.5% to 2.25% in 2024 and further reduce it to 1.99% beginning in 2025.
Analysis of who stands to benefit from the proposed tax cuts shows that North Carolinians with the lowest income would receive a meager 2% share of the tax cuts when fully implemented, whereas 56% would go to those with annual income over $110,000.”
This, when the gap between the wealthy and the state’s low and middle-income households – particularly households of color – has seldom, if ever, been wider.
Now add to all this the fact that both versions of the budget were largely written behind closed doors and are chock-full of so-called “special provisions” – non-budget-related law changes that received in many instances, little-to-no public airing – and one starts to wonder if the architects spoke to anyone other than a narrow clique of affluent allies and well-heeled special interests.
A classic and maddening, but hardly isolated, example – documented by Policy Watch environmental reporter Lisa Sorg last week – can be seen in the decision to appropriate some modest additional funds for flood control at the same time that a special budget provision would prohibit local governments from enacting stormwater ordinances (rules that can greatly aid in flood control) that are stronger than state or federal rules.
The bottom line: Hope springs eternal. One can still envision a scenario in which a combination of public outrage and activism along with skilled and determined advocacy by the Cooper administration results in a final deal that curbs the most appalling components of the competing proposals. But in the near term, House and Senate budget negotiations will be a matter of compromising between bad and worse.