In Civitas’ ongoing mission to be a “Legislative Strike Force,” the Civitas staff is often called upon to provide comprehensive, yet understandable, answers to many questions regarding legislative issues. The following is a list of the top 10 questions asked during the week of May 15.
1. How much is the revenue surplus?
According to a May 9, 2006, report by N.C. General Assembly Fiscal Research Division, the projected total General Fund surplus for 2006-2007 will be in excess of $2.4 billion.
2. Is the leadership using sound fiscal management in putting part of the surplus into reserve accounts?
They are putting part of the surplus into reserve accounts, but they have to. If they were using sound fiscal management, they would put as much as they could into the reserve accounts, replace money that has been taken out of the Highway Trust Fund (see no. 3 below) and pay down a portion of the state’s debt.
Pursuant to North Carolina General Statute § 143-15.2, funds from the unreserved credit balance have to be transferred as follows:
A. Rainy Day Fund gets 25% of the year-end credit balance.
B. Repair and Renovation gets 3% of the replacement value of state buildings constructed and supported with General Fund money (R&R requirement estimated to be somewhere in the $300 million range).
C. Clean Water has a statutory (ongoing) appropriation of $100 million.
3. How much money has been taken out of the highway trust fund over and above the $170 million annual approved allocation?
A total of $529,263,569.
The following transfers have been made since the enactment of the Highway Trust Fund:
Fiscal year: Annual Appropriation to the General Fund
The $170 million transfer was set up when the Highway Trust Fund was established. The $170 million transfer should remain in place. Some or all of the money the governor stole from the Trust Fund beginning in 2001 should be replaced.
4. How much lottery money is available for education?
As of May 14, lottery ticket proceeds were at $138 million, of that $45.8 million will go for education.
The breakdown is as follows:
• $22.9 million or 16.6% of total lottery proceeds is designated for classroom size reduction and More At Four;
• $18.4 million or 13.3% is designated for school construction; and
• $4.5 million or 3.3% is for scholarships.
The governor insists that the lottery money is not supplanting any General Fund monies. The total proposed education budget for 2006-07 is almost $10 billion.
5. How much has the Governor proposed for mental health?
Easley’s proposal is $89 million in new funding for mental health programs.
6. How many new state government jobs will the Governor’s proposed budget create?
A total of 20,257.
New positions breakdown:
12,981 for Public schools
1,507 for Community Colleges
2,988 for Universities
253 for Health & Human Services
2,383 for Justice/Public Safety
145 for General Government/Natural & Economic Resources
Please be advised that all the positions in education are not for teachers — many are for more administrators.
7. How much will it cost taxpayers for a pay raise for teachers and state employees?
Each percentage point raise for teachers and state employees costs $107 million.
8. Under the Governor’s proposal, who wins?
With the governor’s proposal to reduce sales tax by one-fourth cent and cap the gas tax at the current rate, each North Carolina taxpayer would get $23.85 in tax savings. The NCEA (North Carolina Education Association) has negotiated an 8% increase for teachers, bringing the average adjusted teacher salary to $56,960. SEANC (State Employees of North Carolina) is negotiating a 7% increase for all state employees.
9. Are the temporary taxes temporary?
Two big “temporary” tax increases were enacted in 2001, one raised the sales tax by one-half cent, and the other raised the income tax rate for the highest marginal taxpayers by one-half percent. Both were scheduled to sunset in 2003. However, in 2003, when both taxes were set to go back down, the General Assembly extended the sunset until 2005. Then in 2005, again when the 2001 increase on both taxes were scheduled to expire, the General Assembly again extended the sunset until 2007. Under the governor’s proposal for 2006-07, the sales tax would go down by one-fourth cent (only half of what was promised) but not until October 1. The income tax rate would remain unchanged.
10. What Would it cost to rollback each of the "temporary" tax increases, i.e. sales tax and income tax?
According to a May 9, 2006, Fiscal Research report, it would cost $584 million.