Excitement and attention are building for a meaningful presidential primary in North Carolina on May 6. With the focus on the primary, the May 13th start of the so-called “short session” of the General Assembly could get overshadowed, leading some to ignore big issues that will be debated this summer. At the General Assembly, important decisions will be made an impact all North Carolinians as lawmakers ponder how to address critical policies that shape our future.
As we peer into the crystal ball for predictions of the upcoming session, a few trends emerge that will shape the 2008 session this summer. A slowing economy will make revenues tight, forcing tough decisions on how to fund our state’s priorities. Mental health reform and transportation funding will need to be addressed, as the mismanagement of both departments has been exposed over the past few months. Other critical issues such as the drought, the dropout rate and pending court cases will also play a role in shaping the session’s agenda.
The economic slowdown the state, and to a larger extent, the nation is experiencing will mean less revenue available for the revisions of the biennium budget – which, given the General Assembly’s penchant for tremendous increases in spending the past few years, may not be a bad thing.
According to the General Assembly’s Fiscal Research Division, revenues through January are coming in slightly ahead of schedule, with a surplus of $140 million. However, analysts do not expect this pace to continue, and they estimate that there will be little or no surplus by the end of the fiscal year. The 2007-2009 budget passed last year by the General Assembly left about $270 million unspent to be carried over to this year and the state has approximately $800 million tucked away in its Rainy Day Fund. Thus, the threat of a massive budget shortfall as seen in neighboring states seems to be slim.
There are a number of spending proposals under consideration that could quickly eat away at any surplus funds. Never one to forget its base in an election year, the Democratic leadership in the General Assembly will be eager to give across-the-board pay raises to teachers and state employees. It costs approximately $110 million for each 1 percent their pay is increased, thus, a 3 percent pay raise could spend the entire reserve from last year, plus any surplus tax collections this year.
Also, last December Judge Howard Manning ruled that $660 million collected from civil fines and forfeitures should be given to the state’s school districts for technology in accordance with the state Constitution. While lawmakers will not have to repay the money all at once, they will have to make room in the budget to pay the money over the next few years.
The recently passed federal economic stimulus package could also cause some headaches for lawmakers in Raleigh this summer. The stimulus package passed by Congress contained bonus depreciation on capital and higher limits for small business expensing under federal tax laws. Traditionally, the state would match those higher limits and businesses would enjoy the same tax treatment for expenses and depreciation under state law as well. However, it is estimated that mirroring the recently enacted federal schedules would cost the state $282 million in revenue. Conforming to the federal law would result in a much needed tax break for small businesses in North Carolina. Not conforming would make tax preparation and filing more complicated for businesses and put the state at a competitive disadvantage with neighboring states that enact these provisions. The General Assembly will have a clear choice in priorities: cut taxes for small businesses to stimulate growth, or do nothing and diminish the regional competitiveness of North Carolina’s small businesses.
Perhaps no issue has gained more attention since the end of last session than the failures in the state’s mental health system. The news media and advocacy groups have rightly pointed out the failure in management and oversight that has corrupted the current system and wasted hundreds of millions of dollars. Reform is needed, but where will the funds come from?
Governor Mike Easley has called for a package of reforms to give him the power to “fix” the system by giving the Secretary of Health and Human Services more managerial and oversight powers. His reforms would give more responsibility to the state and less to local communities to care for the mentally ill. The proposals come with a price tag, and with tight budgeting, tough choices will have to be made on how best to reform the system.
Two pending U.S. Supreme Court cases could also shape the agenda of the upcoming session of the General Assembly. Sometime in early summer, the court is set to rule on the legality of lethal injection as a method of execution and whether voters can legally be asked to show a picture ID when they cast a ballot.
Currently, there is a de facto moratorium on the death penalty as both the General Assembly and the governor have failed to clarify North Carolina’s law regarding the responsibility of doctors in executions. When the Supreme Court rules it should provide the ultimate clarity one way or another on the use of lethal injection. It will then be up to the General Assembly to decide whether it will still be used as a method of punishment in North Carolina.
An April 2007 Civitas DecisionMaker Poll showed that 86 percent of North Carolina voters thought a person should have to show a photo ID in order to cast a vote. Yet despite overwhelming public support, the General Assembly has failed to make changes to the law to prevent fraud at the ballot box. Opponents to change argue that showing a photo ID will disenfranchise minority or older voters who may not have an ID; however, a November 2007 Civitas poll found that 98 percent of likely voters have some form of government-issued identification whether it was a driver’s license, passport, or some other identification card.
It is thought that if the Supreme Court upholds the constitutionality of laws requiring photo identification to vote, it would spur the General Assembly to action.
A number of other important issues have the potential to be considered including: reforming the funding formulas for transportation and providing gap funding to begin toll projects, combating the drought, securing our driver’s licenses by deciding whether to participate in the REAL ID program, reducing the dropout rate and enacting legislation to protect unborn victims of homicide.
Be sure to visit our Web site at nccivitas.org for regular updates on these and other issues facing the General Assembly this summer.