- North Carolina Democrats have outlined election year “promises” in a new document, Our Carolina Promise
- Implementing the proposals would add nearly $5 billion to the state budget
- To finance these “promises” would require either a 38 percent personal income tax hike or a 65 percent increase in sales tax revenue
To win votes this election year, North Carolina Democrats are making grandiose promises that, if implemented, would cost state taxpayers at least a staggering $4.8 billion in new spending.
How big is the proposed spending increase? North Carolina’s current General Fund budget is $23.9 billion. Fulfilling Democratic “promises” would result in a 20 percent spike in state spending, which would easily be the largest year-over-year spending increase in modern state history. To pay for this spending spree, an average family of four would add about $1,900 to their already sizeable state tax burden.
Making matters worse, this wouldn’t be a one-time expenditure. The Democrats’ plan would ratchet up the baseline for recurring spending obligations by 20 percent, with future spending growth adding on to the new, much higher, baseline.
Such dramatic spending hikes would require historic tax increases that would cause draconian cuts to the household budgets of soaked taxpayers.
Dubbed “Our North Carolina Promise,” the state Democratic Party has put together an election-season platform full of pricey promises that would expand government’s control over every major aspect of our lives. From the description on their website – “From our schools and our health to our jobs and our people, this is Our Carolina Promise” – no aspect of society would be exempt from the preferred method of Leftist problem solving: soaking taxpayers to finance ballooning government spending.
Lofty sounding platitudes are easy on the ear – if there is no price tag attached. That is where this article comes in.
The “Carolina Promise” platform includes 22 bullet point items, ranging from “equal pay for equal work” to “keep judges fair and independent.” Items such as those are ambiguous and difficult to quantify as a cost to taxpayers.
Others, however, such as “increase per-student spending by $2,400” and “expand Medicaid” can – and should — be quantified.
Below is a breakdown of the massive price tag that accompanies the Democrats’ “Carolina Promise.”
Increase per-student K-12 Spending by $2,400 = $3.7 Billion
According to the platform document, “North Carolina spends $2,400 less per-student than the U.S. average.” With an average daily membership count (ADM) of more than 1.5 million students in the 2017-18 school year, this would cost more than $3.7 billion.[i]
(NOTE: The platform document also promises to increase average teacher and principal salary to the national average. Since teacher and staff compensation comprise the majority of K-12 expenditures, Civitas did not include this expenditure separately, as it would be rolled into the per-student expenditure increment.)
Increase Number of School Nurses to National Standard = $79 Million
From the platform document: “North Carolina Democrats are committed to keeping our students and schools healthy and safe by bringing NC up to the national standard for number of school nurses and supporting new support staff for our schools.”
Because “new support staff” is too vague to quantify, Civitas focused on the promise to bring school nurse numbers “up to the national standard.” According to this 2017 report by the legislative Program Evaluation Division, “meeting current standards for school nurses statewide may cost up to $79 million annually.”
Expand Early Childhood Programs (Pre-K) to All Eligible Children = $166 Million
Ironically, Republican legislative leaders included in a 2017 bill funding increases that would eliminate the current N.C. Pre-K waitlist by 2020. The Democrats’ platform document, however, calls for much more than that.
“Democrats promise to expand early childhood programs to not only end the pre-K waitlist but to ensure that parents who are trying to help their children get a quality education have access to early childhood education programs.”
A reasonable way to interpret this “promise” is that the intent is to expand funding to include all North Carolina children eligible for the program. According to this media report, there are about 62,000 low-income children eligible for the N.C. Pre-K program, but only half are currently being served. The report estimates that the price tag to pay for all remaining eligible children would come to about $166 million.
Expand Medicaid = $341 Million
The Democrat “platform” makes a promise to “expand Medicaid to more than 600,000 working people.” Civitas has written extensively about how expanding the state’s already overcrowded Medicaid program would not provide access to care for the newly-enrolled, because coverage does not equal care.
Leaving the extreme shortage of doctors to treat Medicaid patients aside, let’s focus on the taxpayer price tag for Medicaid expansion.
Senate Bill 290, introduced in 2017, would expand Medicaid as laid out in the Democrats’ “Carolina Promise.”
Funding for the newly eligible Medicaid enrollees under expansion would be provided 100 percent by the federal government in the first three years and phased down to 90 percent thereafter.
According to language in SB 290, the price tag for North Carolina’s proposed Medicaid expansion would be steep.
By FY 2018-19, the federal share for expansion was projected to be $3.5 billion per year, with the state portion amounting to $341 million.
Restore ‘Cuts’ to Department of Environmental Quality = $14.6 Million
According to the platform document, to “ensure clean air and safe drinking water” the Democrats will reverse “harmful cuts to the Department of Environmental Quality.”
This promise is vague, however, Gov. Cooper can help us put a price tag on it. In this May press release, Cooper highlighted the fact that his budget proposal included “$14.6 million to give state agencies the resources and personnel to monitor and protect air and drinking water and hold polluters accountable.”
Restore the Earned Income Tax Credit = $108 Million
Since its elimination in 2014, Democrats and leftists have been clamoring for North Carolina to restore its state Earned Income Tax Credit (EITC).
The state EITC was eliminated in the 2013 tax reform. NC Policy Watch reported reinstating it would have cost $108 million at the time. Reinstating the credit today would likely be higher, but we’ll give the benefit of the doubt and use this conservative estimate.
Increase Access to Broadband, Especially in Rural Communities = $10 Million
The “Carolina Promise” platform also includes a promise to “Increase access to high quality broadband, especially in rural communities.”
The 2018 state budget included $10 million in grants to local communities to expand broadband internet service. The grants targeted rural communities with lower rates of connectivity. Clearly, the Democrats who authored the “Carolina Promise” feel this falls short. One can conservatively estimate that they would prefer to see this amount at least doubled to $20 million; meaning their plan would cost North Carolina taxpayers an additional $10 million.
Increase Funding for Government Job Training Programs = $360 Million
According to Carolina Promise, “Democrats will increase access to vocational education to help workers learn the skills employers need and open new doors to well-paying jobs for more North Carolinians.”
While vague, it is still possible to assign a reasonable cost estimate to this “promise.” For instance, we can use the “Moral Monday” demand from 2014 to increase workforce development programs by 50 percent as a proxy. Legislation created to respond to these demands found that such an increase would cost taxpayers $360 million per year.
How To Pay For It?
The massive $4.8 billion price tag to implement the Democrats’ promises would, of course, need to be paid by hardworking North Carolina taxpayers. This hard truth is conveniently left out of the platform document.
But just what sort of tax hike would be required to generate such a large amount?
According to this Office of State Controller report, total state personal income tax collections last year totaled $12.5 billion. Generating $4.8 billion in additional revenue would require a whopping 38 percent increase in personal income taxes.
If North Carolina decides not to raise income taxes it can raise revenue by increasing the sales tax rate. Statewide sales tax collections totaled $7.34 billion last year. To raise the $4.8 billion required to finance the Democrats’ promises would necessitate a stunning 65 percent increase in sales tax collections – requiring a rate increase from 4.75% to 7.84%.
Bear in mind, these tax estimates leave out any negative effects that such dramatic tax hikes would have on the behavior of North Carolina taxpaying workers and businesses. As businesses leave or downsize due to the higher tax burden and its drag on our economy, there will be fewer taxpaying workers left to pay the massive bill. Additional tax hikes would likely be needed.
The bottom line: The Democrats promise to be very generous with taxpayer money. Implementing the proposals would require oppressive tax hikes on hardworking North Carolinians, causing significant damage to the state’s economy.
Taxpayers have good reasons to be wary about promises that come with such a steep price tag.
*NOTE: This article is a commentary on a public policy proposal. This article should not be construed as support or opposition to any political candidates or parties.
[i] North Carolina Department of Public Instruction, “Highlights of the North Carolina Public School Budget, February 2018”. Available online here: http://www.dpi.state.nc.us/docs/fbs/resources/data/highlights/2018highlights.pdf
ADM for 2017-18 is 1,552,638. Multiply that times $2,400 to total $3,726,331,200.