The Senate has taken a new approach to funding for select line items, nonprofits, and other non-state entities. All told, 32 organizations and state divisions have been put on notice that they will need to justify their effectiveness before receiving more funds from the state. A total of $74 million has been moved from recurring funding, which continues largely unnoticed from year to year, to one-time, nonrecurring funding. Each item listed in the “Money Report” notes that funding in the second year of the biennium is dependant on a “continuation review.”
The General Fund Availability Statement of the House budget states that General Fund appropriations are $20.3 billion. This sum is paid with revenues from taxes, fees, transfers from other funds, and other miscellaneous income sources. What the $20.3 billion does not include, however, are the new positions and programs funded with receipts (federal funds, fees collected by agencies that do not go into the General Fund, tuition payments, etc.), not to mention the existing programs whose budgets have been shifted from the General Fund to other sources.
The Civitas Institute has identified $205.4 million in new “pork barrel” spending in the FY2007-2009 expansion budget. In addition, the budget contains $155 million in new debt authorized for pork projects.
One of the main sticking points during this year’s contentious and drawn out budget process was the debate over whether the “temporary” sales and income tax rates should be allowed to expire. In the end, the top income rate was allowed to return to 7.75 percent, while the remaining 1⁄4 cent “temporary” sales tax rate was made permanent.
The General Assembly violated its own rules more than 100 times when it passed the budget last week. At the eleventh hour, legislators added new pork projects that had not been debated on the floor, made major changes to budget provisions, and inserted new laws into the budget bill. While some of these provisions are unquestionably pork for legislators, other insertions may even be good public policy. But to create laws in such a haphazard manner – without formal review or public debate – is a violation of the public trust.
Thanks to the new state budget just passed by the General Assembly and signed by Governor Mike Easley (D), North Carolinians must brace themselves for another significant tax increase. The new budget authorizes tax increases of well over half a billion dollars for FY2008 alone. All of this comes in spite of a budget surplus of nearly $1.4 billion.
Revenue from the North Carolina Education Lottery has fallen short of initial estimates, with the inevitable result that the Legislature has had to provide public tax dollars to “backfill” pre-kindergarten and other programs that were to be financed with lottery revenue. For example, more than half ($37.5 million) of the proposed budgetary increase of $56 million for Governor Easley’s More-At-Four program is to make up for the difference between projected ($425 million) and actual Education Lottery revenue receipts ($350 million). In hopes of remedying this problem, the conference committee budget reportedly includes provisions to change how revenue from the North Carolina Education Lottery is to be distributed. The new formula, however, does not address the root causes of the shortfall and further removes operation of the lottery from public accountability. The new legislation would make the following changes:
As part of the “Medicaid Swap” plan the budget conference committee is reportedly considering, the General Assembly would give counties the authority, with voter approval, to triple the land transfer tax from 0.2 percent to 0.6 percent. Alternatively, counties would have the option of increasing their local sales tax rate by 1⁄4 cent. At the same time, legislative leaders hope to make the “temporary” sales tax increase of 1⁄4 cent permanent. The choice, then, would be between a tax increase on selling a home or a tax increase on consumer goods. Either way, North Carolina’s poorest citizens will suffer most.
As the House and Senate continue their budget negotiations, reports from the General Assembly indicate that House members are proposing a plan that would entail extending the one-fourth cent “temporary” sales tax another two years in exchange for enacting a state-level Earned Income Tax Credit (EITC). Advocates for the state EITC claim it will help offset the high sales tax burden for North Carolina’s working poor. Simple economics, however, suggests otherwise. Our analysis reveals that lowering the sales tax rate would be much better for the working poor than an EITC.
Are you willing to pay higher electricity rates to support renewable energy? If so, you're one of only about 10,000 people in North Carolina who is. That's because the well-publicized N.C. Green Power program has given state residents an ample opportunity to buy power derived from sources such as solar, wind and hog waste. Yet only 10,000 have signed up, or about .01 percent of the population. As a referendum on renewable energy, N.C. Green Power is a pretty clear indication North Carolinians aren't interested.
A variety of Medicaid “swap” plans have become major sticking points in this year’s budget negotiations between the North Carolina House and Senate. These plans put real Medicaid reform further into the future and either raise taxes on North Carolina citizens, or set the stage for future tax increases.
As Senate and House lawmakers meet to negotiate and pass a new state budget, one area likely to receive additional scrutiny is the Senate budget plan to fund $1.1 billion in new construction and renovation projects at the University of North Carolina (UNC). Senators and university officials are counting, not only on strong public support for the UNC building projects, but also − and equally important − on public indifference over how the billion-dollar building plan is financed.
As legislators prepare to go into conference to finalize the FY2007-09 budget, the public is getting mixed messages about what programs are really essential to the good of the state. The governor, the House and the Senate all have different ideas about what programs are truly important, such that the three budgets show distinct differences in terms of spending priorities. Given these differences, it seems that at least some of these priorities are not really as important as their advocates claim.
As the Senate and the House begin the process of reconciling what are two vastly different approaches to spending and taxation, it is a good time to review what is, perhaps, the most distinctive feature of the Senate budget passed last week – namely, the creation of $1.22 billion in new debt over four years. All of this debt is to be fi nanced through the issuance of certifi cates of participation (COPs), which unlike general obligation bonds, do not require voter approval.
With the House’s refusal to concur with the Senate budget last night, now is a good time to summarize the strengths and weaknesses of the three different spending plans. The three budgets differ greatly on taxation, debt, Medicaid, and new hires, with relatively minor differences as regards teacher/state employee raises, education and other healthcare issues.