Opponents of lowering the income tax cap repeatedly appeal to one of their favorite arguments against taxpayers keeping more of their hard earned money: education funding. Some have made apocalyptic claims, painting a state with a 7 percent income tax cap (as opposed to the current 10 percent) as being perpetually underfunded. This claim, of course, demands that we agree with their faulty premise, which is “education is indeed underfunded” (spoiler alert: it’s not).
Was the NYT’s right to hire Sarah Jeong to their editorial board after a long history of racist statements? Could North Carolina finally see an end to its unconstitutional Certificate of Need laws? And what are we to make of the lawsuits filed by the NAACP, Clean Air Carolina, and the Governor’s office last week? We’re talking about it all on this week’s episode of Civitalk!
How have states like Georgia and Alabama fared in light of a constitutionally reduced tax cap? Could they offer us some insight into what lowering our cap to 7 percent might mean? What would happen if (when) we face another economic downturn? These questions are answered on this episode of Table Talk!
Few people seem to be noticing but property taxes for Wake County homeowners may be going up yet again. Last night Wake County Commissioners agreed to put three bond referenda on the ballot on November 6th to pay for education and recreation needs.
If all three bonds are approved, the county’s property tax rate would increase 3.8 cents, or about $114 for someone with a $300,000 home in Wake County.
The bonds are divided as follows:
- $548 million for Wake County Public School construction and renovation
- $349.1 million for Wake County Technical Community College construction
- $120 million for open space and parks.
The bond referenda come on the heels of Wake County Commissioners approving a fourth consecutive property tax increase to fund the newly-passed $1.3 billion Wake County budget.
Wake is one of the state’s fastest growing counties. All the more reason to ensure taxpayer dollars are spent wisely. Four consecutive tax increases mean spending in the schools and county keeps going up. The WCPSS budget has increased $1.3 to $1.6 billion, since 2013.
The November bond will ask for another $548 million for Wake County Public Schools. Of that amount, $140 million is designated for new schools and $283 million for renovations.
Of particular interest is that last year Wake County Schools saw its smallest enrollment growth in 34 years, adding only 880 students, while the local public charter, private and home school populations saw strong increases. Other districts have also had to address the concerns and implications of slowing enrollment.
WCPSS planners had expected the system to gain 2,200 students and 1,900 next year. The final numbers are well below the growth rate that had been estimated. Most school system planners view the current slowdown as only a blip on a path of continued strong growth. There are others who disagree.
Those are important estimates because schools are planned, staffed and constructed built on those numbers. Civitas has written extensively about WCPSS’s penchant for overestimating student enrollment (see here and here).
Of the over half-billion dollars slated for Wake County Schools capital needs, $89 million of technology is designated for technology and “$36 million for contingency and management.”
Does anyone know what that means? Contingency and management? Sounds like a fancy name for a savings account.
Half a billion dollars is a lot of money for school construction and renovation for a county whose population trends are changing and whose residents are choosing different educational options.
The last school bond was in 2013 when voters approved an $810 million bond. 57.7 percent of voters approved. That margin was not as high as some experts had predicted.
Earlier this year there was discussion of a $1.1 billion school referendum. Clearly that figure was reduced, due in large part to some of the factors we discussed.
Because of slower growth rates, smaller households and fewer families choosing public schools, a reevaluation of WCPSS capital building plan is in order. Do voters feel the same way? We’ll find out in November.
State Treasurer Dale Folwell’s office yesterday issued a release reporting on the financial performance of the state’s pension fund.
State Treasurer Dale R. Folwell, CPA reported that the state pension fund posted overall gains of 7.3 percent for Fiscal Year 2017-2018. However, earnings to date for 2018 reflected only a 1.3 percent increase. The approximately $100 billion fund, known as the North Carolina Retirement Systems, is managed by the N.C. Department of State Treasurer.
“For the first six months of 2018, the plan has paid out over $3 billion in benefits, $300 million in Wall Street fees while earnings were essentially flat,” said Treasurer Folwell. “Additionally, the twenty-year average of 6.1 percent misses the assumed rate of return by almost an entire percentage point.”
The performance of the investments in the pension fund is important because a significant portion of the pension benefits paid to state retirees comes from the fund itself, along with a contribution from employees and taxpayer dollars. The worse the pension fund performs, the greater the pressure will be on taxpayers to subsidize pension payments.
NC’s pension fund is falling further and further behind promised benefits, causing the unfunded liability to grow to $7.9 billion. The $7.9 B liability is a dramatic reversal from just 2005, when the pension plan actually had a $3 B surplus. An $11 billion spike in unfunded liabilities in 13 years should raise some red flags.
Moreover, this isn’t a future problem to be addressed at a later date, but has major budget implications right now.
For instance, the state budget passed earlier this summer requires pension contributions from state agencies of 12.29 percent of payroll (see pg. 203). That comes to a rough estimate of almost $1.5 billion in taxpayer dollars in this year’s budget going toward retiree pension payments. That’s more money than the budget devotes to the entire community college system, and about half spent on the entire UNC system.
The 12.29 percent rate is up nearly by half from the 8.33% used just six years ago. In dollar terms, the nearly $1.5 billion in taxpayer funds for pension benefits is up from about $800 million just six years ago – a staggering spike of about 85 percent. In short, pension obligations are ballooning at an unsustainable pace.
North Carolina’s pension bomb is exploding before our eyes. This isn’t partisan, its just math.
Legislators need to act now rather than later to defuse this bomb – and the best remedy would be to transition the state’s pension plan to a defined-contribution plan, like the 401k plans so many in the private sector receive. State employees & retirees would have ownership over their own retirement accounts, the massive $100 B pension fund would no longer be a political football, and taxpayers would no longer be on the hook for overly generous benefits promised by short-sighted politicians.
This November we will have the opportunity to vote for six constitutional amendments. Is it unprecedented to have this many amendments on one ballot?
Many in the left-wing media are abuzz over a Mercatus Center at George Mason University study that purportedly shows that Bernie Sanders’ “Medicare for All” legislation would actually save billions in healthcare spending.
Among them is the Greensboro News & Record, who declared with glee in their recent editorial:
“On Monday, an analysis produced by the conservative George Mason University-based Mercatus Center reported the surprising — perhaps accidental — conclusion that a “Medicaid for All” program could insure 30 million more Americans, eliminating out-of-pocket expenses, while saving Americans $2 trillion over 10 years.”
First off, the study was about “Medicare for All”, not Medicaid.
But more importantly, the leftists citing this study as somehow supportive of Medicare for All (M4A) obviously did not read it. In reality, it does not paint the M4A proposal in a very flattering light.
For starters, the study itself shows that M4A would cost $32.4 trillion over the next ten years, and place “unprecedented strain on the federal budget.” The study further notes that “It is likely that the actual cost of M4A would be substantially greater than these estimates.”
The alleged $2 trillion in “savings,” however, comes from calculations that assume provider reimbursements would all be adjusted to Medicare rates – which are about 40% lower than average reimbursement rates for private insurers. Does anybody honestly think that medical care providers are going to accept a 40% drop in reimbursement rates from a significant share of their patients? Of course not.
Such a dramatic drop in revenue for providers would be devastating. The Mercatus study references a Centers for Medicare and Medicaid Services (CMS) study that simulated M4A and found that “by 2019, over 80 percent of hospitals will lose money treating Medicare patients.”
Naturally, the response would be either a dramatic decrease in medical care providers, or M4A would have to significantly increase the reimbursements – driving total costs thru the roof.
Using even somewhat more reasonable reimbursement rate assumptions, the study notes, “would substantially increase the total projected costs of M4A.”
Then there is the case of increased demand for medical care services. Expanded coverage would cause an increase in demand for medical services between 11 and 16 percent (depending on one’s current coverage), according to the study.
Coverage does not equal access. As the Mercatus study points out, an Urban Institute study concluded that, even if the M4A plan had higher reimbursement rates than set out in the proposal, “not all increased demand could be met because provider capacity would be insufficient.”
Many states already face significant doctor shortages, just imagine the lack of access to care under a M4A plan that significantly increases demand while simultaneously putting up to 80 percent of hospitals out of business?
Supporters of single-payer healthcare jumped the gun on this one, trying to convince people that Sander’s plan would somehow save money, without having any negative impact on access to care. They should have actually read the study first, because it actually helps paint a picture of what a disaster the plan would be.
On Monday, Blue Cross Blue Shield (BCBS) of North Carolina announced it is requesting a decrease in rates for plans on the North Carolina Obamacare Exchange.
As reported by the Charlotte Observer:
Blue Cross and Blue Shield of North Carolina said Tuesday it requested an average 4.1 percent decrease among ACA plans, also known as Obamacare, that are offered to individuals. The N.C. Department of Insurance will need to approve rate changes.
This rate decrease request is the first time BCBS has made such a request in North Carolina, since the implementation of the Obamacare (Affordable Care Act; ACA) Exchange in 2014.
The big question is “why?”
BCBS cites several factors, but two of them are related to a lighter tax burden on the company.
According to BCBS:
- Blue Cross NC used tax savings from the 2017 Tax Cuts and Jobs Act to lower rates by an additional 0.5 percent.
- Congress’ one-year suspension of the ACA’s Health Insurer Tax (HIT) for 2019 helped lower rates by an additional 3 percent. Rates for 2020 will need to be approximately 3 percent higher unless Congress extends the suspension or ends this tax altogether.
It remains to be seen whether progressive lawmakers will view this consumer savings as “crumbs” or the beginning of the End of Days. However, for consumers that have seen multiple years of rate increases on the Obamacare Exchange, this decrease will be welcome news.
A North Carolina doctor filed a lawsuit Monday in North Carolina Superior Court to overturn the state’s Certificate of Need (CON) laws. Dr. Gajendra Singh, a surgeon based in Winston-Salem, wanted to buy an MRI machine to offer MRI’s to patients at a lower cost than the $1,200 he was charged by a local provider last year.
The India-born surgeon decided he would open his own imaging center in Winston-Salem, North Carolina, and charge a lot less. Singh launched his business in August and decided to post his prices, as low as $500 for an MRI, on a banner outside the office building and on his website.
There was just one barrier to fully realizing his vision: a North Carolina law that he and his lawyers argue essentially gives hospitals a monopoly over MRI scans and other services.
Singh ran into the state’s “certificate of need” law, which prohibited him from buying a permanent MRI machine, which meant his office couldn’t always offer patients one of the most important imaging services in medicine. …
Under North Carolina’s law, a medical provider must obtain a government permit (a “certificate of need”) if they want to offer certain new services or buy new equipment. But first, every year, state officials will make a determination about whether certain services are needed in different places.
If the state has decided an area doesn’t need a service, then other providers are barred from even applying for a permit. That is what Singh ran into: He wasn’t allowed to apply to purchase a permanent MRI for his Winston-Salem center. State officials had already decided it wasn’t needed there.
Government bureaucrats felt they knew better than Singh what medical devices were needed in his local community. Now patients are denied a more affordable choice for a vital medical service. Civitas has previously explored North Carolina’s CON laws and how they restrict patient choices, drive up medical care costs and serve largely to protect the entrenched interests.
Decades ago, 49 states adopted CON laws, largely in response to federal funds being contingent on state’s passage of them. Now, 14 states have eliminated their CON laws, and Dr. Singh and his attorneys at the Institute for Justice hope to make North Carolina the 15th. Here’s hoping they succeed.
For those of you who think there is never any good news; listen up.
North Carolina’s economy continues to show strength. Last week the Department of Commerce reported the seasonally adjusted unemployment rate for June was 4.2 percent. North Carolina’s June unemployment figure represents a decline of 0.1 percent from the previous month and 0.2 of a percentage point from the previous year. June represents the third consecutive month that unemployment has declined in North Carolina. The similar unemployment rate for the nation was 4.0 percent.
New jobs have helped to drive down the unemployment rate. Since May of 2018, total nonfarm industry employment in North Carolina has added 13,200 new jobs and 103,400 new jobs since June 2017. Of those new jobs since May, 11,300 jobs are in the private sector. Likewise, 98,200 of the 103,400 new jobs creates in the past year are in the private sector.
There you have it. Smile and be thankful. Wise fiscal and tax policies have helped the NC and US economy to grow. Now let’s stay the course.