State legislative leaders this week dismissed a report by their own nonpartisan legislative staff showing the latest round of tax changes will create a budget shortfall of more than a billion dollars in two years, growing to $1.4 billion two years after that.
The projections came in response to a request made by Democratic leaders in the Senate during the budget debate warning about the impact of the tax cuts, the bulk of which will go to corporations and wealthy families.
The analysis prompted headlines about a looming budget gap and revenue problems and Democratic leaders said it confirmed Governor Roy Cooper’s characterization of the Republican budget as irresponsible.
The response by Republican leaders, including the office of Senate President Pro Tem Phil Berger, was to first irrelevantly blame Democrats for past budget problems and then to promise that no shortfall was looming because Republicans would simply cut spending to make up the difference.
They are technically right, as the state constitution requires a balanced budget. But missing from the headlines and the reaction to the budget news is what the projections really mean, that we are experiencing a dangerous new normal in North Carolina.
No longer does everyone assume that the budget will increase spending to keep up with the state’s needs. Not too long ago funding for increased enrollment at public schools, community colleges and universities was automatically built into budget assumptions.
But now lawmakers must decide every year if they want to pay for the additional students who show up at school and many Republicans boasted during the budget debate this session that they did fund the enrollment increases, though in the university system’s case, they asked for more budget cuts back in return.
The memo from the legislative staff projecting the shortfall assumed “inflationary increases for salaries and other line items” and “spending consistent with a current services approach.”
In other words, the projections of the billion-dollar shortfall is based on lawmakers’ keeping things just like they are, which is spending well below historical levels as a share of the state’s economy.
The analysis also assumes lawmakers will make investments to keep up with increased health care costs and retiree benefits and some of the projected changes in Medicaid.
It does not include any significant new investments in anything, no big teacher raises to reach the national average in salaries, no reasonable increase to help state workers, no new initiatives in child care or K-12 education, even no effort to fund the class size mandate for public schools passed by the General Assembly without the funding to pay for it.
No, the analysis used by the legislative staff is a bare bones budget that continues the inadequate spending levels of recent years but it still results in a massive budget shortfall.
That is the real story here. Not that the unwise Robin Hood in reverse tax breaks are pushing the state towards a budget crisis, but that Republican leaders are clearly planning even more cuts to education, health care, and essential human services.
Raises for teachers and state employees will never be significant, not in the scenario they have created. Inflationary increases will not be fully funded and Republicans will demand credit when they are even partially paid for.
State leaders used to build increased investments into the budget plans and whatever was left over was invested in new programs or bigger raises or more help for children.
Now budget cuts are instead built into the budget by the big tax breaks given every year. There is no assumption that schools will be adequately funded or that teachers will get a raise or that at-risk children will have access to pre-K programs.
All that will be decided every year, AFTER the tax cuts are paid for. It’s a dangerous new normal indeed.
Chris Fitzsimon is the Founder and Executive Director of NC Policy Watch.