The wisdom of the plan by Senate leaders to cut taxes by $839 million was called into question this week by an important source, the nonpartisan legislative staff that works for them and inadvertently by a powerful senator himself.
Two weeks ago, the Senate passed the proposal that would be yet another boon for corporations and wealthy North Carolinians with assurances that the state could afford it and that it wouldn’t hurt efforts to fund schools, health care programs, environmental protections and other vital state programs.
But the Fiscal Research Division of the General Assembly says that’s not true, that the tax package would result in state budget shortfalls of more than $600 million in just three years.
It’s not clear why the analysis wasn’t done before the Senate voted to slash future revenues, but better late than never.
Sen. Jerry Tillman brushed aside the analysis and claimed it did not take into account the growth in the state revenue that the tax cuts would create, pointing to the expanding state economy in recent years.
But the analysis from Fiscal Research does include projections for state budget growth of more than 4 percent a year and does not account for any significant downturn in the national economy. In other words, the legislative economists are basing their warnings about the budget shortfall on a relatively rosy forecast.
Imagine what would happen if the national economy sputters or even heads towards a recession that we know is inevitable.
Then consider that despite all the rhetoric otherwise, North Carolina trails much of the country and most of its neighbors in investments in key areas.
The state ranks 44th in per pupil spending, average teacher pay is lower than in every bordering state and principal pay is dead last in the country.
The university system has been forced to absorb several hundred million dollars worth of budget cuts in recent years with faculty leaving because of low pay.
Thousands of at-risk children languish on waiting lists for PreK programs that could change their lives. The waiting list for childcare subsidies routinely stays at more than 20,000 kids.
Massive tax cuts mean the state has less to invest. That’s just basic math.
And it is worth remembering that if the current Senate proposal is adopted, millionaires in North Carolina will have received a $20,000 a year break from the tax changes made since 2013 while the poorest people in the state have barely received anything at all.
The analysis of the Senate tax plan also does not include the almost certain reduction coming in federal funding for important programs in North Carolina. That will force state lawmakers to make up the difference or leave state agencies even less able to meet the needs of the people they serve.
President Trump’s budget would slash funding for the EPA by almost a third and federal funds make up half of the budget of the state Department of Environmental Quality. Federal Medicaid funding is even more precarious and even a slight reduction in the percentage of funding could cost the state hundreds of millions of dollars.
The obvious conclusion from the analysis from the legislative staff is that North Carolina cannot afford the Senate tax cut proposal. And Tillman himself reinforced that notion, telling the News & Observer that if there is a shortfall, the General Assembly could just make more budget cuts to address it.
Apparently, 44th in the country in per pupil spending isn’t low enough for Senate leaders. Tax cuts for millionaires are more important.
Chris Fitzsimon is executive director of N.C. Policy Watch.