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Wednesday, 28 June 2017 15:29

State budget fight comes down to the wire

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Leaders in both the North Carolina House and Senate have reached consensus on a $23 billion fiscal year 2017-18 budget June 19.

As The Smoky Mountain News went to press June 27, Gov. Roy Cooper vetoed the budget, which is 3 percent higher than the current budget; Cooper had hoped for a budget at least 5 percent higher. 

The Republican-controlled House and Senate have more than enough votes to override Cooper’s veto, which will likely happen before the state’s July 1 deadline.

At this juncture, things may change, but likely will not. Although Speaker of the House Tim Moore, R-Cleveland, and President Pro Temp of the Senate Phil Berger, R-Rockingham, had been trying to goad Cooper into signing the budget in a series of press releases issued this week, Cooper wants bigger raises for teachers and has taken issue with the amount of tax cuts.

Likewise, 70 percent of voting members of the General Assembly support the budget, practically ensuring a veto override. 

Assuming that occurs and the compromise budget remains as-is, public school teachers will see a raise of just over 3 percent and retirees 1 percent. 

Tax cuts will begin in 2019, and an Education Savings Account program will help special needs students along with children in military families. 

But even in states with fiscally conservative legislatures — like North Carolina — pork projects always find their way into budgets. 

And like most all states, personnel expenses account for the lion’s share of the budget — in this case, 60 percent, or around $12 billion. 

The fact that the state’s entire budget was less than $12 billion just 20 years ago shows strong revenue growth but also ever-increasing spending that, if not properly managed, could spell disaster down the road, especially as it relates to pension obligations. 

 

Local response 

Rep. Michele Presnell, R-Burnsville, did not return calls seeking comment on this year’s budget, but a press release issued June 26 by her office taunted Cooper, blasted prior administrations and extolled the virtues of her tenure in the legislature. 

Saying that the budget reflects the priorities of legislators and not “a political ideology bent on spending our state into the ground through a bloated, ineffective, inefficient bureaucracy,” Presnell accused Gov. Cooper of being ignorant as to what happens when “you run out of other people’s money.”

Presnell specifically mentions Illinois as an example; the state hasn’t passed a budget in three years and is looking at the very real possibility of a meltdown. Contractors have been told to halt work, state lottery ticket sales may be halted and the state’s bond rating is rapidly headed for junk status, possibly as early as this week. 

When she took office, Presnell said, the state had $2 billion in debt and “very little” savings — the result, she said, of spending beyond reasonable means and of government’s intrusive expansion, “far too deep into our everyday lives.”

Today, Presnell said, all the debt is gone and the proposed budget will end up creating a $1.84 billion “rainy day” fund. 

“That is a $4 billion swing from the red to the black, and that is what responsible governance looks like,” she said in the release. 

To Presnell, that responsible governance includes 96,000 more North Carolinians paying nothing in income taxes than had previously — due to the tripling of the standard deduction — as well as an almost $530 million tax cut and a 1 percent recurring cost of living adjustment for state retirees. 

Presnell said it’s “absurd” that Cooper would veto this budget.  

“Our approach has been simple: get government out of the way, let people be free to make their own choices and free to do with the product of their work as they see fit. Our approach has led to surplus after surplus even while cutting taxes because our economy is one of the fastest-growing in the nation,” she said. 

Rep. Mike Clampitt, R-Bryson City, also did not return calls seeking comment on this year’s budget. But in a newsletter released by his office June 24, Clampitt echoed many of Presnell’s talking points, specifically saying that North Carolina was well on its way to becoming the next Illinois before righting its course around 2011. 

“Like all states, Illinois had felt the effects of the recession, and some tough decisions were certainly called for. Rather than addressing the inefficiencies and overspending, the Governor and Illinois Legislature thought that all their budget woes could be solved with a 75 percent tax increase,” he said in his newsletter. “The result has been an extended recession, and a state with a government not able to agree on a budget since the Illinois legislature refuses to consider any reforms that would help turn Illinois around. The point is this: if North Carolina had continued down the path it had been on in 2011, we could certainly have wound up in the same situation as Illinois. I would hope that we can all be glad that we are nowhere near experiencing that fate.”

In Clampitt’s district, which includes part of Haywood County and all of Swain and Jackson counties, he seems most proud of the economic developments grants singled out for those counties; Swain and Jackson will see $35,000 each, and Haywood, $30,000. 

Clampitt went on to laud efforts in the General Assembly since 2011 — like Presnell — that have resulted in the state garnering recognition for being a great place to do business. 

The Tax Foundation, which bills itself as “the nation’s leading independent tax policy nonprofit” has since 1937 conducted research and analysis aimed at formulating smart tax policy. It recently ranked North Carolina 11th in the nation in terms of tax climate. 

Forbes Magazine also recently ranked North Carolina as having the second-best business climate in the nation. 

“Since 2011, the leadership of the General Assembly has undertaken a series of tax reforms that allows all people to keep more to do with as they see fit, changed the regulatory climate to treating entrepreneurs of North Carolina as customers rather than ruled subjects, and changed budget policy from one of wild-eyed spending sprees to one of prudent management,” Clampitt said. 

With that more laissez faire approach, Clampitt asserted, “our state now outpaces the rest of the country in economic growth, and we now have a lower unemployment rate than the rest of the nation. We now have less debt, and we have a rainy-day fund that better enables us to assist in disaster relief than we did before.”

So what’s Cooper’s problem?

“Simply put, this budget shortchanges our state at a time it doesn’t have to,” the Democrat said in a June 26 news conference announcing his intention to veto the budget. “It prioritizes tax breaks for the wealthy and corporations and comes up short for education and the economy.”

He went on to call it “shortsighted” and “small minded” and said it was the most fiscally irresponsible budget he’d ever seen. 

Cooper wants to see a corporate income tax cut scrapped, and a cap on the personal income tax that would exclude households making more than $150,000. 

It’s unlikely he’ll get either.

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