During a discussion of the state budget on a political talk show recently, a prominent Republican political consultant reeled off what apparently are the talking points of folks determined to mislead us all into thinking North Carolina is just inches away from ruin thanks to the actions of the General Assembly this summer.
To hear the naysayers tell it, people in North Carolina are now taxed to death and the roads and schools and the economy are all falling apart at breakneck speed. That must be why so many people keep moving here.
Most of their distortions are wild exaggerations about the state budget, claims that Governor Mike Easley and state lawmakers have been on a reckless spending spree in the last few years, spending way beyond levels that inflation and the growth in the state population demand.
Like most shallow soundbites, at first glance it seems plausible. This year’s budget increased spending by 9.5 percent over last year, which adds up to almost $1.8 billion. Last year’s budget increased spending by roughly the same amount, allowing the demagogues to breathlessly point to a 20 percent increase in the size of the state budget in the last two years and claim that government is wildly out of control.
Add in a sentence about this year’s $1.4 billion surplus and it adds up to some good soundbites for the talk shows and campaign trail. But even a quick look at a few numbers behind the talking points reveals the distortions.
The budget surplus is the easiest one to dispel. Much of the surplus is considered one-time money that may not be there next year. The same self-described conservatives decrying the size of the budget also frequently rail against using one-time money for ongoing expenses.
The same logic applies to tax cuts, which are also recurring expenses as they reduce state revenues every year. Some of the one-time money was spent this year on construction projects and one-time expenses. A lot of it wasn’t spent at all.
Lawmakers put $320 million in savings accounts this session and left another $237 million unappropriated. The State’s Rainy Day Fund now has almost $800 million in it, an all time high.
This year’s budget also reduced taxes on the wealthy and gave tax credits to the working poor, people adopting children, residents in long term care facilities and a host of other groups. The budget eliminates the sales tax on electricity for agricultural and manufacturing companies.
It does make a quarter cent of the 2001 temporary sales tax increase permanent. If you consider that a tax increase, a debatable point since it merely maintains the current tax rate, lawmakers raised taxes this year on some citizens and reduced them for many others.
Whether wise fiscal policy or not, the tax cuts contradict the claims that lawmakers spent the session raising taxes on everybody.
The characterizations about the size of the budget are similarly misleading. The majority of the new spending funds enrollment increases in schools, salary increases for teachers and state employees and adjustments to the state health plan and retirement programs, spending no one opposes.
Much of the rest of the spending increase pays for non controversial programs like teacher ABC bonuses, college scholarships, and inflationary increases in Medicaid.
Last session’s budget was much the same, putting $546 million in savings, spending $200 million to cut taxes, and allocating $700 million for pay raises for teachers and state employees that were widely supported and long overdue.
Another important number about the state budget comes from the North Carolina Budget and Tax Center. A July report from the Center using U.S. Census Data found that as a percentage of personal income, North Carolina’s total state and local taxes in the period from 2000-2005 were at the same level as they were in 1990s.
That does not take into reductions in the sales tax and the income tax on the wealthy since then. Hardly sounds like the state’s taxes are out of line.
And none of the discussion of taxes and the size of the budget takes into account the vital investments that the budget makes in education, human services, and new initiatives like the Cancer Research Fund at UNC-Chapel Hill.
Lawmakers made plenty of mistakes this session and the process used to put the budget together still leaves much to be desired. But the bottom line is that the shrill talking points from the political consultants and the anti-government crowd simply don’t add up, no matter how loudly they shout them.