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Budget and Taxation

The State Budget
North Carolina’s state budget reflects its governmental priorities. Unfortunately, over the past two de-cades governors and lawmakers have usually chosen to add new programs to the state budget with-out considering the merits of existing programs and finding ways to fund higher-priority items by eliminating lower priorities. More »

The State Tax Burden
Taxes represent the price we pay for government, so a reasonable tax burden is of benefit to the citizens who consume the services they fund. Unfortunately, the price of government in North Carolina has grown dramatically over the past two decades, and is no longer reasonable. More »

State Tax Reform
North Carolina has a high state tax burden by regional standards, and its top marginal tax rates on
individual (8.25 percent) and corporate (6.9 percent) income are among the highest in the U.S. Since 1990, the state legislature has imposed a net tax increase of well over $1 billion. Clearly, more effort is needed to alleviate the tax burden on North Carolina families and businesses. More »

State Agency Consolidation
The constitutional offices of North Carolina state government have changed little since the beginning of the century. As a reaction first to the tyranny of royal governors and then to the Civil War, the state has divided executive power among a number of separately elected offices. At the same time, governors and legislators have created many agencies under their direct control. The result has been a lack of coordination and focus on major functions, wasteful administrative spending, and a lack of accountability to the public. More »

The State Lottery
The idea of creating a state-run lottery in North Carolina has been a perennial issue in state politics for decades. While some say that the issue involves the personal freedom to gamble or the need to keep dollars circulating within the state, the real question is whether state officials should set up a gambling monopoly likely to attract players disproportionately from lower-income households and then impose punitive taxes on them to expand the size and budget of state government. More »

Education

School Standards & Testing
With the implementation of the ABCs of Public Education, the Excellent Schools Act, charter school legislation, and other reforms, North Carolina lawmakers have put education at the top of the priority list. But even after some recent progress, repeated problems with the state testing program and disappointing performance from our high school students suggest that more fundamental changes are needed. More »

School Choice & Competition
Public education is a core function of state and local government. The state constitution, in the words of the N.C. Supreme Court, recognizes the right to a “sound, basic education” for every child in the state. But public education need not and should not be delivered by government monopolies, as a diverse array of magnet, charter, and private schools are demonstrating across the country and here in North Carolina. More »

Higher Education Policy
During the past several legislative sessions, the topic of state funding for the University of North Carolina system has frequently arisen. University leaders complain that years of insufficient funding have hurt academic programs and created a “brain drain” of talented professors. But critics point to other problems, such as an over-reliance on teaching assistants and part-timers, a tenure system that rewards research over teaching, and a tuition policy that provides disproportionate benefits to newcomers and the wealthy. More »

Job Training Policy
For state and local policymakers, the issue of job training requires a significant amount of rethinking. North Carolinians spend a vast amount of money on training, but the benefits are difficult to quantify. In the 1999-2000 fiscal year, total expenditures for job training and placement services were about $270 million, spread wastefully and somewhat haphazardly over nine major departments and agencies. More »

Local Government

Local Budgets & Taxes
Local governments across North Carolina are complaining about increasing demands for public services, proliferating unfunded mandates from the state and federal governments, and insufficient revenue sources to meet their financial obligations. Some of these complaints are more legitimate than others. In recent legislative sessions, local officials have asked for new taxing authority, all the while using their existing control over property taxes and other taxes and fees to impose an ever-higher cost on North Carolina taxpayers. More »

Housing & Urban Development
Homeownership is widely viewed as a necessary first step for community development. Once renters become owners, they begin to take a proprietary interest in their own property and that of the neighborhood. They set down roots. They begin to accumulate assets (most families use homes to a greater degree than bank accounts or mutual funds to save for the future) and, as property taxpayers, participate in local public affairs. But state and local policymakers disagree about how best to promote homeownership. And problems associated with public housing projects and blighted downtowns continue to plague cities and towns across North Carolina. More »

Smart Growth & Transit
As communities across North Carolina cope with the challenges of rapid growth in population and
economic activity — which are, it should be remembered, far less serious than the problems associated with a lack of such growth — some policymakers are embracing the idea of “Smart Growth.” Unfortunately, this new debate about growth controls, zoning, open space, and transportation in North Carolina reflects too little consideration of the details of Smart Growth policies and market-friendly alternatives. More »

Business and Regulation

Economic Development
While economic development has dominated the agendas of many governors, legislators, and local elected officials in North Carolina, it is one of the most misunderstood activities that governments undertake. The political incentive to attract media attention through job announcements is frequently a substitute for a policy that maintains a balanced, efficient, and fair economic environment. Such a policy would provide the maximum amount of opportunity and prosperity for North Carolinians. It would respect the rule of law, protect private property, promote competition, and allow markets to operate freely. More »

Regulatory Reform
Regulation is the “hidden tax” that governments impose on families and private firms. State and local governments clearly have an interest in protecting natural resources, regulating public health and the spread of disease, and facilitating the efficient operation of markets to deliver the high-quality goods and services that consumers demand. But regulatory policy often seems to be made in a vacuum with little examination of how governmental policies themselves might be causing problems. More »

Transportation Policy
Highways and transportation facilities are some of the most visible programs that state and local governments operate. But they are not without controversy. Some believe that North Carolina has invested too much money in highways and not enough in mass transit. At the local level, bus systems receive significant operating subsidies, yet continue to attract only a small minority of commuters. Current projects such as outer loop highways and the Global TransPark in Kinston have sparked a broader debate about the proper scope and amount of state transportation spending and the value of past infrastructure investments. More »

Legal Reform
North Carolina has a good legal system, partly because punitive damages cannot reach the ridiculous “I-spilled-hot-coffee-in-my-lap” levels achieved in other states. But there are areas in need of both vigilance and reform. State lawmakers enacted tort reform a few years ago but efforts must be maintained to ensure full compliance and enforcement with no weakening of the punitive damages cap. Another issue that deserves attention is the state’s “unauthorized practice of law” (UPL) statute. More »

Health and Human Services

Health Care Reform
Ever since the national health care debate began in earnest in 1993, policymakers in North Carolina have wondered how best to proceed with state measures to improve access, increase quality, and reduce the expense of medical care. The state has already made several reform attempts, including a costly expansion of Medicaid coverage and a law introducing greater regulation into small-group health insurance. But critics say these measures have had marginal or even counterproductive results. More »

Medicaid & Health Choice
North Carolina’s Department of Health and Human Services has long been one of the state’s fastest
growing institutions. This growth has been fueled in large part by increases in state and federal spending on Medicaid. With one of the most expensive Medicaid programs in the nation, North Carolina desperately needs to inject doses of market competition and common sense into its medical assistance efforts. More »

Disability Services
State programs for the physically and mentally disabled, most of them funded to a significant degree by federal dollars (for the most part originating in North Carolina, it should be noted), have become one of the largest government enterprises in North Carolina, making up nearly one-fifth of the Health and Human Services budget and employing thousands of people. Unlike other HHS programs, such as welfare for the able-bodied or Medicaid for middle-class seniors, disability services have long been considered a proper function for government to perform. Unfortunately, the evidence suggests that North Carolina’s disability services are poorly administered and delivered, too expensive, and too little directed toward promoting self-sufficiency and gainful employment. More »

Welfare Reform
Reforming our welfare system is a popular idea with the general public. But the case for significant change would be dramatic even if it were unpopular. Built gradually over decades of accompanying economic and social change, the welfare state has provided some level of material comfort for its recipients but at a staggering cost in terms of dollars spent and lives wasted. More »

Child Care & Preschool
One of the most controversial issues in the past few years has been the proper role of the state in providing child-care and preschool opportunities to North Carolina children. The Smart Start program was intended to be an innovative public-private partnership to facilitate local coordination of children’s services, but the program is mostly state-funded and focuses mainly on the minority of preschoolers in paid child care. North Carolina also affects the market through a tax credit for child-care expenses and through rules on personnel, facilities, amenities, and location of centers and homes that raise the price of care. More »

Other Issues

Privatization & Competition
Like other states and localities, governments in North Carolina are struggling to satisfy two apparently conflicting public demands: lower taxes and better services. Under the traditional model of public sector management, these two goals are diametrically opposed. To lower taxes, a government must reduce the amount or quality of services. To improve programs such as public schools or social services, citizens must be willing to “invest” more tax dollars in government. More »

Crime & Punishment
Preventing crime is the most basic of government functions. But despite some important progress in recent years, North Carolina governments still have much to do to meet this fundamental responsibility. For example, the crime rate was about 16 percent higher in 2002 than it was in 1983 and remains far higher than the rates of the 1950s and 1960s. In high-crime areas of the state, the goals of education reform or economic development will be difficult to achieve without making more progress in improving safety. More »

Civil Rights & Equal Opportunity
Civil rights and discrimination are among the most controversial subjects that state and local leaders must discuss. But they are also crucial issues that involve the core values of our political system: equality before the law, personal freedom, and the dignity of the individual. Affirmative action, originally proposed as a device for extending educational and employment opportunities to minorities and women previously excluded from fair and open competition, has in all too many cases become discrimination itself. The resulting disaffection and anger threatens to pull our society apart at the seams. More »

Campaign Finance Reform
While the issue of campaign finance reform barely registers in public opinion polls, many politicians and the media tell us reform is critical to the future of democracy in America. However, it is clear that they believe this is true only insofar as we accept the version of reform demanded by these same politicians and the media — public financing, contribution and expenditure limits, and an end to all independent expenditures. This version of reform will have little impact other than to stifle political debate and to further corrupt our political system. Instead, serious reformers should accomplish the effective liberation of campaigns and elections from arbitrary limits on the flow of money, information, and access. More »

Term Limits & Legislative Process
It is no exaggeration to say that term limitation continues to be one of the most popular ideas in American politics today, even though the issue has been on the national agenda for more than a decade. Large majorities of Republicans and Democrats, conservatives and liberals, whites and nonwhites, men and women, all support term limits. At the same time, one of the least popular aspects of the North Carolina General Assembly is its apparent inability to conduct its business in a timely and responsible fashion. More »

Suggested Resources
The brevity of this briefing book obviously precludes lengthy discussion of many of the important and complicated issues that face state and local policymakers. We recommend that interested North Carolinians request Locke Foundation Policy Reports and Spotlights on topics of interest, and that they contact one of the public policy research organizations below for additional information. More »

Vital Statistics at a Glance
Twenty Years of Vital Statistics on North Carolina Public Policy. More »

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