by Paige Terryberry
Senior Analyst for Fiscal Policy, John Locke Foundation
Instead, Honor Taxpayers and Emphasize Long-Term Sustainability
Last fall, North Carolina passed a state budget for the Fiscal Year 2021 – 2023 biennium with many notable wins for North Carolinians. The budget allows workers to keep more of their hard-earned money through cuts to the personal income tax and promotes growth by phasing out the corporate income tax. Though surpluses and federal funding allowed for historical capital spending, legislators still set aside generous funds to the Rainy Day fund (the Savings Reserve).
During the current “short” session, legislators are evaluating the second year of that budget plan in order to make adjustments to account for any new needs or changing circumstances.
Governor Roy Cooper released his recommended budget adjustments last month, calling on the state to spend 8.5% over the current dollar amount budgeted for the coming fiscal year.
The General Assembly is expected to reach a budget agreement within the next few weeks.
Here are a few things the updated budget should consider:
Continue to Respect Taxpayer Dollars and Honor Commitments
Recall that one year ago, legislators agreed to limit spending. Now more than ever, legislators must keep their word. Government spending is the true tax and increasing spending during a time of economic uncertainty and a likely downturn is incredibly irresponsible.
Disregarding principles of fiscal restraint during a time of high political pressure disrespects taxpayers and puts the state in a more precarious position to deal with economic crises.
The state’s revenue surplus that exceeded projections further tempts some to call for increased spending. But one-time money is not for use on recurring expenditures or expanding government payroll.
Moreover, a looming economic downturn could cause revenues to nosedive. Spending more now could mean higher taxes later – and going back on a promise to taxpayers to follow through with tax cuts.
Spending the state’s windfall would upend the great work that has been done.
Refuse Medicaid Expansion
Political pressures have caused some to take the federal bait and favor Medicaid expansion. Though Medicaid expansion has now been introduced as a separate bill, it would have major future budgetary impacts. Let’s be clear: Medicaid expansion is still a disastrous policy.
Political winds have changed solely due to the federal government sweetening the deal by offering more “free money.”
Legislators argue that expanding Medicaid now is a good option as the federal government offers higher reimbursement. Yes, the program is paid for, but only for now.
The federal government will chip in more, and hospital taxes will offset other costs of the program.
Even so, as my colleague wrote: “the federal government is broke and dysfunctional … Why would North Carolina legislators want to make our state more dependent on the federal government?”
In the end, Medicaid expansion is a big government policy that fails to address the systematic issues of our healthcare system.
Lawmakers should build on the state’s laudable budget and reject political currents that do not consider long-term sustainability. Bills like S.B. 896 – which would prevent the corporate tax’s planned phase out – should be dead on arrival as they undo some of the very best progress that has been made in making North Carolina a state more hospitable for job growth and investment.
Lawmakers have an opportunity to again honor taxpayers and stay true to conservative principles that work for North Carolina, remembering that workers’ money is best kept with workers themselves, and not in government coffers.