by Becki Gray
Former Senior Vice President, John Locke Foundation
Crazy talk. Or is it?
Here we are, more than 100 legislative days into the 2015-16 session and still no budget. What gives?
North Carolina is one of only 5 states in the country that hasn’t adopted a budget this year. Alabama gets a pass since their fiscal year begins Sept 1. Other states without budgets are Illinois, Massachusetts, and Pennsylvania — states we usually don’t have much in common with. We’re the only one with one party control and the only one with a revenue surplus. C’mon, we can do better than those guys.
The Senate agreed to pull out the big sticking points in negotiations this week — Medicaid reform using commercial managed care and provider led entities with capitated payments rather than fee-for-service will be considered separately. They also offered a compromise proposal on redistribution of sales tax revenue reverting to the pre-2007 distribution formula — 50% on point of sale; 50% on population. They agreed to bump JDIG funds to $20M a year, extended the program for three years, and added some accountability measures. Okay, let’s assume they reach on agreement and get these out of the way.
Now on to the differences in the House and Senate budgets. Spending growth: 2% or 6%? Teachers or TAs? Save or spend? Carve outs or tax cuts? We’re looking for a budget that is fiscally conservative and balanced, continues strong economic growth and recovery, and produces healthy revenue growth. Hmmm.
Could be déjà-vu all over again. Maybe the best place to find the ideal budget for this year is … last year’s budget. Crazy talk? Maybe not.
The 2014-15 budget (which by the way, worked pretty darn well) could be extended for two more years with some updates. Continue last year’s spending just like it is. Everyone agrees to stop the $216M diversion of Highway Fund money. Done. That leaves availability for 2015-16 at $21,940,374,867, 3.9% more than last year’s enacted budget. So there’s wiggle room to make needed adjustments.
Make adjustments for enrollment growth in K-12, Community Colleges, Universities, and Medicaid. By my calculations that’s around $450 Million, about the same as the surplus revenue going into the new budget cycle.
Raise beginning teacher pay to $35,000 and allow step increases = $157M. Give local LEAs flexibility for the rest; schools start next week after all. Get rid of that unintended bias in the tax reform and re-enact the medical exemption, costing $23.6M.
Anything that’s left over can go into savings or be returned to taxpayers next spring with tax cuts.
Let everything else go. It worked well last year and it will work well again. That prudent, conservative, workable budget the General Assembly has been looking for is right in from of them and on the table. All they have to do is pass it as the new continuing resolution by next Friday and go home.
Will it work? I’ve heard crazier ideas coming out of Jones Street.
Icing on the cake: The Senate’s three constitutional amendment proposals — Limit spending growth to the increase in population plus inflation; cap the personal income tax rate at 5%; and build and maintain an emergency reserve fund to 8% of General Fund —are worth passing before adjournment.