by Anna Manning
John Hood writes for Carolina Journal’s Daily Journal that although it may not be exciting, newly and re-elected law makers should act with prudence, making a responsible budget with no dramatic changes.
So far this year, North Carolina’s state budget is running a surplus. There’s nothing new about that — robust economic growth and fiscal restraint have produced a series of healthy surpluses since 2014. But both the Cooper administration and the General Assembly need to temper their expectations about next year’s budget.
I recognize that neither party may be in the tempering mood. Gov. Roy Cooper, now backed by larger Democratic minorities in the North Carolina House and Senate, talked during the 2018 campaign about significant spending hikes for education, health care, and other services. Some Republicans did, too, while others dangled the possibility of additional tax relief.
The context of state budgeting in 2019, however, argues against major new initiatives in either direction. Last year, the General Assembly gave public schoolteachers an average raise of 6.5 percent, plus significant raises for other state employees and increases in many other state programs. Total expenditures in the state’s General Fund went up by nearly $1 billion, an increase of between 3.85 percent and 4.5 percent (depending on how capital expenditures are accounted for).
North Carolina’s tax rates will also go down again without any additional action by the General Assembly. Thanks to budget bills already enacted, the state income tax is declining to 5.25 percent, down from about 5.5 percent, and the corporate rate will drop half a point to 2.5 percent.
Democrats may wish to refight the tax-cut battles of the past several years. Some Republicans may wish they’d been more careful about last year’s spending growth. But I don’t see the General Assembly going along with any proposal from Cooper to raise taxes, and I don’t see the governor — his negotiating position newly strengthened thanks to Democratic gains in the legislature — viewing with favor any major GOP initiative to pare back government in some areas to fund new spending in others.
Read more here.