RALEIGH — The $23 billion General Fund compromise between N.C. House and Senate budget negotiators would spend roughly $100 million more in 2017-18 than either chamber originally had planned. But the overall spending increase of 3.1 percent still falls within fiscally prudent standards.
The John Locke Foundation’s budget team offers that assessment as legislative leaders unveil their budget deal this evening. “That 3.1 percent figure is less than the combined rate of inflation and population growth,” said JLF Senior Vice President Becki Gray. “That’s generally a good limit for government spending that’s fiscally prudent.”
JLF budget experts also like budget negotiators’ decision to add $263 million to the state’s “rainy-day” savings reserve, to include funding for the “Raise the Age” initiative targeting 16- and 17-year-old criminal offenders, to repeal a state tax on mill machinery, and to create a new school funding task force.
Less exemplary are decisions to boost the state’s film tax grant program to $31 million in 2018-19 and to extend a renewable energy tax credit to a biomass project that’s already operating in the state.
The budget’s major tax changes generate mixed reviews. The personal income tax rate would drop to 5.25 percent, while the standard deduction would climb to $20,000 for a married couple. Both of those changes would be delayed until January 2019, halfway through the second year of the two-year budget cycle.
“Lowering the state’s single flat tax rate while raising the standard deduction to provide additional relief for working families fits generally well with the positive policies lawmakers have pursued in recent years,” Gray said. “By pushing this change to January 2019, though, some of the fiscal impact is masked. It remains to be seen whether these changes are as fiscally prudent as the limited spending increase.”
Gray’s initial overall assessment is positive. “There are items we like in this plan, and there are items we would have approached differently,” she said. “We agree with lawmakers that their plan places North Carolina government on a more sustainable path than Gov. Roy Cooper has proposed.”