RALEIGH — North Carolina state government would boost its savings reserves and set aside more money for infrastructure, while still increasing starting teachers’ pay, providing additional tax relief for families, and limiting government spending growth. That’s if state lawmakers adopt the recommendations in the John Locke Foundation’s 2015-17 alternative General Fund budget.
JLF is releasing its plan as the N.C. House of Representatives begins a week of budget debate and votes.
The JLF plan would spend roughly $21.5 billion for the new budget year that starts July 1. That’s about $25 million less than Gov. Pat McCrory’s proposal. The JLF plan would spend $22.1 billion for 2016-17, roughly $100 million less than the governor proposed.
“Consistent with prior years, this alternative budget focuses on core government,” said the report’s lead author, Sarah Curry, JLF Director of Fiscal Policy Studies. “Under our proposal, General Fund spending grows by $567 million over the next two fiscal years. The annual average growth rate is 1.3 percent, far below the combined rate of inflation and population growth.”
Along with that modest rate of spending growth, the JLF budget proposes adding $620 million to the state’s savings reserve over the next two years. It recommends adding $520 million to the repairs and renovations reserve.
Other major recommendations focus on core state government priorities, Curry said. “In education, this budget focuses on raising starting teacher pay to $35,000, as the governor recommends, while also increasing funding for opportunity scholarships and grants for children with disabilities,” she said. “The JLF budget offers full funding for Medicaid reform efforts, without limiting those reforms to the model endorsed by the McCrory administration.”
Within major categories of state spending, JLF recommends $11.9 billion for education in 2015-16, about $100 million less than McCrory. While the JLF plan would spend nearly $50 million more on community colleges, it would spend about $92 million less than the governor’s budget on the University of North Carolina system. Within K-12 education, the JLF plan recommends new local flexibility for public school teacher salaries and school calendars.
In the second-largest category, Health and Human Services, JLF’s proposal of almost $5.3 billion in spending is about $23 million less than McCrory’s budget. The amount of money devoted to Medicaid is equal in both plans.
The JLF alternative budget would repeal the Job Development Investment Grant program and other targeted tax incentives tied to the N.C. Department of Commerce. Funding for state film and entertainment grants would end. “This budget calls on state government to stop picking economic winners and losers and competing with private-sector investors.”
Among the other ideas embedded within the nearly 50-page JLF document is a new voucher system to cover indigent defense within the judicial branch of government. “This market-based solution would allow indigent defendants to select their own attorneys while simultaneously saving money and fixing a broken system that cost more than $124 million in the last budget year.”
Budget provisions in JLF’s plan also include: a shift of the NC GEAR government efficiency program to the state auditor’s office, a move of the Division of Veterans Affairs to the Department of Public Safety, and an end to state subsidies for preservation of older buildings in Raleigh.
Curry points to a list of six R’s of fiscal responsibility in North Carolina. “Reform entitlement programs,” she said. “Require more user responsibility. Redirect spending to higher-priority uses. Revive free enterprise. Restore civil society. Reduce biases in the tax code.”
The JLF budget incorporates additional tax relief for families, Curry said. “This takes the form of larger per-child tax credits and 529 education savings account deductions, along with reinstated deductions for medical expenses,” she said. “These recommendations go along with the cuts in corporate and payroll taxes already scheduled for the next two years. These changes are consistent with our long-term tax reform goal of eliminating the tax system’s bias against saving and investment.”
Even with an emphasis on savings and fiscal discipline, the plan adds money for state workers. “This budget funds a 1 percent cost-of-living adjustment for all state employees, as well as retirees, in addition to fully funding the actuarial contributions to the state’s pensions and the state health plan,” Curry said.
Curry and the JLF research division staff approached the 2015-17 budget process with a clear goal in mind. “The focus is on directing scarce resources to areas where government has a role and where revenue can be allocated most effectively,” she said. “Our proposed spending and policy changes attempt to make government more transparent, more efficient, and more accountable to taxpayers.”
The John Locke Foundation Research Division’s Policy Report, “An Alternative Budget: Response to the governor’s proposed budget for the upcoming biennium,” is available at the JLF website. For more information, please contact Mitch Kokai at (919) 828-3876 or [email protected].