RALEIGH — North Carolina’s continuing unemployment problems should send a clear signal to lawmakers preparing the N.C. House budget: scuttle any plans for higher taxes. The John Locke Foundation’s top budget analyst offers that recommendation today.
The N.C. Employment Security Commission’s latest report lists the state’s unemployment rate at 10.8 percent for April, unchanged from March. The rate has leveled off after climbing every month for more than a year.
“The latest numbers indicate that North Carolina continues to struggle with one of the nation’s worst unemployment rates,” said Joseph Coletti, JLF Fiscal Policy Analyst. “State government needs to take steps to help boost the prospects for job creation and entrepreneurial investment, not special breaks for select companies and higher taxes for everyone else. Unfortunately, Gov. Beverly Perdue and the N.C. Senate have prescribed more than $1 billion in new taxes over the next two years.”
Now the House faces an even larger budget hole than the governor and Senate projected in their budget plans, Coletti added. “Some in the House will use the deteriorating state revenue picture to push for even larger tax increases,” he said. “That is precisely the wrong way to address the problem. Declining revenues offer a good opportunity to cut state government spending and leave more money available for the private-sector investment that will get the economy moving.”
Coletti’s alternative Back to Basics budget offers several ideas that could help point the House in the right direction, he said. “We propose 15 policy changes that could help the state save money, from enacting a Taxpayer Protection Amendment to lifting the state’s charter school cap to reforming the state’s health-care management scheme.”
“Just as important, we suggest that lawmakers follow four key principles in drafting a budget,” Coletti added. “First, set priorities. Second, make budget decisions transparent, and hold state agencies accountable for the money they receive. Third, make budget and tax decisions fair — improving the public welfare, not the welfare of specific targeted groups. Fourth, apply a policy of ‘last in, first out.’ That means new programs launched in recent years should be the first ones cut during these lean times.”
Seasonally adjusted employment increased by about 26,000 workers to a total of 4.08 million, according to the ESC. Unemployment decreased by 815 workers, with more than 492,000 workers now listed as unemployed. The number of workers who were unemployed, but actively seeking work, remains near an all-time high, according to the ESC.
Unemployment has increased by more than 234,000 people in the past year. The unemployment rate has nearly doubled in the past year. The state rate in April 2008 was 5.7 percent.
North Carolina state government’s new budget year starts July 1. The House will unveil its overall spending proposal for that budget year soon. “The governor and Senate ignored this opportunity to reverse years of government overspending by refocusing the state budget on core government functions,” Coletti said. “Now that the state’s revenue picture is even worse, the House has an even greater incentive to focus on priorities.”
“Business owners, entrepreneurs, and workers are uncertain about how federal government policy is going to limit their options in the future,” he added. “State lawmakers can take steps now to improve the conditions those economic actors will face in the months ahead. Lower tax rates and restrained state spending limited to core government functions would offer the best possible signals to the people who will help our economy rebound.”