House budget offers chance for prudent final spending plan focused on growth

May 31, 2017

RALEIGH — N.C. House budget writers’ decision to mirror the Senate’s overall goal of $22.9 billion in General Fund spending next year should pave the way for relatively quick agreement between the House and Senate on budget details. Both the House and Senate would spend substantially less than Gov. Roy Cooper proposed for 2017-18.

The John Locke Foundation budget team offers that reaction to the current House budget plan. The House’s budget-writing Appropriations Committee is reviewing that document today, with full House votes expected this week.

“The House and Senate essentially agree that General Fund spending should go up by 2.5 percent from the current adopted budget, well below the 5.1 percent growth the governor recommends,” said JLF Senior Vice President Becki Gray. “That level of spending increase also falls well below the 3.8 percent combined rate of inflation and population growth. The House and Senate offer similar worthwhile proposals for building North Carolina’s rainy-day reserves. House budget writers are to be commended for their restraint.”

There’s room to improve on the House’s spending target for 2018-19, the second year of the two-year budget, Gray said. “The House would spend $334 million more than the Senate that year, and just $70 million less than Gov. Cooper,” she explained. “Since revenue projections are even more difficult to make two years out than for next year, it would be wise to approach second-year spending increases with caution.”

Speaking of caution, the House approaches its tax package with more caution than the Senate, Gray said. “A two-year impact of $366 million — versus a Senate proposal of $1 billion — gives both chambers room for negotiation,” she said. “Working-class families should be glad to see that both chambers are talking about increasing the standard deduction, or zero tax bracket, which helps them keep more of their own money to spend or save as they see fit.”

“The rest of the tax package should focus on broad-based changes that enhance economic growth,” Gray said. “Lawmakers also should be careful to ensure their tax cuts fit with the overall plan of keeping state government on a sustainable path.”

While headlines focus on teacher pay, the most noteworthy piece of the House’s education budget might be its provision calling for a new legislative task force to investigate funding of public schools. “As House and Senate negotiators work out their differences on education priorities, we hope they’ll preserve this task force,” Gray said. “It could lead to major long-term benefits for parents, students, and taxpayers.”

JLF budget experts like a series of House education provisions that focus on career and technical education. Like the Senate, the House continues its commitment to funding Opportunity Scholarship school vouchers.

Among other provisions in the House budget, the JLF budget team likes one that would repeal the Map Act. That law allowed the N.C. Department of Transportation to block development on property targeted for new roads. Courts recently ruled that the DOT used the Map Act essentially as a “taking” of private property. “This would represent a victory for property rights in North Carolina,” Gray said.

The House budget includes funding to move forward with the Raise the Age initiative focusing on moving 16- and 17-year-old criminal offenders from the adult court system to the juvenile justice system. “It’s good to see the budget follow through on this needed reform that has widespread support,” Gray said.

House budget writers did not join Senate counterparts in phasing out the state’s certificate-of-need restrictions for medical facilities and major equipment. “We would have liked to have seen that provision in both budgets,” Gray said. “Getting rid of the certificate of need will lead to major positive benefits for health care in North Carolina.”

Both the House and Senate continue to focus on targeted tax incentives that raise objections from the JLF budget team. “The House’s new sales tax exemption for distribution equipment used by companies with a ‘large fulfillment center’ for shipping online orders serves as an example of the government picking winners and losers, rather than making a broad-based reform,” Gray said.

Overall, the prospects for a good final budget deal look good, Gray said. “While we don’t like everything in either the House or the Senate budget plans, both chambers generally are pursuing proposals that offer a sustainable approach. They are focusing on tax relief, increased savings, and placing prudent limits on government spending.”

For more information, please contact Becki Gray at (919) 828-3876 or [email protected]. To arrange an interview, contact Mitch Kokai at (919) 306-8736 or [email protected].