The N.C. House finalized its changes to the 2016-17 budget this morning with a strong bipartisan vote, 103-12, on both second reading and third. Members of both parties cited teacher and state employee raises, as well as plans to increase the zero tax bracket. They agreed “overall it does some good things.” I think so, too.
Here are a few of my favorite things in the House budget:
- 2.3 percent spending increase over last year. Reining in the growth of government is key to ensuring and protecting our freedom from overreach. Keeping the spending increase under the rate of inflation plus population growth is fiscally responsible and good policy. And unlike some other states. North Carolina has no statutory or constitutional mandate to cap the growth of government. This leadership just did it. BTW: This was the third straight budget in which they kept growth under inflation plus population growth. I like that.
- Savings. This budget puts $300 million into the rainy day fund, building our reserves to $1.4 billion. After the recession and past administrations’ tendencies to spend (and spend and spend), we had nothing left in our savings accounts. When, not if, the next recession hits and when, not if, North Carolina’s coast is hit by a hurricane or other natural disaster, we now have some money set aside to ride out those storms and have a cushion against future tax increases. I like that.
- Certificate of Need repeal. Certificate of Need laws restrict access, increase cost, and stifle innovation. North Carolina has some of the most restrictive CON laws in the country. When the state sold the Dorothea Dix property, the proceeds were to be spent on mental health services. But mental health, substance abuse, and developmental disability beds require a Certificate of Need, a process costing millions in application fees and a long time to approve. This budget establishes a pilot program with $25 million to construct and convert mental health beds now in rural hospitals. The impediment? CON requirements. The solution? Repeal Certificate of Need for these beds, for this pilot and these funds. Get mental health services to those who need them now. This is a step in the right direction, and the CON repeal needs to be duplicated so that all health services are available where they are needed at an affordable cost now. Repealing CON for the Dorothea Dix mental health services is a strong step toward complete CON repeal in North Carolina. I like that.
- Repeal of the 1%/$80 excise tax. Business-to-business taxation is double taxation of savings, investment, and entrepreneurship — the very thing tax policy should encourage rather than discourage. 40 percent of North Carolina’s sales tax base is business-to-business taxes. Lower taxes and fewer taxing options lead to greater economic growth. Eliminating this machine mill excise tax is a start, a good start, toward eliminating business-to-business taxes from our code. I like that.
- The House increases the zero tax bracket by about $2,000 per taxpayer over four years. The Senate proposed the same increase and originally wanted the total tax break implemented this year, but amended that yesterday to implement the increase over two years. This is a strong signal for compromise between the two bodies. With both chambers agreeing to the 2.3 percent increase in spending (see No. 1), some teacher pay increases and building on past successful reforms, we may in fact see the Senate agreeing to many of the provisions in the House budget. We may just see a short session after all. I like that.