Sometimes the folks on Jones Street get into arguments over definitions.
The clearest example cropped up in a 2003 debate about the definition of “tax increase.” Democrats and some House Republicans (mostly those aligned with then N.C. House Co-Speaker Richard Morgan) clashed with the rest of the House GOP caucus and with Senate Republicans over the extension of two “temporary” taxes — on sales and income.
Lawmakers approved the taxes in 2001. Both were scheduled to expire on June 30, 2003, but a majority of representatives and senators agreed to extend the taxes through 2005. (They’ve since extended the taxes again. Gov. Mike Easley proposed Tuesday to eliminate part of the sales tax increase October 1.)
Critics called the extensions “tax increases.” If lawmakers had taken no action in 2003 or 2005, the critics pointed out, the “temporary” taxes would have disappeared. Since lawmakers affirmatively voted instead to extend the taxes, they essentially agreed to raise taxes again.
Supporters of the tax extensions disagreed with that definition of “tax increase.” They said a taxpayer buying an item on June 30, 2003, paid the same amount of sales tax for the same item July 1, 2004. Moreover, a high-income earner paying 8.25 percent of his income to the state tax man in 2003 faced the same 8.25 percent tax burden in 2004. To those lawmakers, there was no reason to refer to the extended taxes as a “tax increase.”
I present that example to point out that we could see a similar discussion this year about “supplanting” of education funds.
Easley has always promised that proceeds from the new state lottery would never supplant existing education funding. He also promised that the lottery would help fund his top education priorities — including class size reduction and the More At Four academic pre-kindergarten.
General Fund money has paid for those two programs in recent years, but Easley’s new budget plan would take some of that General Fund money away — to be replaced by lottery dollars. A critic could easily say the governor is “supplanting” General Fund spending with lottery dollars. It’s that concern that prompted this Carolina Journal exclusive in February.
Easley and his supporters do not buy that argument. They say it’s inappropriate to refer to the shift of money — or “reprogramming” — as “supplanting,” since the overall level of spending on education programs is increasing.
One of the governor’s chief budget advisers — Dan Gerlach — explained the idea to the General Assembly’s Joint Appropriations Committee today. Gerlach says Republican state auditor Les Merritt endorsed the Easley administration’s stance on the issue:
The auditor told us he that he would judge that this is not supplanting if the General Fund budget on education continues to go up at least at the same rate it has historically. The last four or five years, education spending has gone up 4 percent. General Fund spending this year — when we look pre-K through 12 or any way we look at it — goes up at least 8 percent, well above that benchmark. We talked to the auditor the other day — I did personally. He thought the methodology was sound.
Audit manager Lee Linker of the State Auditor’s office confirmed Gerlach’s assessment:
As Mr. Gerlach said, we have met with them on a continuing basis. They have expressed their commitment from the beginning to avoid supplanting, and as he said, Auditor Merritt is very concerned about this issue. And after much discussion, we are indeed satisfied with the methodology they applied. Auditor Merritt expresses that we will continue to monitor this each and every year.
With the auditor on board, it will be interesting to see whether there’s much traction for the argument that lottery funds are “supplanting” General Fund spending.
