Gov. Easley Proposes $16 Billion Budget [NC]

The Carolina Journal (Exclusive) ^ | May 11, 2004 | Paul Chesser

[TaxRelief]

Carolina Journal Exclusives
Easley Proposes $16 Billion Budget

Adjustments would hike spending on state employee compensation, debt service, other items

By Paul Chesser

May 11, 2004

RALEIGH — Gov. Mike Easley released his mid-biennium budget term adjustments yesterday, which he said maintained his priorities for spending discipline, creating jobs, and improving public education.

“I think it sets priorities,” the governor said, “and reflects the priorities of the people of North Carolina.”

Easley’s plan states that it would increase “non-federal spending” by $876 million over last year. Because authorized General Fund spending for FY 2003-04 was reported as approximately $14.8 billion, the governor’s proposal of $15.9 billion would appear to be an annual increase of nearly $1.1 billion, or 7.4 percent. But Dan Gerlach, a key fiscal-policy aide to the governor, explained that the 2003-04 budget baseline should be expressed as approximately $15 billion, including nearly $200 million in Medicaid expenses that for one year only were financed by federal rather than state dollars.

Easley said that after only providing a miniscule raise for state employees during the last three years of economic difficulty, he most wanted to offer them something more after this year’s improvement in revenues. He proposed a 2 percent salary increase, plus a one-time bonus of $250 per employee.

“I’m most concerned about state employees in general,” Easley said at a press conference yesterday. “The dollars are just not there to do more.”

General Fund revenues are expected to exceed budget projections by $198.3 for fiscal year 2003-04, which ends June 30. Forecasters anticipate economic growth by a rate of 5.5 percent for 2004-05, which raised revenue expectations for next year by $200 million.

Easley’s revised budget includes $119 million for education enrollment, $231 million for state employee retirement and health care, $220 million for employee compensation increases, and $80 million for servicing debt and capital expenditures. Also, last year’s temporary Medicaid relief ($191 million) from the federal government was removed, so state spending on the program will increase by $182 million.

The new spending proposals mean that some across-the-board budget savings were necessary.

The governor said the budget keeps spending below the cap he proposed last year, which was limited to the previous ten-years’ average of personal income growth, though this assumes use of the $876 million spending-increase number in the calculation. His recommendations included an additional $105 million for the state’s “Rainy Day” reserve fund.

His proposals for economic development included an additional $20 million for the One North Carolina Fund, which Easley uses to clinch business deals for corporations negotiating to relocate or remain in the state. He wants $48 million in tax breaks for businesses, which includes an exemption from the corporate income tax on the first $20,000 companies earn. He also would add or increase tax credits for business research and development and for new ventures.

Easley also renewed $1.6 million in state funding for the Global TransPark in Kinston, which the both he and the General Assembly planned to eliminate. He also called for $5 million to go to the North Carolina Biotechnology Center, for business development in the life sciences. Also, Easley included $500,000 in his budget to promote North Carolina “as a wonderful state to visit” at the 2005 U.S. Open golf tournament, which will be held in Pinehurst.

The governor also recommended a $15 million appropriation for the proposed North Carolina Motorsports Testing and Research Complex in Charlotte. The facility would provide a test track for NASCAR.

Bowing to political reality in an election year, Easley did not include revenues from a hypothetical state lottery in his plan, as he has done in past years. He said he had not given up on the idea.

“I’m going to push hard for the lottery every single (legislative) session,” Easley said.

A one-half percent sales tax increase and a temporary personal tax hike on the highest earners is scheduled to end in June 2005.

“We’re still going to need a source of revenue as we go forward,” the governor said.

Paul Chesser is associate editor of Carolina Journal. Contact him at pchesser@carolinajournal.com.

[TaxRelief]

(For discussion and educational purposes, only.)

Fancy that! For once our Utopian-oriented Governor has not included revenue from his non-existing lottery in the first budget round. Guess it is an election year.

[Constitution Day]

BTTT.

(How ya been?)

[TaxRelief]

It's that time of year again, folks. Your North Carolina Legislature is back in session (as of Monday), and Tax-hike Mike has presented a budget for your consideration!

NC *Ping*

Let MYkdsmom, Constitution Day or Taxrelief know if you want on or off the NCPing list, or if you think you've been accidentally dropped, or ....

Budget details to follow as they become available. Please check back to this thread regularly for budget updates, and please add any information that you can to help us all be as informed as possible.

[TaxRelief]

Great! You? More Budget analysis:

The Fiscal Choice We Face
By John Hood

RALEIGH -- The 2004 session of the General Assembly began Monday with Gov. Mike Easley's $16 billion proposal for a 2004-05 General Fund budget. It helped to bring North Carolina's fiscal choice into stark relief.

The governor's rhetoric was, frankly, welcome. The appearance of a small budget surplus for 2003-04 -- made up of $146 million in unappropriated funds, $100 million in authorized funds reverted back to the treasury, and about $200 million in higher-than-projected revenues -- should not lead to fiscal recklessness, he said. "Now is the time to reinforce our fiscal discipline," Easley added, warning that the latest good news should not be "a license to return to the overspending days of the past. We must continue to provide government services in the most efficient manner possible."

The governor restated his support of a statutory cap on annual growth in General Fund spending linked to a 10-year average change in the state's personal income. His 2004-05 proposal comes to about $15.9 billion, just $14 million less than what he says the cap would allow. Easley also offers regulatory relief and $48 million in tax reductions, most coming from exempting the first $20,000 of a corporation's income from taxation.

But after three years of signing dramatic tax increases -- leaving North Carolina with one of the highest marginal income tax rates in the United States and a higher-than-average sales tax burden for our region -- this election-year tax cut hardly balances the scale. The governor's budget plan does, however, help to advance the case of fiscal reform and restraint in another sense: by clarifying the real fiscal choice that we face.

Based on my preliminary examination of the Easley budget — which is reported to increase General Fund spending by $876 million over the state-funded portion of the 2003-04 General Fund — there is at least $159 million worth of what might be called "purely discretionary" expansion items. That is, if you set aside enrollment increases, teacher bonuses, Medicaid, and even the $252 million in compensation increases for teachers and state employees, you are still left with a sizable chunk of new spending, much of it not just indefensible but risible. There's $15 million to begin the now-infamous free test track for the motorsports industry near Charlotte. There's new corporate subsidies, expansions of new public-assistance programs, and, gulp, continued funding for the Global TransPark aircraft graveyard in Kinston.

Going back to last year's budget bill, I identified $54 million in similar kinds of "purely discretionary" expansions already legislated for 2004-05 -- that is, not really expected or required to continue the current (already excessive) programs of state government. I then delved into the Locke Foundation's alternative budget published last year and added up the reductions and eliminations we proposed that did not include changes in major spending areas such as Medicaid, non-teaching positions in public schools, Smart Start, and tuition increases at UNC. That total for the 2004-05 fiscal year came to approximately $339 million, and included the elimination of redundant programs and agencies, corporate subsidies throughout state government, and grants to unaccountable nonprofits.

The sum of these three numbers -- obviously low-priority expansion items plus relatively easy-to-justify reductions in the base budget -- comes to $552 million. The price tag for the income and sales tax increases previously imposed by Easley and the General Assembly will come to about $551 million during 2004-05.

In other words, it is false to suggest that this new budget plan doesn't rely on tax increases. It does, but they've already been passed. And now you know what it would take to repeal them immediately. Not major changes in state government, although they would be wise. Not fundamental restructuring of big-ticket programs such as Medicaid and higher education, although that would also be wise.

What it would take is for our leaders to make a different choice, one that makes North Carolina's economy more competitive and lets North Carolinians keep more of their own money to use as they wish rather than having politicians confiscate and "invest" it in bigger government and dubious economic-development schemes. Which choice will they make?

Hood is president of the John Locke Foundation and publisher of Carolina Journal.

[snopercod]

I recommend we abolish the NCDENR for starters.

[F.J. Mitchell]

Tis said that NC has a revenue surplus this year. Maybe Easely will consent to cramming some of it into the giant pits in our roads, rather than pouring it all down some rat hole.

[lafroste]

I recommend we abolish the NCDENR for starters.

DENR is doing it to itself already. With chronic understaffing (largely due to woefully inadequate pay scales), coupled with increasingly complex unfunded mandates, they are foundering.

It took me more than three years to get approval for a sprayfield expansion, yet they want me to spend more than $100,000 to disinfect an effluent stream that is already nearly pure and is irrelevant to the quality of the receiving stream due to it being less than 1/3500 th of the total stream flow. Even EPA doesn't require disinfection of a stream like this, but DENR requires it because a few years ago some politician somewhere wanted to appear strong on the environment.

[TaxRelief]

It is so hard to forget that there are NCDENR employees like those in the Roanoke River Basin (eastern NC) office, who are sitting around, wasting taxpayer dollars and trolling on and disrupting FReerepublic.com.

The NCDENR--except for a few good employees, is woefully mismanaged and has no concept of "customer service". Like most departments in NC government, it is staffed with an excess number of incompetent administrators--affirmative action hires and best buddy hires--and way too few engineers.

[TaxRelief]

I am sorry to say, Mr. Mitchell, that the NCDOT and NCDOH are too busy funding their "public transportation utopia" to give a hoot about the highway infrastructure of our state.

[mrustow]

Please forgive me for the interruption and for the typeface, but we need all FReepers, their friends, lovers, enemies, relatives, spouses, exes, acquaintances, strangers, debtors, creditors, colleagues, bosses and subordinates to sign The Federalist's petition to save Don Rumsfeld!

Thank you!

RUMMY Petition

We now return to the regularly scheduled thread.

[Phantom Lord]

The governor also recommended a $15 million appropriation for the proposed North Carolina Motorsports Testing and Research Complex in Charlotte. The facility would provide a test track for NASCAR.

Theres $15 million that can be cut instantly. Let the NASCAR and other race teams in NC (over 300) pay for their own test track.

[F.J. Mitchell]

I know. I just thought it was time to drop the sarcasm bomb on their parade. Severe collateral damage was the only results-one more 18 wheeler eating hole in our highway system.