Courage should be in the budget

January 8, 2010 

— It's understandable if you are confused about how things are going in North Carolina and what's likely to happen with the economy and state budget next year. How could you not be?

In just the last few days, headlines have proclaimed that the stock market has reached a 15-month high and that manufacturing activity is increasing. Prominent state business leaders said earlier this week that things are looking up for 2010 as confidence in the economy is beginning to return. Sounds promising.

But the headlines also brought news that foreclosure filings in North Carolina climbed in 2009 to a record 63,341, almost 10,000 more than in 2008 and a staggering 45,000 more than just 10 years ago. The state unemployment rate hovers near a record 11 percent, and that's the average. It's more than 13 percent in many counties.

The chief economist at the General Assembly still expects slower-than-projected state revenue collections to create another budget shortfall this summer that could rise to several hundred million dollars. And that's after accounting for the $427 million raised by settling tax disputes with corporations in the state. That program was expected to bring in $150 million.

Then there is the $2.5 billion budget cliff facing the state in 2011-2012 as the federal stimulus dollars run out and a temporary tax increase expires.

That is the backdrop as 2010 begins. Add in the looming November elections and an understandably anxious electorate, and you have a recipe for extreme caution among officials, many of whom aren't prone to bold action in the best of times.

There is a growing consensus among lawmakers that one part of the solution to address this year's shortfall and the approaching budget cliff won't happen this year. Long-overdue tax reform will be pushed back to 2011 at least, despite the fact that expanding the sales tax base to services could raise more revenue to prevent further rips in the state's already tattered safety net.

More families have lost their homes since the General Assembly last met, more people are out of work and more people with mental illness cannot access the services they need. More schools are making due with bigger classes, fewer teacher assistants and fewer supplies. Medicaid rolls are increasing, and the already overwhelming need for affordable housing is rapidly growing.

Yet lawmakers seem ready to gamble that they can find a way to patch the budget this summer without confronting the anti-government demagogues or the entrenched special interests in Raleigh that oppose both changes in the revenue system and rustling the ground beneath their sacred cows.

The bet seems to be that they can ride this crisis out for a year and deal with all the problems after the election and after new legislative districts are drawn. But the problems are too big, and too many families are already hanging on by a thread.

More cuts to human services would be devastating. Many programs that help poor and working poor families were underfunded before last year's cuts were made.

Let's hope that legislative leaders and administration officials are working hard behind the scenes on a different path even as they are throwing up their hands in public.

If they can't muster the will to completely overhaul the tax code, surely they can manage to close a loophole that allows multistate corporations to avoid paying taxes in North Carolina.

Instead of trying to figure out which part of the sputtering mental health system to cut further, maybe they can spend some time looking at other ways to balance the budget, like redirecting some of the $170 million the state receives every year from the federal tobacco settlement.

Simply doing nothing and riding things out won't do it for thousands of families in North Carolina. It's time for lawmakers to do more than hope for the best. Time to show some courage.

Chris Fitzsimon is director of N.C. Policy Watch. This piece appeared in its electronic newsletter.

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