McCrory’s budget sets up a debate over how to pay for it

March 21, 2013 

State employees, teachers, Democrats and others unnerved by the idea of Art Pope’s drawing up the state’s next spending plan for Gov. Pat McCrory got a look at the 324-page document Wednesday and must have felt sheepish about dreading its contents.

Rather than terrifying those who rely on or support state government spending and programs, the $20.6 billion budget maintains the status quo and makes changes around the edges.

This is a budget notable mostly for spending more on the necessary work of fixing state buildings and its prudent setting aside of extra money in the state’s reserve fund.

How could Pope – the nemesis of progressives, supporter of conservative think tanks and ally of the Koch brothers – produce such a moderate plan? Hadn’t Pope, McCrory’s surprising choice as state budget director, been itching to fundamentally cut government’s costs and functions?

But those questions miss the wider picture. Pope doesn’t need to change government with a budget. He already has changed it through his heavy investment in the last two elections that put Republicans in control of the House and Senate. They will make the dramatic, ideological moves. McCrory, meanwhile, will offer a sensible plan that preserves his moderate image and his statewide electability.

A modest proposal

McCrory’s budget proposes a modest but long overdue raise of 1 percent for state employees, including teachers. It asks for 1,800 more teachers but blunts the gain by cutting 3,000 teacher assistants. It spends more where it will do the most good by providing 5,000 additional pre-kindergarten slots.

The budget saves money by closing five prisons in response to a falling inmate population, but it does little to foster new jobs in the rural areas where the loss of prison jobs will be felt sharply and where unemployment remains above the state average.

This budget may be dull, but it’s politically shrewd. It may also end up being largely irrelevant.

Senate President Pro Tem Phil Berger described McCrory’s budget as an “outline.” House Speaker Thom Tillis welcomed “many aspects” of the plan but only specifically praised the $10 million it proposes to compensate victims of a defunct state-run sterilization program. That’s a good allocation but only a small line in the overall budget.

Vague reception

The legislative leaders’ reception suggests that the drama in state budgeting won’t be in what’s spent, but in how it’s paid for. McCrory’s budget may ask for more of the same, but it will be a lot different if it’s supported by a major downward shift in the tax burden.

McCrory has endorsed eliminating the estate tax, which applies only to estates valued over $5.25 million. Next will come efforts to cut or eliminate income taxes with the difference being made up by a broader – and more regressive – sales tax.

On Thursday, Sen. Dan Clodfelter, a Mecklenburg Democrat, opened the move to change the state’s tax structure. He introduced Senate Bill 394, which promotes itself as “a bipartisan tax reform plan to promote economic development in North Carolina.”

The bill, co-sponsored by two Democrats and six Republicans, calls for lowering rates on the corporate and personal income taxes and the sales tax. It proposes to offset the cuts by eliminating exemptions and expanding the sales tax to more services. But Republicans expect to do more than that to taxes. This “bipartisan” bill may be clearly partisan when it reaches its final form.

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