RALEIGH—Gov. Mike Easley signed a $14.8 billion budget Monday that will fund state government through June 2005.
Approved just before the deadline of midnight, the measure has been hailed by some observers as a compromise that protects public services and adequately funds the ever-increasing cost of public education. Other lawmakers, however, contended it continues the state’s pattern of fiscal irresponsibility.
The Senate approved the budget on a party-line vote of 25-19. The House voted 76-39 in favor. Arguments in both chambers included heated debate about the tax burden in North Carolina and the impact of the budget on a struggling state economy.
Sen. Patrick Ballantine, R-Wilmington, said, “This plan calls our fiscal integrity into question. We have a spending problem in North Carolina, not a revenue problem.”
A 3 percent increase in General Fund expenditures is scheduled for the fiscal year, which began Tuesday, and the rate of spending will increase to 5 percent by 2005. Higher sales and income taxes, by $427 million and $124 million respectively, are also on the horizon.
Lawmakers who supported the budget highlighted a commitment to keep social and education spending apace with population growth. Sen. Charlie Dannelly, D-Charlotte, said, “ It pains me when we talk about cutting. The invisible people who think they have no voice here on the floor are the ones that suffer.”
Included in the plan are pay increases for teachers, averaging 1.8 percent, a onetime bonus of $550 for state employees, and a $113 million contribution to the State Health Plan system. A second-grade class-size reduction initiative is budgeted for $25.3 million. Another $46.6 million is allotted for 518 new university positions.
But John Hood, president of the John Locke Foundation, indicated the budget includes much more that taxpayers may find objectionable.
“The governor and the legislature aren’t raising taxes, hiking fees, and raiding trust funds to pay for the core functions of state government, such as law enforcement and public schools. Taxes are rising to finance public assistance spending, to subsidize researchers and nonprofits, and to pay off bond issues that were originally sold to the public as not requiring any tax increases,” Hood said in a statement released to the press.
The bulk of an authorized $249 million increase in the cost of servicing the state’s debt over the next two years is atttributable to the passage of a $3.1 billion bond issue in 2000 for university and community college construction. A prominent element of the campaign for the bonds was that, according to officials, it would not result in a tax increase.
Most of the new revenue in the 2003-05 plan comes from a two-year extension of the “temporary” half-cent sales-tax increase originally enacted in 2001 and once set to sunset Monday. On the spending side, included are subsidies to nonprofits through such means as Commerce Department grants to “economic development” agencies and continued payments to the Golden LEAF Foundation — expenses that surpass the entire amount of new taxes, fees, and fund diversions in the budget.
Senators who defended the budget said it was a fair compromise. Sen. Tony Rand, D-Fayetteville, argued that high-quality public services are vital to attracting new businesses to North Carolina and staying economically competitive with other states in the Southeast.
“The answer lies in worker training, in helping people,” he said.
Senate Republicans asserted that passing the proposed budget would only worsen any potential shortfalls in the coming years.
“The bottom line is this is an unbalanced budget. We have no legislative will to look beyond the day,” said Sen. Hamilton Horton, R-Winston-Salem.
The largest single area of greater spending over the next fiscal biennium comprises Medicaid and other health and service programs. In addition, the overall tax burden will increase for the third straight year. Yet difficult economic times have not led to an end of government expansion.
“Anyone who says spending growth has been limited has not read the fine print,” said Sen. Fern Shubert, R-Union. “You’ve got to live within your means. At some point, there is going to be a day of reckoning. The longer we put it off, the more painful it’s going to be.”
Jones is an editorial intern at Carolina Journal.