Kudos to Gov. Pat McCrory and the General Assembly for moving budget talks forward and reaching an agreement on the spending number for the 2015-16 budget year.
Capping spending at 3.1 percent growth and a General Fund budget number of $21.735 billion should satisfy fiscal conservatives as a good starting point and an appropriate level of spending to cover core functions of state government while encouraging investments and continued economic growth.
Now that we have a number, let’s make a budget. By my calculations, there is $653 million in extra money moving forward.
First, let’s be honest in our accounting. Count all spending, including capital and repairs and renovation reserves, grants, etc. Keep it all lined up online. No accounting gimmicky allowed.
To make good on a longstanding and bipartisan commitment to transparency, adopt the Senate’s idea to set up a transparency portal for full online budgetary disclosure for all state agencies, counties, cities, and local education agencies. Funding for the portal should come through information technology modernization. Make the portal priority No. 1 for that funding.
Continue tax reform, and preserve the scheduled reduction in corporate tax rates from the current 5 percent rate to 4 percent in 2016 and 3 percent in 2017. Allow transformational tax reforms enacted in 2013 to continue to stimulate private investments in a recovering economy.
Reforms over the last few years have lowered taxes, removed regulatory barriers, lowered the unemployment rate, improved infrastructure, ensured a well-skilled work force and made North Carolina an economic leader in the Southeast and the nation.
More people are choosing to call North Carolina home. More people mean, first and foremost, we must fully fund enrollment growth in K-12 schools, community colleges, and universities. We also must fund enrollment growth in Medicaid. All of this will cost $450 million.
Make good on the promise to raise pay for beginning teachers to $35,000 per year and advance veteran teachers by one step on their salary schedule. This will cost $157 million. Make market salary adjustments for correction officers, law enforcement, and magistrates ($28.8 million).
Move state aquariums, science museums, state parks and recreational areas, and the state zoo from oversight by the Department of Environment and Natural Resources to the Department of Cultural Resources.
Maintain funding flexibility for local school districts for teacher assistants, textbooks, digital technology, driver’s education, and adjustments due to lottery receipts. Local control is matched with advanced training for principals and teachers entrusted with managing school systems and students.
Eliminate the $215 million annual transfer from the Highway Fund to the General Fund. Increase highway user fees by 10 percent, and use highway money for highway projects only.
Fund economic development as already agreed upon with $20 million allocated for the Job Development Investment Grant programs. Eliminate the remainder of economic development grants, refunds, credits, and special preferences proposed in the House budget, saving taxpayers $125 million and creating a fairer playing field for all N.C. businesses.
Just as spending restraint and streamlining government are fiscally responsible, so is saving. With the state’s reserve accounts depleted due to past management decisions, it is both necessary and prudent to build those reserves back up. There are long-neglected repairs and updates. The neglect threatens investments taxpayers have in capital assets.
An emergency fund is necessary to address damage from a possible natural disaster and avoid the threat of tax increases in case of an economic downturn. Add $500 million to the rainy day fund to bring the total to $1 billion. Put $145 million into reserves and renovations.
Any extra money this year should go into reserve accounts. It’s prudent, it’s conservative, and it’s smart.
In a compromise move, the Senate moved Medicaid reform out of the budget negotiations. Medicaid spending makes up 18 percent of the General Fund budget. It’s also the fastest-growing portion of the budget, so reform is important and worth at least a mention here. Reform Medicaid to decrease costs, ensure budget predictability, and provide quality care to recipients. Repeal the state’s certificate-of-need restrictions.
As priorities change, so should state spending. While spending increases are justified for things like enrollment growth and raising teacher pay, less important items should be eliminated. Writing a budget offers the opportunity to reset priorities.
Funding for the Biotechnology Center should come from private investors, saving the state $12.5 million annually. Grass-roots museums should require some kind of local match in the communities they serve instead of depending on 100 percent state funding.
North Carolina should join 17 other states that do not provide funding for public broadcasting, saving $9 million a year. Eliminate state funding for Planned Parenthood, which amounts to $175,000 every year.
Rather than pay for the N.C. Center for Advancement of Teaching in Cullowhee, transfer those resources to digital technology to engage more teachers more effectively across the state.
The state should offer challenge grants starting at 10 percent of total funding to encourage local support for historic sites. State parks should offset state expenses by charging a nominal admission fee, saving state taxpayers as much as $50 million a year. There are numerous places to find savings.
A budget sets priorities. Legislators can decide between special carve-outs for economic development or boosting pay for teachers? Save money to prepare for the next recession or fund a risky expansion of government?
These are tough decisions that bold leaders are entrusted to make. They’ve set North Carolina on a prosperous path the last four years. It’s worth taking the time to get it right this year.
Becki Gray (@beckigray) is Vice President for Outreach at the John Locke Foundation.