A short, busy, largely successful session

Published July 23, 2016

By Becki Gray

by Becki Gray, John Locke Foundation and NC SPIN panelist, July 22, 2016.

The N.C. General Assembly’s 2016-17 short session is over, the legislature has adjourned, and everyone is back in his or her district — either planning retirement or campaigning.

A total of 486 bills received some kind of action; 113 had become law (as of July 18), with 28 sitting on the governor’s desk. Now that we’ve caught our breath and the dust has cleared, what happened?

In short, a continuation of the transformational reforms that began in 2011 and have resulted in a smaller state government, tax cuts, education that works, and record economic growth.

As one of the fastest-growing states in the country, with an average of 281 people moving to North Carolina every day, pressures on the state budget grow. The General Fund budget for fiscal year 2016-17 is $22.34 billion.

Key questions include: How fast does it grow? Is spending in line with growth? Spending, with a 2.8 percent increase, was kept under the combined rate of inflation and population growth.

More money was put into savings than ever before. The state now has more than $1 billion in reserves, bringing the total of our savings to 7.5 percent of the General Fund budget for the first time in history. Lawmakers paid down debt, with $1 billion going toward the state’s $8.1 billion outstanding debt and $38 million toward a bill left over from the days of Jim Hunt’s administration. (He left office in 2001.)

The highest priority in the budget went to teachers and state employees: 62 percent of recurring money went to salaries. Teachers got another average 4.7 percent increase this year, bringing the total increase under Gov. Pat McCrory’s administration to 15 percent.

The average pay for a North Carolina teacher will top $50,000 in the next year. It will increase to $55,000 a year over the next three years. That increase moves North Carolina to the highest teacher pay in the Southeast.

State employees received a 1.5 percent pay increase, with many now eligible for additional pay based on merit. Retired state employees got a 1.6 percent cost-of-living bonus.

Since 2011, North Carolinians have seen their taxes cut. The personal income rate has been reduced. The corporate rate has dropped from 6.9 percent to 4 percent and is scheduled to drop again to 3 percent. The estate tax is gone. Tax savings total approximately $3 billion a year since 2011.

There’s more this year. The amount of personal income freed from taxation through the standard deduction (or zero tax bracket) increases from $15,500 to $17,500, benefiting the middle class and small businesses the most. In addition, sales taxes were broadened, and the personal income tax rate goes down again. This results in a $605 million net tax cut for this year alone.

Education spending increases by $512 million over last year’s budget and represents 56.8 percent of the total General Fund budget. Education is clearly a priority, and this budget focuses that spending where it matters, ensuring every kid has every opportunity to succeed.

In addition to raising base teacher pay to a competitive level, there are also incentives and rewards for the excellent high performers we want in our classrooms. A two-year program of bonus and merit pay include $10 million to be split among third-grade reading teachers with success records of producing strong readers.

Advanced placement, International Baccalaureate, and industry-certification teachers can earn $50 for every student who meets thresholds of competence and mastery of subject matter. Ten school districts will participate in a three-year program with extra bonuses for teachers who take on extra work, from managing a few extra students to mentoring colleagues to overseeing information technology records.

Lawmakers expanded the successful and life-changing opportunity scholarships, with a 10-year commitment to expand the program by 2,000 additional kids every year and expand the funding from the current $10 million to $25 million next year and $145 million by the 10th year.

This commitment to stability, consistency, and sustainability gives parents confidence to enroll children in schools of their choice. Those children can enjoy opportunities they never imagined, and parents can watch their kids flourish.

There are more than 500 failing schools in North Carolina whose students are falling farther behind every day. Traditional methods to help have failed. No amount of money, no mentoring programs, no edicts from the N.C. Department of Public Instruction have helped.

These kids have been stuck with no way out, until now. A special designation called an Achievement School District has been created for five of North Carolina’s worst schools. Turnaround teams of education experts with proven records of success will have the flexibility to make changes to turn the schools around. In addition, districts with an achievement school can establish an innovation zone that offers other struggling schools the flexibility found in charter schools to innovate and improve.

The General Assembly tackled what to do about coal ash. Removing all coal ash from all current storage basins immediately — as environmentalists have insisted — would have cost Duke Energy customers $10 billion in increased energy costs.

Instead seven of Duke’s 14 coal ash sites will have all water removed, and the dry ash will be capped in place. An annual inspection will follow to determine that the sites are sufficiently strong, in good repair, and operating correctly. Three of the sites also have been designated as recycling centers for ash to be used for concrete, eliminating the need for expensive treatment and removal.

Property rights had been violated for years for hundreds of homeowners in the path of land designated for future highways. The violation left them with nearly worthless land, no compensation, and lots of frustration. A successful lawsuit (aided by a JLF friend-of-the-court brief) restored property rights for those in the path of highway corridors linked to North Carolina’s Map Act. Legislative action by the General Assembly nullified the Map Act once and for all.

Debate continued over the key to economic prosperity: economic development linked to targeted incentives and corporate welfare versus economic growth based on free markets. Some continue to insist on carve-outs and breaks for a few at the expense of the rest of us. The state Farm Act extends the sunset on a 25 percent tax credit for building a renewable fuel facility, giving a $50 million tax break to BioChemTech in Sampson County. Plus the $30 million flimflam film grant was funded again. Ugh!

On the other hand, this General Assembly cut funding for longtime state-funded economic incentives programs. Lawmakers cut the Job Development Investment Grant program by $10 million and the OneNC Fund by more than $400,000.

They fought back efforts for a state-level New Markets Tax Credit. Removing barriers for more people to invest money as they choose is now possible under relaxed requirements for crowdfunding.

Is all this working? After years of revenue shortfalls, there is a $425 million revenue surplus for the fiscal year that just ended. North Carolina has beaten the national and regional averages in gross domestic product, job creation, and per-capita income growth since the adoption of conservative budgets in 2013. About 252,000 net new jobs have been created in the state since Gov. McCrory took office in 2013.

Unemployment rates are down in all 100 N.C. counties. According to the latest U.S. income numbers, North Carolina has met or exceeded the U.S. per-capita income growth rate for 10 consecutive quarters. That’s the best stretch of comparative income growth since 1996.

All in all, this has been a very good session for fiscal conservatives. Now, what’s in store for 2017? Keeping the momentum going toward a strong economy with people working, businesses growing, and more freedom for all.

Becki Gray (@BeckiGray) is vice president for outreach at the John Locke Foundation.

https://www.carolinajournal.com/opinion-article/a-short-busy-largely-successful-session/

July 23, 2016 at 9:38 am
Bruce Stanley says:

It's quite a success story! Hope the media doesn't derail it all with non-stop HB2 frenzy.

July 27, 2016 at 1:55 am
Pat Kelley says:

I don't think you can blame the HB2 frenzy on the media ... everyone from Coach K to the NBA to esteemed entertainers to corporate CEOs agree it's a stupid law and deserves all the derision it is getting across the state, country, and world. You'll see in November how many voters agree ... trust me.