Heard on the Street Posted: Thursday, August 6th, 2009 The best they could do?
How will the people view the budget bill passed by the General Assembly this week? That’s a question Rep. Cullie Tarlton (D-Watagua) posed during the debate and one we asked on this week’s NC SPIN program. By the way, we ask each of our panelists to give the legislature a letter grade on this budget. Be sure to catch their responses. Our entire show is devoted to the budget this week.
Nobody seems to like this budget very much and that probably is to be expected. Legislators had to make some hard choices about spending and raising revenues. But few of them seem proud of their work. Repeatedly, their response has been “this is the best we could do.”
We understand what they are saying. Politics is the art of compromise but this compromise budget isn’t close to being art. Budget critics frequently get lectures that we just don’t understand what it takes to get enough votes in either the House or Senate to pass a budget. Compromises must be made in order to secure a needed vote or votes. We’ve heard this song before.
Was it really the best they could do? We give our answer to that question in this week’s My Spin. Read it and give us your response.
Most North Carolinians haven’t paid much attention to the budget and may not until September 1, when their sales taxes increase. Speaker Joe Hackney says people won’t mind the increase because they will understand all the cuts lawmakers had to make. Hackney, a fine person and a good Speaker, needs to get outside the beltline more often. North Carolina’s sales tax is slated to become the fourth highest in the nation, according to a WRAL story, and this includes some states where there are no income taxes and the sales tax is the primary source of revenue.
We haven’t taken any scientific polls but strongly suspect that the average citizen won’t be impressed with this budget. For starters, few will believe that legislators made serious cuts and eliminated fat from the budget. Too many sacred cows were allowed to continue grazing on green state cash. Most North Carolinians have had to carefully scrutinize their budgets and cut down or cut out expenditures they might enjoy but can no longer afford. They wanted no less from their leaders.
Repercussions from this budget have yet to register. Even though Governor Perdue was successful in restoring some funding to public education, the legislature still cut more than $225 million to local school systems. K-3 teaching positions and assistants were protected but the cuts will most certainly cause increased class sizes in grades 4-12 and result in teachers losing jobs. Senate Minority Leader Phil Berger says as many as 6,000 teachers will be cut. We have no way of knowing whether that is accurate or not. The legislature passed the buck to school systems to do the dirty work. Some of that, it must be explained, was at the request of local systems. If cuts were coming, they said, they wanted to be able to choose their poison rather than having it dictated from Raleigh.
NCAE, the North Carolina Association of Educators, says they will begin a district-by-district campaign to lobby against cutting teacher jobs. As children prepare to go back to the classroom in the next few weeks this topic could become very interesting. Look for more discussion on NC SPIN.
We know that Health and Human Services took a major budget cut. Mental Health again will be the victim of budget cuts. Some of it can be explained because so many spending abuses and management problems have been reported that few people have confidence in DHHS. But a lot of the problem is the mentally ill, Medicaid patients and others have few effective advocates.
John Locke Foundation president and NC SPIN panelist John Hood makes a good point in saying that we really don’t understand the true impact of this budget. The document is confusing, whether deliberately or not. It was hard to compare previous budgets because some items are now off-budget. Some of these changes were made to accommodate federal stimulus funds, we understand, but it may be some time before the dust settles on this 233 page document that lawmakers received Tuesday morning and voted on that same day. So much for promises to allow ample time to digest the budget.
The budget was passed pretty much along party lines. Republicans, who were essentially left out of the negotiations for the budget, sat on the sidelines and said “No.” We understand their frustration (which is real) but if they are to become a serious player in the debate they must do more. We would love to see their list of priorities to cut and how much savings they would generate. We would like to have seen their own version of the budget. Yes, we recognize they have trouble getting media attention but there are examples where they are getting exposure. Senate Minority Leader Phil Berger frequently releases statements and his Daily Press Clips are widely read. Content is the key.
Newt Gingrich built the model for minority political parties with his “Contract for America.” He told us what he would do when Republicans controlled the House and he was able to sell his vision. If you want to capture voters today you have to tell them what you will do. Blogs, Twitter, and web sites are great ways to communicate today. But it has to be more than “no.”
How would you grade this budget and why? Let us hear from you.
Now comes the push for adjournment, the most dangerous time in the entire legislative process. The pace of action escalates dramatically in this compressed time. It is this period when, in a rush to go home, all kinds of mischief can slip through the cracks. Sessions convene, then quickly adjourn for committee meetings, then reconvene and pass legislation before it is even committed to paper.
Last we heard the legislature will try to clean up their work and adjourn next week. It will be hard to do but perhaps they can achieve this by Thursday or Friday of next week.
UNC the big budget winner
The biggest winner we can note at this point is the University of North Carolina system. In a year of budget cuts they actually ended up with $23 million more budget than last year, the only agency we’ve found that netted a budget increase. And yes, they kept the in-state tuition for out-of-state scholarship students, costing taxpayers $12 million.
Why? One friend swears it is because our universities have bigger shrimp and better football and basketball tickets. Pretty accurate. Make no mistake. The UNC lobby is the most effective in our legislature. UNC President Erskine Bowles spent a lot of time in the legislature last week calling on lawmakers. And as long as Senators Tony Rand and Marc Basnight are in power, UNC is likely to continue to win big at the budget table.
It doesn’t hurt that UNC Chapel Hill’s Citizens for Higher Education contributed nearly $500,000 to legislative campaigns in the 2008 elections. Despite what lawmakers say, they know when they have gotten money from this PAC. Even though this isn’t an election year the Citizens for Higher Education PAC has raised $170,000 in the first half of the year.
Donors pay “dues” of $2,500 per year. Some of the names you might recognize who have contributed so far this year include: Wilmington developer Bill Cameron, Cherokee Investment Partners’ Tom Darden, Ruddick Corp’s Alan Dickson, Franklin Street Partners’ Bob Eubanks, former UNC Business School Dean Paul Fulton, former NC Biotechnology head Charles Hamner, former Lowes’ CEO Leonard Herring, philanthropist Tommy Kenan, former RBC head Kel Landis, Basnight close friend Fred Mills, former IBM exec Paul Rizzo, UNC Hospital head Bill Roper and his wife, former CP&L head Sherwood Smith and others. Read the complete list of donors to Citizens for Higher Ed through July 31 from the State Board of Elections report.
Special session?
First we hear there will be a special session in October, then we hear not. The budget document calls for yet another study on our tax code, purportedly to recommend changes. There have already been many blue ribbon studies on the subject causing some to question why another one might matter.
The fact is that our tax codes must be revised. They were originally developed when our state’s economy was built around agriculture and manufacturing. We agreed with the House that reforms need to be carefully considered so as to be fair. If there are to be exceptions and exemptions there must be sound reasons (not just good lobbying) for doing so. So it doesn’t make sense to rush into such a reform. But neither is it good leadership to allow this outdated system to continue indefinitely.
The question is when we can expect something to be done, legislation to be proposed and considered? If not October, when? Some are saying lawmakers may tackle this in the short session but recent history would indicate few big issues are tackled during short sessions. Some say the reforms will likely see a reduction in both income and sales tax rates and might be a plan for incumbents to run-on. Others say that putting makeup on a pig still doesn’t make her a beauty queen and that it won’t take long for voters to discover a tax increase in disguise. Stay tuned for more on this.
Video poker regulation might be included in this reform discussion. Some are turned off by the thought and give this as reason why no special session should be called. Proponents of video poker claim they are gaining ground with the public and cite a Public Policy Polling survey to show that 79 percent believe the state should regulate video poker, 73 percent said they see no difference between playing the lottery and video poker and 76 percent say the state should regulate and tax video poker.
One observer noted that the lottery legislation that was passed several years ago allows our NC Lottery to expand into video poker. While this might not be what video poker advocates would ideally want this may be how this issue ends up, with our lottery taking over video poker.
Disclosure: Video poker advocates are running ads in support of regulation on NC SPIN.
Legislation moves
While the focus has been on the budget the Senate took action on several bills this week, notably the Racial Justice Act. The Senate concurred with the House version and the bill goes to the Governor.
The Beach Plan measure passed the Senate and final concurrence from the House. This could become law before North Carolina faces the next serious storm. It may not be perfect but most agree is a better solution to coastal property insurance than what is currently in place.
The Transit Tax bill also passed the Senate and awaits concurrence on a minor change by the House. This bill will allow voters in Wake, Durham, Orange, Guilford and Forsyth Counties a vote to impose a half-cent sales tax addition so as to begin development of high-speed rail service. Johnston and other rural counties would vote on a quarter-cent tax increase for public transit service.
Next week NC SPIN will discuss these bills, other significant bills that have passed this session and those likely to be left for next year.
Corruption on the menu
Aside from the state budget, the big stories coming out of Raleigh all surround public corruption.
A media circus this morning at the Federal Courthouse in Raleigh did not disappoint news reporters. As we circulated earlier this week, Rielle Hunter, former mistress of NC Senator John Edwards, was seen entering the courthouse this morning at 8:30. It is suspected that Hunter is being questioned regarding expenditures from the Edwards for President Campaign. It is rumored that the feds believe Edwards illegally transferred campaign funds for his personal use. Read the WWAY-TV in Wilmington concerning this fire.
There is a lot of buzz about Representative Nick Mackey, especially after the State Bar released a report indicating he was under investigation for not paying his taxes.
Sales tax holiday
Despite the budget problems our state is experiencing the annual holiday from sales tax begins tonight at midnight. Back-to-school buyers and others can save on selected items costing up to $3,500 by purchasing this weekend. Last year the loss of revenue to the state was estimated to be in excess of $19 million. This year retailers report back-to-school sales are below last year. It will be interesting to see if consumers were just waiting for the tax-free weekend. You’ll know if you can’t find a parking space at the mall.
ABC’s results released
Was it just happenstance or a carefully timed plan to release the results of the State ABC testing program the day after the budget passed and most attention was focused on that story? At any rate the results for
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