Governor's budget proposal is a cautious step toward rebuilding NC

Published March 24, 2021

By Alexandra Sirota

The Governor’s budget proposal is a cautious next step as North Carolina begins the serious work of not just responding to this pandemic and downturn, but rebuilding afterward as well.

By focusing on people’s well-being now in several critical areas — boosting income, supporting access to health care, and committing to investments in public institutions — it demonstrates the potential of state dollars to support a more equitable recovery.

And it makes clear that state dollars alone won’t get us to the North Carolina we could be. Federal dollars available from the American Rescue Plan are urgently needed to meet the scale of hardship and priority investments — but so is a long-term plan for our state to align our tax code to support the common good.

By passing on popular options to raise the tax rates paid by high-income taxpayers and profitable corporations, it misses a critical moment for getting NC on a sustainable path to more equitable outcomes. After a devastating year on top of a devastating decade, the harm to people, businesses, and communities of starving our public institutions of the resources they need to respond, innovate, and deliver is clear.

What the Governor’s budget does do on tax cuts is an important contrast to the proposals that have been introduced just this week by legislative leaders that would advance tax cuts for big companies and poorly targeted income tax cuts. The Governor’s budget would provide tax breaks for people who are struggling with income that isn’t keeping up with the cost of living and that recognize their well-being can fuel a stronger recovery.

Governor Cooper proposed a series of bottom-up tax cuts for working families that will effectively drive support to those most hurt by the pandemic, who are currently being bypassed in a recovery that has already reached very high-income North Carolinians.

A state Earned Income Tax Credit will reach more than 900,000 families, primarily with children, and boost the value of the federal credit to ensure that the earned income in households is available to meet basic needs and support children’s healthy development.

This budget proposal drives state dollars to people by recognizing with pay increases the essential job that public sector workers are doing to deliver vaccines, launch and update responsive programs to help communities recover, and educate our next generations from early childhood through K-12 and higher education.

It recognizes that our healthy economy depends on the health of people by closing the Medicaid coverage gap and making affordable health care accessible to more people. It’s a move that this year will result in even greater support from the federal government through a provision in the American Rescue Plan.

And while the proposal missed the opportunity to advance a vision for how to integrate equity — the principle that people and communities get what they need to thrive and that barriers are removed — into every aspect of programming and services, it makes progress to staff up agencies so that they can better assess the needs in communities, work to remove barriers to opportunity, and ensure more inclusive responses to our challenges.

The Governor’s budget proposal uses the majority of unreserved cash balance but only a small portion of year over year revenue growth to expand services in key areas.

The budget leaves $1.7 billion unappropriated. It also doubles the state’s set aside to the Rainy Day Fund, which keeps more dollars on the sidelines and harder to access to meet the urgent needs of today.

This $2.2 billion could have increased our commitment to making sure child care and education is affordable, made faster progress toward the delivery of a sound basic education for every child, and ensured that the public health infrastructure in every county has the capacity to inform and serve the needs of communities.

The Governor plans to release details on the priorities for federal aid to the state made available through the American Rescue Plan. These dollars are urgently needed to meet the large scale of need in communities and repair the damage to our public infrastructure due to years of under-investment and neglect.

It is these public institutions that hold the promise of connecting every community to opportunity and providing a way to ensure that people have what they need regardless of where they live or who they are.

The common good — not bottom lines — must guide our public policy decisions.

A final assessment of the Governor’s plan for North Carolina’s rebuilding efforts needs to wait until the plans for the American Rescue Plan are released. In the meantime, it should be clear that to sustain a just recovery, North Carolina will need to combine available federal and state funds today with a plan to align our tax code to the needs in communities.

There is simply no way to rebuild without addressing the underlying inadequacy of our current tax code and the damage it has done to the delivery of critical public services that keep us healthy, safe, and connected.

In this first proposal of the budget season, the Governor has shown that we can do better than what we have done in the past. It will be critical to show that we have a much higher standard than that for our collective future.

Alexandra Sirota is the Director of the Budget & Tax Center, a project of the NC Justice Center.