Legislators lacking revenue but not confidence

Editorial by News and Observer,May 10, 2014.

The legislative session after the passage of a two-year state budget is referred to as the “short” session because it is devoted mainly to budget adjustments, and it takes less time for lawmakers to complete their work,

But the session that opens Wednesday will be short for another reason – the state is short of tax revenue. How short isn’t really known. Preliminary estimates are at least $445 million.

North Carolina has had to deal with shortfalls before, but rarely one of this type. The deficit this time is caused by the Republican-led legislature’s feckless tax cuts and wishful revenue projections. It is a manufactured fiscal crunch that will perpetuate spending levels that don’t meet the state’s needs. Indeed it will create new needs as investments in infrastructure and education are put off yet again.

The Republican mantra in North Carolina has been that tax cuts that benefit mostly the wealthy and corporations will make the state more competitive. But that hardly seems the case five months after the tax cuts took effect. North Carolina is one of only seven states where revenues are growing slower than expected, according to the National Conference of State Legislatures. Thirty four states are on target to meet their revenue projections and nine are enjoying surpluses.

The first and largest effect of the shortfall will be the gap between the Republicans’ pledge to raise the paltry pay for teachers. The average salary for North Carolina’s teachers is the 46th-lowest in the nation and it trails all neighboring states.

Gov. McCrory and legislative leaders say they’ll find a way to give something to teachers who’ve received only a 1.2 percent statewide pay increase in the last five years. But how and how much will be part of the intrigue of this session.

Republicans have little choice but to do something to placate the state’s 95,000 teachers. They clearly deserve more pay, there is a deeper and broader cost to the state in not paying them more, and the flight of teachers to better paying jobs will accelerate as the economy improves.

Low teacher pay is not only an education problem. For Republicans it’s a major political problem. For that reason most of all, the General Assembly and the governor are likely to come out of this session with some form of teacher pay raise they can use to rebut their critics on the campaign trail.

The problem with helping teachers in this artificially constrained financial situation is that it likely will require taking from other parts of the budget. The University of North Carolina may endure another round of cuts to pay for a Republican deal with teachers.

But that trade-off scenario may be an optimistic one. The revenue shortage may get far worse. Hacking away at UNC and raiding reserve funds may not be enough to offset the shortfall. The teachers, after so many promises, may yet go away empty.

What may be most worrisome about the coming session is legislative leaders aren’t worried. Senate leader Phil Berger said last week that Republican policies have increased jobs, reduced unemployment and put more money into public education. It can be argued that those policies have stymied job creation and hidden the jobless by driving them out of the labor force. As for increased state investment in public schools, that would be news to local school superintendents and teachers.

Nonetheless, Berger said, “This session we intend to continue the work that we’ve engaged in the past three years and we intend to pursue further those policies that have proved successful over the past three years.”

The state is lacking tax revenue, but Republicans are not lacking confidence. Get ready for a long short session.