The good, the bad and the ugly about Cooper's first budget
Published March 3, 2017
by Brian Balfour, Civitas Institute, March 2, 2017
Democratic Gov. Roy Cooper released his first budget proposal this week, featuring a plan to expand Medicaid, aggressive pay raises for teachers, and tens of millions of taxpayer dollars for corporate welfare, but no tax increases.
Cooper’s spending proposal totals $23.5 billion, marking a 5.1 percent increase over the current year’s budget. The governor’s budget was met with instant criticism from legislative leaders. “The governor’s proposal is a step backward from this successful approach that has led to a booming North Carolina economy and helped generate close to 500,000 new jobs,” said Senate Leader Phil Berger.
The budget does, however, include some provisions that conservatives should like, along with proposals worthy of criticism and some items that should be dismissed immediately. Following is a breakdown of the good, the bad and the ugly in Cooper’s budget proposal:
· No new taxes. Cooper’s plan includes no tax increases, and in fact includes an increase in the child tax credit for FY 2018-2019 estimated to save families $52.5 million.
· Rainy Day Fund. The budget proposal would set aside more than $300 million into the state’s Savings Reserve Fund, a fiscally prudent move to better prepare the state to weather the next economic recession (although I’d like to see a larger number set aside). Another $100 million would be set aside into the Disaster Relief Fund.
· Funds for retiree healthcare liabilities. With roughly $30 billion in unfunded liabilitiesfor health coverage benefits for state retirees, any proactive measure to begin to rein in this growing obligation is wise.
· The topline number: $23.5 billion. This marks a 5.1 percent increase over the current year’s budget, a hike of more than $1.1 billion. For broader perspective, a spending plan of this size would be double the state budget of 20 years ago, and mark a 64 percent rise from 15 years ago. Recent budgets have seen annual increases in the 3 percent range.
· Corporate welfare. Tens of millions of taxpayer dollars are dedicated in Cooper’s plan to be handed out to corporate cronies. Such programs include: $30 million for the “NC Ready” program to subsidize ‘economic development’ projects, $20 million for the Manufacturing Site Infrastructure Development Fund, and an additional $5 million to the Main Street Solutions program that gives taxpayer dollars to government-approved “revitalization” projects. Such programs politicize our economy and empower politicians to pick winners and losers, rather than empowering consumers to determine which businesses succeed or fail.
· Breaks for Hollywood. Cooper’s plan not only includes $15 million of taxpayer dollars to go to Hollywood production corporations filming in NC this year, but would transition the grant program back into an even larger tax credit that would be estimated at $40 million annually. Click here to find out why these tax breaks are a bad deal for North Carolina.
· “Free” Community College. The NC GROW (Getting Ready for Opportunity and Work) program would be created effective 2018, and would fully subsidize NC students graduating high school with a 2.0 grade point average or better who enter Community College within 18 months of graduation. Students would also be required to apply for financial aid first, and the state subsidy would pay for any costs not covered by the aid. Presumably, those students not receiving any financial aid would have their entire costs covered by this program. Cooper’s budget projects the cost of this program in its first year to be $19 million, and would be covered by state lottery revenue. Click here to read why programs such as this are a bad idea.
· Ferry Funds. Roughly $7 million in new funds are directed to improvements to the taxpayer-funded ferry system. This increased burden on taxpayers serves as another reminder that the ferry system should be privatized.
· Medicaid Expansion. The governor’s budget proposal includes a provision to expand Medicaid, with a projected state price tag of $1.4 billion in the first year to add an estimated 624,000 people to the already overcrowded system. According to Cooper’s budget document, “no existing general fund tax dollars” will be needed to pay for the expansion. Instead, “provider contributions” would be sufficient to cover the expansion, according to the spending plan. Details of the “provider contributions” were absent from the budget document. Click here to learn why expanding the failed welfare program is a bad idea.
· Opportunity Scholarships capped. While providing funding to cover opportunity scholarships already awarded, Cooper’s budget explicitly states it “anticipates no new scholarships.” Meanwhile, the waiting list of parents wanting their children to be able to get into the program will be denied under Cooper’s plan.
· Museum, Arts and Symphony Money. The budget plan expands by millions funding for various museums, “grassroots arts” programs, and the NC Symphony (in addition to their annual appropriations). Museums and art programs are nice to have, but should be financed by voluntary support, not taxpayer dollars.