Research Reports: 2002

With news of a worsening state budget and a weakened state economy, Locke Foundation analysts have updated last year's alternative budget with new projected savings and tax changes for FY 2002-03. The resulting Changing Course V budget would eliminate the deficit, repeal last year's hikes in sales and income taxes, stimulate the economy through additional tax relief and highway investment, and protect highpriority items such as public safety and classroom teachers.

With news of a worsening state budget and a weakened state economy, Locke Foundation analysts have updated last year's alternative budget with new projected savings and tax changes for FY 2002-03. The resulting Changing Course V budget would eliminate the deficit, repeal last year's hikes in sales and income taxes, stimulate the economy through additional tax relief and highway investment, and protect highpriority items such as public safety and classroom teachers.

The American Lung Association's annual "State of the Air" reports are treated as scientific and informative by the state news media. They are neither. They use outdated information that reflect changing weather patterns rather than real pollution and are biased against jurisdictions like North Carolina with high numbers of ozone monitors. As a result, the reports supply propaganda for lobbyists for heavier regulation but do a great disservice to science and the general public.

In recent months, public officials have made a range of statements in an attempt to explain persistent state and local budget woes. Many of these assertions do not square with the facts. A collection of graphs and tables shows clearly that North Carolina government is out of line with neighboring states in spending, employment, and taxes. Moreover, revenue growth outpaced personal income growth during the 1990s, while debt service costs are projected to triple over 10 years.

A 2002 survey of North Carolina’s most politically active business executives found that they did not necessarily agree with the current direction of public policy in the state. Business leaders from every region answered questions about fiscal policy, education, transportation, tax rates, regulation, and ways to improve economic competitiveness. They disagreed strongly with legislative decisions to raise taxes.

To date, debate over the proposed Clean Smokestacks bill has focused primarily on the purported air-quality benefits, which would be negligible. Little attention has been paid to the cost, which could be substantial given North Carolina's already high electricity and tax rates compared to its neighbors'. This study estimates the impact on such institutions as school districts and manufacturers. The higher prices and lost jobs must be weighed against any potential benefits.

A new study in the Journal of the American Medical Association alleges a significant increase in lung cancer risk for those exposed to high-levels of particulate matter, commonly called soot. In North Carolina, the news media and others have cited the study to boost support for the proposed Clean Smokestacks bill. But according to expert analysis, the study is so flawed that it should have been rejected by the journal. Moreover, it does not establish a case for new regulation.

Flawed studies and ignorance about North Carolina air quality have given lawmakers and the general public an inaccurate picture of trends in ground-level ozone, or "smog," in some cases exaggerating public exposure by a factor of 10. This study reexamines air-quality data from monitors across the state, concluding that exposure to dangerous ozone levels is surprisingly rare - and is dropping even without passage of the proposed "Clean Smokestacks" legislation.

North Carolina's approach to economic development policy has failed, with the state’s high tax burden, lack of industrial diversity, and hostility to entrepreneurial effort contributing to a painful decline in employment and competitiveness. Public policymakers should rethink their reliance on central-planning models and schemes to subsidize specific businesses or regions. Instead, the state should lower taxes and avoid costly regulatory mistakes like the "Clean Smokestacks" bill.

By the Numbers 2002: What Government Costs in North Carolina Cities and Counties is a publication of the Center for Local Innovation, a division of the John Locke Foundation. Its purpose is to inform North Carolinians about their local governments and promote debate and discussion about the future of city and county fiscal policy in North Carolina. It is not intended to advance or impede legislation before local, state, or federal lawmaking bodies.