Research Reports: 2003

The North Carolina Senate is considering a budget plan for the 2003-05 biennium that would compound the House’s error in raising taxes in the midst of a slack economic recovery. While proponents of the plan claim that it would help families with children, the reality is that it would impose higher taxes on family purchases of such items as clothes, furniture, candy, soft drinks, and health insurance — in order to fund a $726 million increase in state spending, or 5.1 percent.

Political observers may welcome the North Carolina House’s uncharacteristic speed in devising its 2003-05 budget plan by its previously announced deadline of Easter weekend, but state taxpayers are unlikely to view its nearly $860 million in extra taxes over the next two fiscal years as timely given the weakness of the state’s economic recovery. By working harder to identify budget savings, lawmakers could have avoided the tax increase without adversely affecting teachers, prisons, or other core services of state government.

The North Carolina General Assembly faces a critical choice about the state’s fiscal direction: whether to extend nearly $500 million in tax increases that politicians had previously promised were “temporary,” or to find additional savings to balance the FY 2003-04 budget. Since the taxes were originally imposed in 2001, North Carolina’s business growth has fallen short of the Southastern average and its tax rates remain among the highest in the region and the nation. And according to the Tax Foundation, North Carolina's state/local tax burden has risen to 25th in the nation in 2003, up from 36th in 1998.

North Carolina faces significant fiscal and economic challenges over the next two years. But it need not resort to higher taxes, a state-run lottery, higher debt, or gimmickry to balance its budget. Nor does North Carolina need to skimp on crucial needs such as education and highways. By setting firm priorities within state government, eliminating unnecessary or duplicative programs, and charging users of some services a reasonable price, state leaders can generate sufficient savings to invest in the future needs of the state.

North Carolina has now joined many other states and the federal government in debating solutions to the problem of rising costs in medical malpractice insurance. Evidence suggests that flaws in our tort laws and procedures are a major part of the problem. Proposed state legislation to cap “pain and suffering” awards and implement other reforms represents a good starting point, but state lawmakers should also look at a “loser pays” rule and judicial oversight of expert testimony to reduce the impact of junk science and quack medicine on jury deliberations.

Ground-level ozone, often referred to as smog, is front and center on the policy agenda of environmental groups and legislators at all levels of government. Over the past several years, high-profile studies published by the American Lung Association, the Public Interest Research Group (PIRG) and the Clean Air Network (a consortium of environmental advocacy groups) have claimed that ozone is having a severe impact on public health, both nationwide and in North Carolina. These reports have gotten a great deal of media attention but very little media scrutiny.

Gov. Mike Easley has proposed an annual cap on the growth of state spending in North Carolina that would be tied to personal income growth. In considering the idea, lawmakers should examine recent data that show state spending caps to be effective particularly if they rebate excess revenues to taxpayers and enjoy constitutional, rather than just statutory, authority. Without a spending cap, it is likely that fiscal discipline will disappear as the state’s economy recovers.

This fifth annual report on schools from the North Carolina Education Alliance shows that many school districts in the state made progress in 2001-02. It also shows that many of the failing school systems from 2000-01 were still performing in the failing range again last year. Official results of statewide testing are reported annually in the Department of Public Instruction’s ABCs of Public Education. End-of-grade tests for elementary students and end-of-course tests for high school students are the only exams administered statewide each year. As such, information about public schools is focused on the results of these exams. Grading Our Schools offers a different lens for studying test results and other performance data. As an additional information tool, we hope it will allow parents and taxpayers to better evaluate student performance in North Carolina’s public schools.

All middle school teachers in North Carolina have to teach physical science, which is required for middle school students in NC public schools. Unfortunately, over 80% have never taken a physical science course and many of those who have, have taken a course that is of no help to their students. Naturally, with their limited backgrounds, they hare heavily dependent on the materials they are given to teach from. In addition, in many instances these materials form the teacher’s own introduction to the subjects. It is especially important, therefore, that the textbooks and other materials that teachers and students are forced to use get it right.

North Carolina lawmakers are once again coming to Raleigh to grapple with a projected deficit exceeding $1 billion. A close examination of fiscal trends demonstrates that excessive spending, not inadequate revenue, is the cause and that the state budget continues to be bloated with wasteful or low-priority expenditures. Policymakers must show courage, be willing to apply fundamental principles, and target major areas of state spending for savings and reform.