Archives: John Hood

A new survey of North Carolina’s most politically active business executives suggests that they disagree with the current direction of public policy in the state. A sample of over 600 respondents from every region of North Carolina answered questions about fiscal policy, education, transportation, tax rates, regulation, and ways to improve economic competitiveness. This report provides data not only from the statewide sample, but also from six regional subgroups: the Research Triangle (RTP), the Piedmont Triad (WNC), the Charlotte area, Northeastern North Carolina, Southeastern North Carolina, and Western North Carolina.

State legislators are currently considering proposals to issue hundreds of millions of dollars in additional debt without seeking voter approval. The billions of dollars worth of bonds and other debt already approved since 1996 have more than quadrupled the state’s debt service and represent as much as a third of the fiscal impact of the tax hikes passed by the General Assembly since 2001. It’s no wonder politicians are wary of asking voters for more. But that’s why they should.

As the 2004-05 budget process continues, policymakers should use regional and historical benchmarks to identify where to look for savings. Among major budget items, North Carolina spending on K-12 education and law enforcement is at the regional average but its Medicaid and higher-education expenses are higher than in comparable states. Reasonable restraint would save enough money to repeal last year’s tax hikes and catch up on deferred repairs and renovations.

For the first time since 2001, Gov. Mike Easley is proposing a budget plan that does not include new tax increases. However, his 2004-05 plan does contain hundreds of millions of dollars in new spending financed by previous, costly tax hikes on North Carolina families and businesses. A better fiscal choice would be to eliminate low-priority items from the budget and repeal prior sales and income tax increases. The best choice would be to implement JLF’s Freedom Budget plan.

The North Carolina General Assembly is returning to Raleigh for a special session on economic development. Rather than rush to push targeted tax credits and incentives for a few, lawmakers should pursue a broader examination of the factors under their control that really influence state economic growth. The wrong direction is to enact any set of policies that increase the state bureaucracy or the ranks of lobbyists seeking to arrange special “deals” for their industrial clients.

It‘s been a decade since a contentious merger of three Guilford school districts, and now merger disputes are underway in Orange and Cleveland counties. Unfortunately for merger advocates, the evidence is thin that creating larger school districts improves efficiency or learning. Indeed, some studies suggest that district mergers result in more non-instructional spending and actually hurt student achievement, particularly for those in lower-income communities.

A House-Senate compromise budget for the 2003-05 biennium will cost North Carolina taxpayers another half-billion dollars a year and do little to stem the government’s long-term growth. General Fund spending will actually rise 3 percent in FY 2003-04 and 5 percent in FY 2004-05, with most of the increase over the next two fiscal years concentrated in health and human services, debt service, the UNC system, and subsidies to nonprofits. North Carolina deserves better.

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.