Policy Report

An Alternative Budget: Response to the governor’s proposed budget for the upcoming biennium

posted on in Government Reform, Law & Regulation, Spending & Taxes
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The John Locke Foundation is continuing its tradition, started in 1995, of offering an alternative to the governor’s budget recommendation.

Consistent with prior years, this JLF budget focuses on core government. This budget spends less in both years of the biennium than the governor’s, and only increases spending by 2 percent from the last fiscal year.

Even in a year when personal and corporate income taxes were cut, state tax revenue has grown significantly faster than budget officials and legislative staffers had predicted. Instead of spending this unanticipated revenue on special interests, this budget focuses on fiscal discipline and funds necessary government operations while saving for unforeseen expenses. Under our proposal, General Fund spending grows by $567 million over the next two fiscal years, to $22.1 billion in FY 2016-17. That’s an annual average growth rate of 1.3 percent, far below inflation and population growth. We also propose adding $620 million to the state’s savings reserve over the biennium and $520 million to the repairs and renovations reserve.

The most significant differences between our budget and the McCrory proposal involve the decision-making process. Each of this budget’s recommendations is based on prioritizing core functions of government. In education we focus on raising the starting teacher pay to $35,000 and also increase the funding for opportunity scholarships and grants for children with disabilities. Medicaid reform efforts are fully funded, and a much-needed Indigent Defense reform gives defendants more choice in their representation. This budget eliminates economic incentive grants or programs and stops picking winners and losers and competing with private sector investors.

This budget also incorporates additional tax relief for families, in the form of larger per-child tax credits, 529 education savings account deductions, and reinstated deductions for medical expenses, to go along with the cuts in corporate and payroll taxes already scheduled for the next two years. These changes are consistent with our long term tax reform goal of eliminating the tax system’s bias against saving and investment.

State employees and retirees have had nominal pay raises in recent years, and retirees should receive a cost of living increase to keep pace with inflation. This budget funds a one-percent cost of living adjustment to all state employees, as well as retirees, in addition to fully funding the actuarial contributions to the state’s pensions and state health plan.

As previously noted, this budget proposal starts with a set of guiding principles. The focus is on directing scarce resources to areas where government has a role and where those revenues can be most effectively allocated. Our proposed spending and policy changes are attempts to make government more transparent, more efficient, and more accountable to taxpayers.

An Alternative Budget

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About John Locke Foundation

We are North Carolina’s Most Trusted and Influential Source of Common Sense. The John Locke Foundation was created in 1990 as an independent, nonprofit think tank that would work “for truth, for freedom, and for the future of North Carolina.” The Foundation is named for John Locke (1632-1704), an English philosopher whose writings inspired Thomas Jefferson and the other Founders.

The John Locke Foundation is a 501(c)(3) research institute and is funded solely from voluntary contributions from individuals, corporations, and charitable foundations.