Spend and Tax … Again

The first full glimpse of the N.C. House version of the 2007-2009 budget was released late Monday afternoon. What did it contain? More of the same: increased spending and higher taxes. In spite of an estimated budget surplus of $1.135 billion for the year, House leaders increased tax revenues by more than $300 million. Much of this new revenue will come from reinstating the so-called temporary tax increases that were passed in 2001. The “temporary” taxes were lowered last year with the promise that they would finally be allowed to expire on July 1, 2007. If the House budget passes, North Carolina taxpayers will again see what, in effect, has become a biennial tax increase that would keep the state sales tax rate at 4.25 percent and the upper-level income tax rate at 8 percent for another two years.

All told, the House budget raises spending from $18.9 billion to $20.3 billion — an increase of 7.4 percent.

So where are legislators spending your tax dollars? Here’s a brief synopsis of some of the most wasteful pork projects, as well as a review of several line items that are just bad ideas.

Pork

• $21 million as requested by Representative James Crawford (D-Granville, Vance) for special projects: $2 million for the “Kerr-Tar Regional Economic Development Corporation;” and $19 million for the Rural Center’s Economic Infrastructure Fund.
• $14 million for “economic development, spot safety, and transportation improvement projects.”
• More than $10 million in recurring funds requested by Representative Mickey Michaux (D-Durham) for nonprofit organizations in his district.
• $1 million to the Johnson & Wales University — a private university in Charlotte that “specializes in the culinary and hospitality industries.” Apparently, the money is being allocated to fulfill a promise made by former Speaker Jim Black (D-Mecklenburg).
• $2 million — contingent on passage of legislation — for “implementation of swine waste technology initiatives.”
• $1.2 million to “provide transportation services for annual or semiannual trade shows of international significance.”
• $1 million to the “Natural Science Center of Greensboro, Inc.” — a nonprofit organization planning to provide “experiential science education facilities and programs.” This spending is sponsored by three representatives (Maggie Jeffus-D; Alma Adams-D; Earl Jones-D) who hail from Greensboro.
• $1 million to subsidize short-line railroad companies.
• $500,000 to operate a new “Blue Ridge Parkway Destination Center.”
• $330,000 for an “Equine Industry Study” that will “assess the numbers, composition, and value of the equine industry in North Carolina … and develop a comprehensive plan to maximize the economic opportunities presented by the industry.”
• $300,000 for “Shellfish Restoration Funds.” Among other things, this money would be used to “conduct a pilot project to protect oyster sanctuaries from cownose ray and skate predation.”

Bad Ideas

1. Increased Taxes: $300 million in increased taxes that result from not letting the “temporary” sales and income taxes expire as scheduled on July 1, 2007. First proposed as a two-year stopgap measure in 2001, this will be the third continuation of these taxes. Even with a $1.135 billion surplus, legislators refuse to let these taxes sunset.
2. Earned Income Tax Credit (EITC): The budget implements an EITC beginning in 2008. Modeled after the federal EITC, this program is designed to help lower-income individuals recoup taxes lost through the payroll tax. At the state level, however, the EITC amounts to little more than an income transfer. If the House were serious about providing tax relief for hardworking families, they would instead allow the regressive sales tax to expire.
3. More Corporate Welfare: The House budget allocates $12 million for the One North Carolina Fund; $1 million to create the NC Green Business Fund (to promote “the growth of a green economy in the state”); $5 million for One North Carolina Small Business Funds; and $1 million for the NC Research Campus at Kannapolis. The One North Carolina Fund exists to provide cash payments to companies seeking to locate or expand in North Carolina. The fund is under the control of the governor and is dispersed solely at his discretion. It is often referred to as the governor’s “walking around money.” The governor decides which companies receive a subsidy and how much they get. In 2006, the General Assembly gave Governor Easley $15 million for the fund.
4. Another Step Toward Universal Healthcare: The budget allocates the following for NC Kids’ Care: $3.16 million in recurring funds for FY2008 (plus $1.56 million in nonrecurring); and $7.01 million in recurring funds for FY2009. This provision would expand health coverage to some 12,000 children from families with income between 200 percent and 300 percent of the federal poverty level (FPL). Currently, 300 percent of FPL is $61,950 for a family of four, an income level that includes half of all families in North Carolina.
5. Finally, not just bad ideas … but no ideas at all as to how the state is going to resolve what is fast becoming a Medicaid spending crisis. The budget only provides $60 million in one-time money to assist counties in paying their $100 million Medicaid burden. With a $1.135 billion surplus, more should have been done to relieve this burden.