The Public Demands Spending Restraint, Lower taxes:

*69 percent of voters stated they would be “somewhat or much less likely” to vote for a candidate for state legislator who voted to increase taxes to fund increased spending

*68 percent of voters believe the General Assembly should “ cut existing programs” in order to balance the current budget, compared to only 16 percent that replied “raise taxes”

*73 percent of voters believe it is more important to cut taxes to help stimulate the economy, compared to just 14 percent who believe it is more important to increase state spending

What Happens When the Federal Funds Dry Up?

*The Governor and Senate budget proposals rely on $2.9 billion in federal funds over the next two years to help balance the state’s budget. But what will happen when state lawmakers attempt to craft a budget for 2011-12?

*Maintaining high spending levels by relying on federal money over the next two years creates a massive structural deficit of at least a billion dollars going into 2011-12. Where will the state come up with this money?

*Federal stimulus funds may provide a short-term bailout for the state budget. The reality is, however, once the federal aid is gone, North Carolina will not be able to sustain spending levels without significant tax increases, and will likely be sent into another panic as we face another huge deficit.

Don’t Repeat Mistakes From Last Budget Crisis

*In the last major budget crisis in 2001-02, North Carolina state government responded by implementing several tax increases, including the infamous “temporary” taxes

*Thus, North Carolina became the only state to raise income taxes (and one of only a handful to raise taxes at all) during the recession. As UNC-Chapel Hill economist James Smith noted in September 2001, "It's one of the all-time stupidest things done by a legislature anywhere. You don't raise taxes during a recession, or even in a dismal economic environment." Smith was right.

*Because higher taxes discourage investment and job growth by sapping resources from the private sector, North Carolina recovered from the last recession slower than most of the nation.

Annual unemployment has remained above the national average since then, and NC’s current unemployment rate is currently 5th highest in the nation

Per capita income grew at a slower rate than the national average from 2001 to 2007, and was second lowest in the region

North Carolina ’s child poverty rate climbed from 17th highest to seventh highest from 2001 to 2007

North Carolina ’ average annual per capita income rate from 2001 to 2007 was 4 th lowest in the nation

Job growth from 2001 to 2008 in North Carolina lagged behind the regional average

Spending is Out of Control:

*Inflation adjusted, per person state spending in NC is up 25% over the last 15 years, and has virtually doubled in the last 25 years. In other words, North Carolina state government now spends twice per person than it did in 1984, even after adjusting for inflation.

*Overly aggressive spending increases during healthy economic years is what put us in this mess. The four years prior to FY2008-09 saw an average annual spending increase of 8.6 percent- with a total of nearly $6 billion in new spending. It is unfair to ask taxpayers to bail out your irresponsible, short-sighted spending habits.

Taxes Already High Enough

*None of the three major state taxes were lowered in the last eight years. Lawmakers in Raleigh did, however, enact the “temporary” sales and income tax increases – as well as the permanent ½ cent local sales tax increase – that have extracted more than $5.5 billion from taxpayers during the last 7 ½ years.

*North Carolina ’s state tax collections as a percentage of personal income (for FY2006) is higher than New York’s, Massachusetts and Connecticut’s tax burden.

*North Carolina ’s top personal income tax rate is 7.75 percent – highest in the Southeast and 11th highest in the nation.

*For instance, a single filer earning between $60-$75K, would pay the 7 th highest rate in the U.S.

*The corporate tax rate of 6.9 percent is highest in the Southeast.

*Our sales tax rate of 6.75 percent is tied for 19 th highest in the nation, and significantly higher than neighboring Virginia (5 percent).

State Debt Exploding – With No Accountability

*The state has issued more than $7 billion in new debt since 2000
Per capita state debt has more than doubled in the last seven years

*The last time North Carolinians were allowed to vote on new state debt was 2000.

*Since then, the General Assembly has authorized $3.1 billion in new debt without consent of the voters

*Debt service payments are now two-and-a-half times more than they were just seven years ago.

*The state’s debt-financed spending spree has contributed to the budget deficit – it’s not fair to make taxpayers bail out reckless debt spending that we never even had a chance to vote on.

*Stop the debt spending. Growing debt just guarantees higher taxes in the future to finance the debt payments.

Taxpayer Protection Act Would Provide Needed Restraint; Could Have Saved NC from Budget Crisis

*Taxpayer Protection Act, or Taxpayer Bill of Rights – such as being proposed by House Bill 183 or House Bill 159 would limit the growth of government spending to the growth of population plus inflation

*The second major budget crisis in eight years indicates that North Carolina lawmakers need some imposed restraint to avoid such massive deficits in the future

*If this type of spending restraint would have been implemented just five years ago, North Carolina would be sitting pretty

*Had North Carolina implemented a spending restraint beginning with the 2004-05 budget (using 2003-04 as the baseline), state spending for the current year would be $18.7 billion – compared to our actual $21.35 billion budget that has proved too large to be supported by current revenue streams. In other words, there wouldn’t be a budget hole at all.

*Moreover, each year, excess revenue would have been set aside in reserve funds to prepare for a rainy day under a TABOR or TPA plan. Under such a plan, the state would be sitting on reserves totaling $3.9 billion today, more than four times the $787 million actually in the state’s rainy day fund.

*Even after funding such a generous reserve fund, $5 billion would still have been available to return to taxpayers over the last five years. That amounts to roughly $2,200 for every family of four.

A Smooth Spending Pattern Avoids Budget Crises, Makes Agency Budgeting More Predictable

*A TABOR or TPA amendment will smooth out state government spending patterns over inevitable business cycles, ending the up-and-down roller coaster state budgeting trends dominating the past 30 plus years

*More predictable budgets will enable state agencies to better plan long-term spending strategies; and avoid sudden, panic-induced cuts made necessary by the repeated budget shortfalls created by the state’s current short-sighted spending patterns

Public Support is Strong

*Sixty percent of North Carolina voters said recently they would be “more likely” to vote for a candidate that supports a taxpayer bill of rights, compared to only 17 percent who replied “less likely”

Don’t Follow Governor’s and Senate’s Dangerously Optimistic Revenue Projections

*When determining how much money will be available to spend, both the Senate and Governor’s budget proposals project an increase in baseline tax revenue for 2009-10 compared to current year collections.

*Given double-digit unemployment and continued economic stagnation, such a prediction is likely overly optimistic.
Consider that as we entered the current fiscal year last summer, North Carolina’s unemployment rate stood at 6.3 percent, and remained under eight percent until December. Conversely, as of March unemployment had climbed to 10.8 percent. More than likely it will remain in double-digits as we enter the new fiscal year this summer.

*Moreover, jobs are typically a lagging indicator of economic recovery, meaning that even if the economy begins a healthy rebound later this year, unemployment will likely remain high through most of the coming fiscal year (ending June of 2010).
The governor has already drained the state’s rainy day fund, so there will be no reserves available to balance next year’s budget if the revenue increases fail to materialize

*Note also that the state budget office doesn’t have a very good track record of late. For instance, this time last year the governor’s budget proposal predicted a 5.5 percent unemployment rate in North Carolina for 2009

Beaches for Millionaires or Money for Teachers?

*Both the Gov. and Senate propose spending $5 million of taxpayer dollars for more sand to go to the beaches on Bald Head Island – an exclusive area for the wealthy. If they want their beaches to have more sand, let them fund it. How many teachers could keep their jobs with that $5 million?