By Chris Fitzsimon
Columnist
Final approval of the Senate budget came Thursday morning with no discussion. That was guaranteed yesterday when Senate Majority Leader Tony Rand moved to cut off debate for both days.
The next round of the budget battle comes as House and Senate leaders try to work out the differences between their respective spending plans, and there is plenty to negotiate, starting with the Senate decision to insist on cutting taxes by $300 million and rejecting House plans to provide targeted tax relief to the working poor with an Earned Income Tax Credit.
Let’s hope the Senate leadership’s fondness for tax cuts for everyone, including the wealthy, doesn’t prevent them from raising the revenue needed to address the crisis in the state’s infrastructure identified recently by the Partnership for North Carolina’s Future.
The group recently called on lawmakers to make major investments in affordable housing, school construction, parks and open space, water and sewer projects for local governments and transportation. Rep. Bill Owens has said that a bond issue of three to five billion dollars is not out of the question and will require a dedicated source of revenue to pay for it.
The other major financial issue facing lawmakers this year is related: the push to relieve the counties of paying for a share of Medicaid costs. The county share totals $500 million and makes it difficult for poor counties to keep up with their obligations, including school construction.
There is good news on both fronts. Sen. Dan Clodfelter has been working on a plan to have the state pick up the full cost of Medicaid and take back some revenue streams from local governments, like the corporate income tax, which currently pays to build schools.
Clodfelter’s proposal would not force counties to raise the regressive sales tax like the plan proposed earlier this year by Rand. Instead, it would be revenue neutral for counties and the state would absorb the expected growth in Medicaid costs in future years.
The proposal is picking up support in the General Assembly and seems to make sense, depending on the details of the revenue sources.
The size of the infrastructure bond and finding a revenue source to pay for it is proving much more difficult. The Senate budget calls for $1.2 billion worth of construction projects paid for by certificates of participation, bonds that don’t require a vote of the people, but still debt that mostly must be repaid with General Fund dollars.
That makes it even more important that the infrastructure bond package come with a permanent revenue source. Otherwise, the huge new debt payments will leave the state without enough money to continue even the meager investments in human services that the House and Senate are calling for this year, much less to make more significant progress by expanding health care, child care and mental health services.
The real estate transfer tax remains the most obvious place to look and must be part of any revenue package, no matter how many misleading ads the multibillion-dollar real estate industry runs against it. It simply makes sense that the folks rolling in profits from the state’s growth be asked to pay for the costs associated with it.
The good news about the debate is that Raleigh’s leading free market fundamentalist think tank has marginalized itself on the issue. Its leader said recently that the state’s response to the growth that requires new schools and roads and housing should be to do “absolutely nothing.â€
There’s a forward-thinking agenda for North Carolina — do nothing. Good thing that wasn’t the prevailing wisdom when state leaders created Research Triangle Park or the university system or even public schools.
He thinks the magic market will take care of it, that growth will pay for itself and that state leaders need to implement his group’s “Freedom from Responsibility†budget that would devastate the state safety net, dramatically increase tuition at UNC campuses and end the state’s affordable housing programs.
Lawmakers have their work cut out for them: reaching a final budget agreement, resolving the county Medicaid issue and confronting the special interests and the wacky right-wing think tanks to raise revenue to address the state’s infrastructure crisis.
And as Martin Marietta CEO Steve Zelnak said at the Partnership’s recent news conference, “The word ‘no’ is not a solution.†Doing absolutely nothing isn’t either. The stakes are too high.