Missing the Mark – Gov. McCrory’s Budget Proposal is Hampered by Last Year’s Tax Changes and Revenue Shortfalls

May 2014

Governor McCrory’s fiscal year (FY) 2015 budget proposal leaves too many vital public services operating at diminished levels and would take North Carolina further from the path of broadly shared growth and opportunity. While it would make progress in certain areas—such as a small pay raise for teachers and state employees—overall, the spending plan fails to meet the needs of children, working families, and communities.

Further progress is hampered by the substantial revenue shortfall the state is facing in the current budget, as well as the projected revenue shortfall for FY2015. Last year’s tax plan, which gave a substantial tax cut to the wealthiest households at the expense of low- and middle-income North Carolinians, will drain $438 million in FY2015 from resources that could be used to invest in schools, health care, public safety and the other building blocks of a strong economy. Despite scaled-back revenue projections, the Governor chose to move forward with the next phase of tax rate cuts that will go into effect next January, rather than stopping these costly cuts.

As a result, North Carolina would find it more difficult to regain lost ground. In the 2015 fiscal year that begins July 1, the state would invest $1.6 billion—or 7 percent—less in schools, health care and other public services than it did before the onset of the Great Recession, taking account of inflation. While the Governor’s proposal would take some small steps toward getting North Carolina back to pre-recession levels of spending, it would continue to badly underfund vital public services that North Carolina residents and businesses rely on every day