The Governor’s March Column: Building on North Carolina's Success Story: Changing Strategies for Changing Conditions

This month Governor Stein is highlighting North Carolina's impending fiscal cliff. Media outlets are invited to publish Governor Stein's column below.

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North Carolina is a special place to call home - and more people and businesses are drawn to our state each year. We have earned the rankings of the best state for business, for economic development, and for workforce development. We're fast-growing - more people from other states are moving to North Carolina than to any other state in the country. We created more jobs than any other state in the 4th quarter. And last year, we achieved our best year ever for announcements of new good-paying jobs and capital investment. Too many people are still struggling with the rising cost of living, but the fundamentals of our state's economy are strong and our reputation is first-rate.

But even in the midst of this success, irresponsible state budgeting is causing warning lights to flash. We are unnecessarily standing on the brink of losing our competitive edge and shortchanging North Carolina's greatest resource: our people.

Scheduled Tax Giveaways Benefiting Out-of-Staters and the Wealthy Stand to Force Billions in Cuts

A few years ago, the General Assembly preprogrammed corporate and personal income tax cuts that are scheduled to take effect in the coming years. Even if these cuts were a good idea when they were enacted, they are now irresponsible. While our state is experiencing strong economic growth, that growth would not make up for the damage of these cuts. North Carolina is on track to be forced to cut critical services for our people: the schools that educate our children, the law enforcement officers who keep our families safe, our health care system that keeps people alive and healthy, and the infrastructure that fuels our businesses' growth.

These tax giveaways will cost about $3.4 billion by fiscal year 2028. At a minimum, we will be forced to cut $2.8 billion from current spending levels after inflation and population growth. $2.8 billion is real money. A $2.8 billion cut to public services would be equivalent to firing about 30,000 teachers and shutting down all our state psychiatric facilities. It's equivalent to shuttering all 58 of our community colleges, the entire court system, and the State Bureau of Investigation all at once. Slashing services to that extent should concern us all.

Unless the General Assembly acts, this problem is only going to get worse. By 2029, the cuts grow to an astounding $5 billion. Despite our healthy economy and growing population, in the coming years, we're facing billions and billions in cuts the likes of which we have not seen since the Great Recession. Cuts to services of this magnitude represent a seismic structural shift, not a minor trim. Key programs will be eliminated and others starved of support.

Where is this money going? Most of the corporate income tax cuts benefit out-of-state corporate shareholders and people who are already doing well. When corporate income taxes are cut, approximately 75% of that money flows to corporate shareholders and top executives, most of whom do not even live in North Carolina. On the personal income tax side, fully half of the money goes to the top 8% of earners. People already making $764,000 or more will see an average cut of more than $8,000. Meanwhile, about 40% of our state will see a benefit of less than $100 a year. Basically, we're asking everyday North Carolinians to sacrifice key services to put more money in the pockets of folks who are already doing well.

North Carolina Is Already Struggling to Serve Its People

If North Carolina were a high-tax state or wasted taxpayer money, I could see the argument behind these changes. No one wants to pay taxes unnecessarily. But North Carolina is already a low-tax state. We have the ninth-lowest state and local tax burden in the country. And we currently tax businesses less than any other state in the nation! I am not arguing to raise taxes. But given the urgent needs of our people and rapidly growing population, it is just not smart to keep cutting them on autopilot, either. After all, we are already cutting taxes by $1.3 billion this year.

In many ways, we're already struggling to meet the needs of North Carolinians. We rank 49th in starting pay for state troopers, 49th in starting pay for correctional officers, 40th in pay for frontline police officers and deputies, and 43rd in teacher pay - lower than all of our neighboring states. We are last in the nation in public school funding effort and second to last in per-pupil investment. Our school buildings need nearly $13 billion in repairs. One in five children in North Carolina faces food insecurity. Our nursing shortage is among the worst in the country and by 2038 is projected to be the second worst nationally. We want the best for North Carolina and should not have to settle for ranking at the bottom when it comes to meeting people's urgent needs.

We have so much to be proud of in North Carolina, but not these statistics. They are both a source of shame and a real liability to our future prosperity. And as our state continues to add people at one of the fastest rates in the country, we will face increasing demands on law enforcement, our teachers and public schools, and our health care system. Not only will we not be able to meet these demands, but also we will be forced to make billions and billions of dollars in painful cuts to these critical services, forcing us to fall even further behind.

These fiscal challenges are aggravated by the fact that the federal government is no longer a reliable partner on many critical services. Federal changes in HR 1 are projected to reduce Medicaid funding for North Carolina by nearly $50 billion over the next decade. Reductions in federal SNAP funding could shift more than $500 million annually in costs to our state. Eliminating the U.S. Department of Education could jeopardize funding for schools and students. Federal disaster assistance is becoming less reliable. As a state, we find ourselves increasingly on our own.

Investments Worth Making

When circumstances change, leaders adapt and pivot. Let's study these new realities and hit pause on outdated, irresponsible tax triggers. This is the time for leadership from the General Assembly to pass a fiscally responsible budget - one that protects the revenue necessary for North Carolina to meet its basic obligations and invest in its people.

North Carolina's success has been built on our people. Past leaders have invested in strong public schools and universities, safe communities, a strong health care system, reliable infrastructure, and a skilled workforce. These investments have been, and remain, worth making. Let's continue to invest in you so you and your families have the opportunity to thrive.