Greetings From Raleigh 6-10-05
Attention this week has focused on passing a Finance Committee proposal, House Bill 1630, which cleared the House yesterday as members approved the $562 million revenue package. Now, attention will shift back to passing a spending plan by the end of next week. To help accomplish that, House Appropriations subcommittees scheduled rare Friday morning meetings for today and hope to finalize a budget in the next several days if levels of spending for state-funded programs can be determined.
Most of the revenue for this part of the budget will come from a two-year extension of a half-cent sales tax and higher individual income tax rate on individuals making more than $120,000 or couples making over $200,000. Both of these increases were initially passed in 2001 during the height of the recession with the intent of improving the state's economy. House members and staff said that although North Carolina's economy has improved slightly, job losses continue and the state would not be able to meet the growing needs of our citizens if these taxes were cut as suggested by the budget bill passed in the Senate several weeks ago. House members stressed their intention to return to pre-2001 levels of tax in these areas as soon as our economy is thriving again, and as soon as sufficient revenue can be generated to meet the state's commitments to its citizens.
House Bill 1630 also includes $62.7 million in sales tax changes and modifications, which is part of a national effort to streamline sales taxes so the states can collect sales taxes on purchases over the Internet. The Governor and Senate also recommended these streamlining changes in order to keep North Carolina in compliance with the national agreement.
Finance Committee members pointed out that North Carolina is one of the fastest growing states in the nation. We have more than 100,000 new people moving to our state each year and these people depend on our schools, health care system, roads, police and public safety programs, and other vitally important state-funded programs. A recent report released by the N.C. Justice Center found that although the state budget has increased by $1.2 billion between fiscal year 2000 and 2005, spending as a share of the state's resources and per capita has shrunk over the last several years. From fiscal year 2000 through 2005, general fund appropriations actually shrank from 6.5% to 5.9% of total personal income. A similar result emerges when the budget is adjusted for inflation and allocated per person. By this calculation, the fiscal year 2005 budget allocated $313 less per North Carolinian than in the 2000 budget.