North Carolina GOP budget writers are using an over forecast in tax revenue collections as leverage in an ongoing budget impasse.
North Carolina’s revenue collections rose way above predictions in the 2018-19 fiscal year, economists say. The state saw an increase of nearly $900 million — about 4 percent more — than what was expected in the May 2018 consensus forecast, the Fiscal Research Division of the General Assembly announced on Thursday.
Sen. Harry Brown, R-Onslow, who chairs the Senate Budget Committee, said the over projections were a product of Democratic Gov. Roy Cooper’s 2017 veto of the 2018 fiscal year budget proposal, which could be a foreshadow to this year.
“When Governor Cooper vetoed the budget that produced this surplus, his budget director wrote, ‘We anticipate this budget would blow a $600 million hole just to meet current service levels' in two years,” a media release sent from Brown’s office said. Republicans later overrode Cooper’s 2017 veto.
Barry Boardman, an economist for the Fiscal Research Division, sent an email obtained by The Center Square to lawmakers and staff that outlined the surplus.
Personal income tax and sales tax were two main contributing factors that led to the over-projection, said Boardman. Personal income and sales tax saw an unanticipated $150 million and about $74 million more respectively. All a result of lower tax refunds, according to Boardman. Republican lawmakers are crediting themselves for the economic boost while questioning the governor’s creditability in the ongoing budget battle.
Cooper vetoed the 2020 budget proposal in late June. Cooper said the proposal short-changed people and focused on tax cuts for corporations. Legislators have not yet voted on an override.
Republicans say Cooper’s gripe is over Medicaid expansion, which was excluded from the proposal. Cooper sent a counter-proposal for the budget that included the Medicaid expansion. Movement on the bill has been on a standstill since then.
“The same people who made wildly inaccurate doom-and-gloom predictions are now telling us that Medicaid expansion won’t cost the state a dime, and they're holding the entire budget hostage over that one issue. They have no credibility,” said Sen. Brown.
The Center Square can confirm that in a 2017 memo, State Budget Director Charles Perusse wrote: “This budget would blow a $600 million hole just to meet current service levels.”
“It creates a self-inflicted fiscal crisis that needlessly hinders the administration’s ability to provide adequate service levels to the citizens of the state,” Perusse continued.
Cooper’s office could not be immediately reached for comment. However, in a media release on Thursday, Cooper’s office said: “Legislators are wasting time and taxpayer dollars” instead of presenting a counteroffer.
“It appears as though Republican leaders are still prioritizing power politics and a veto override for which they do not have the votes instead of sitting down for honest negotiations with Governor Cooper,” the release said.