“Short Session” to focus on Teacher Pay; NC Political Landscape Changing

Photo posted by Triangle Business Journal
Photo posted by Triangle Business Journal

Upcoming policy discussions in the General Assembly and ongoing upheaval in North Carolina politics resulting from the State’s ongoing economic and demographic transformation reflected the focus of comments from a diverse group of Raleigh policy experts during the Rocky Mount Area Chamber of Commerce’s Spring Legislative Forum, held April 17th.

The morning event featured presentations by Joe Stewart of the North Carolina FreeEnterprise Foundation, Alex Sirota of the North Carolina Justice Center’s Budget & Tax Center, Chris Fitzsimon of the North Carolina Justice Center’s NC Policy Watch, and Becki Gray of the John Locke Foundation. While their presentations and subsequent audience questions did include some discussion of economic challenges for Rocky Mount and Eastern North Carolina, most of their content focused on issues and trends applicable to the state as a whole.

Leading off, Joe Stewart highlighted the “fundamental shift” taking place with respect to North Carolina’s electoral map, influenced by continued, concentrated growth in urban areas along the Charlotte-to-Raleigh corridor (“Charleigh”), voter anger and disgruntlement with current incumbent office holders, mobilization in response to negative opinion regarding the Affordable Care Act, and traditional poor results for the party of the incumbent Present during the mid-term election of their second term. Stewart anticipates the general election results staying close to current political party distribution, though several incumbents may suffer defeat in their primaries against strong opposition and voter dissatisfaction.

Click Here for Audio of Joe Stewart’s Presentation (MP3)

Alex Sirota followed up with an overview of current state budget and economic conditions, emphasizing the challenges many parts of North Carolina are facing with “too few jobs, and too few consumers.”

Sirota’s presentation included mention how North Carolina’s state budget as a percentage of the overall state economy is at its lowest level in 40 years, reflecting decreased investments for infrastructure, schools and programs focused on economic accessibility. She does not anticipate policymakers doing much in the coming legislative session, as leadership blames the impact of Medicaid entitlement spending for limiting budget options.

Sirota disagreed, arguing Medicaid expenditures have shown lower rates of growth than other state programs. While recent legislative forecast of state revenues shows overall growth slightly above budgeted projections, Sirota express concern about the impact of tax reform plans adopted in prior sessions, including last year’s significant reforms which will reduce revenues from the state income tax by approximately $655 million per year.

Click Here for Audio of Alex Sirota’s Presentation (MP3)

Similarly, Chris Fitzsimon emphasized how limits in available state revenues impacted funding for education. The veteran journalist started off retelling a story provided by Mooresville School Superintendent Mark Edwards, who encountered one of his teachers working an evening shift at Food Lion as a janitor in order to earn extra pay and cover family living expenses.

Fitzsimon did note Governor Pat McCrory’s proposal for increasing starting teacher pay as a positive step, but expressed deep concern regarding the lack of pay increases for veteran teachers, as well as limited funding for student textbooks and additional essential programs, including the state’s Pre-K initiative.

Fitzsimon also mentioned approximately 20,000 families in North Carolina are on the waiting list for childcare subsidies, a program he argued is critical to helping parents move off other entitlements and successfully reenter the workforce.

In closing, Fitzsimon concluded that the current “list of priorities” comprising the state budget is backwards and requires significant consideration in the coming session.

Click Here for Audio of Chris Fitzsimon’s Presentation (MP3)

Becki Gray closed the presentations with some counterpoints to Fitzsimon’s claims, providing a summary of actions taken by Governor McCrory and the General Assembly to achieve economic growth and job growth through restructured and reduced taxation, as well as addressing business concerns with the costs and impact of regulation.

Gray noted the reduction of sales taxes in 2011, as well as personal and corporate income tax rate reductions taking effect earlier this year. In defense of regulatory reform, she mentioned how several entrepreneurs informed her how they did not believe they could start their current businesses in today’s environment of rules and bureaucracy.

Gray also discussed the importance of effective investments in infrastructure, emphasizing the strategy of moving away from past focus on patronage and toward greater consideration of actual need. On education, she discussed current reforms centered on standards and accountability, while noting how teacher pay has been identified by the General Assembly as their top issue for the upcoming short session.

Gray concluded that while economic response to reform takes time, early indications show improvement with respect to new job creation and growth across multiple sectors of the state economy. She does not believe we are “out of words,” though she feels we are “moving in the right direction.”

Click Here for Audio of Becki Gray’s Presentation (MP3)

Subsequent discussion following the presentations focused on current job growth, especially confusion over statistics and conflicts in reporting. Panelists agreed on the challenges dealing with confusion. Joe Stewart used the opportunity to discuss observations of how economic evolution and the impact of globalization are having significant impacts on workforce expectations.

Stewart noted the potential for growth of Charlotte’s Douglas International Airport, which will likely become the State’s third major port following construction of additional runways and a multimodal rail cargo distribution facility. Stewart also mentioned how North Carolina is home to the largest concentration of German-owned businesses in the United States, as well as how companies like Siemens, with funding assistance from the German Government, are working to train employees for their North Carolina plant, as well as trying to deal with the challenges of a multi-cultural workplace.

When asked about the importance of local infrastructure investment, all panelists agreed that local governments would help themselves to make strategic investments in local roads, bridges. They also acknowledge challenges facing the state with respect to transportation funding and growing demand for transit in densely-populated urban areas.

Click Here for Audio of Q&A Portion (MP3)

Analysis Roundup – June 10, 2013

Next edition will be published June 17th

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NC House Released Budget Proposal, Comparison to Senate Available

The NC House released their 2013-15 biennium budget proposal late Sunday evening. The bill will be debated in the House Appropriations Committee, starting 8:30am tomorrow morning (click here to listen to the meeting as it happens).

Late this afternoon, the NC League of Municipalities published a comparison (click here to view) of how the House plan impacts cities and towns within the state, and how these impacts compare to the version already passed by the Senate. Overall, the House version appears to avoid some of the more noticeable cuts to programs and allowances provided for municipal governments, including the following:

  • Senate budget eliminates the provisional hold harmless allotment for select local governments, while the House version continues it
  • Senate budget eliminates funding for the NC Rural Center, reallocating funds for a new program to be administered by the Department of Commerce. The House proposal, on the other hand, does not eliminate funding and actually increases funding by $3.4 million in FY 2015.
  • Senate budget eliminates the Clean Water Trust Fund, while the House proposal continues and increases funding support.
  • Senate budget reduces Parks & Recreation Trust Fund Grant program by approximately $16.5 million, while the House proposal does not.

We will update this post to include analysis of the House proposal for counties once it becomes available from NCACC.

House Proposal Resources:

Appropriations Committee Report

Budget Proposal (Bill)

WRAL Stories:

House budget lays out stark differences with Senate

House budget subcommittee documents (includes links)

NC House Tax Reform Revised

The NC House will likely vote this week on a tax reform bill that was revised last week to provide some protection for municipal governments with respect to their revenue from utility franchise taxes.

A rundown comparing the House plan to the Senate plan and an alternative proposal (provided by the NCLM) has been updated to reflect these changes (click here to view).

NCLM provided an overview of the change in last Friday’s LeagueLINC Newsletter:

The previous version of HB 998 provided that each city and town would receive distributions each year in the future equal to the amount it received in electricity and natural gas franchise tax distributions for FY 13-14. The new version of the bill will continue to keep city electricity and natural gas revenue at the FY 13-14 level or higher, but only if sales of gas and electricity do not decline below the FY 13-14 level. While such a decline in electricity sales is unlikely, the sensitivity of natural gas sales to winter temperatures makes a decline in these sales more possible.

Bond Referendum Debt Information Bill Modified

Click here to view the revised version.

Per NCLM:

The Senate Finance Committee gave its approval this week to HB 248 Taxpayer Debt Information Act, which would require bond order information to include an estimate of the interest to be paid on the bond, and would require that any bond referendum include a statement that the bond repayment will include interest and that additional taxes may be required for repayment. The League opposed the original version of the bill because it required the estimate of the amount of interest be written into the referendum. Bond attorneys had indicated to the State Treasurer that this requirement could invalidate a debt issuance because interest rates at the time of the issuance are likely to be different than estimated rates submitted on the ballot. The current version of the bill avoids this problem.

LGC Issues Memo on New Unemployment Insurance Requirements

The Local Government Commission distributed guidance last week on the requirements regarding reform of the Unemployment Insurance program adopted by the Governor and General Assembly earlier this year.

Click Here to View the LGC Memo (PDF)

The instructions appear to align with the information we shared in a special presentation that was part of our Analysis Roundup on March 22nd.

Click Here to View the Original NCLGBA Tutorial

North Carolina GDP Grows 2.7% in 2012

The state’s gross domestic product grew 2.7% last year, on pace with all of our neighboring states except Tennessee, though higher than the regional (2.1%) and national (2.1%) aggregates.

gsp_0613SE

Comparatively-speaking, North Carolina continues to outperform the regional and national economy, a trend that has continued since 2005.

ComparativeGDPGrowth9712NC

 

Walden’s Outlook for Summer 2013

NC State University Economist Dr. Michael Walden recently-published his Economic Outlook for the summer. You can view it here (PDF).

Here’s some of Dr. Walden said about the North Carolina economy at the present:

Evidence suggests the North Carolina economy has been growing slightly faster than the national economy. Growth in both labor compensation (a proxy for gross domestic product) and payroll employment has been better in the state during the past three years. The state’s retail, housing, and public revenue sectors also show solid signs of having turned the corner to improvement…

North Carolina is expected to add over 100,000 payroll jobs in both 2013 and 2014, and by the end of 2014 the state’s jobless rate will have dropped to 6.8%. Four factors will push the state’s economic recovery: a manufacturing revival, a construction surge, a boost in college graduates attracting knowledge-based industries, and an influx of retirees. The Triangle and Asheville regions will have unemployment rates under 6% by the end of 2014, while Rocky Mount will still have a double-digit jobless rate…

True to the state’s pattern of a more volatile business cycle, labor compensation fell relatively more during the peak recessionary year of 2009 in North Carolina than in the U.S. However, the rebound in labor compensation in 2010, 2011, and 2012 has been as strong or slightly stronger in the state than in the nation. The state’s different economic structure – primarily its greater reliance on manufacturing – is the primary reason given for both deeper recessions and stronger recoveries in North Carolina compared to the country…

The economic divides in North Carolina likely won’t close in the near future. Economic trends and technologies appear to be favoring metropolitan areas over non-metropolitan regions. As growth continues, metropolitan areas will likely expand their geographic scope – hence, counties designated as metropolitan will likely increase in the future. Challenges will persist for bringing
economic growth to all regions of North Carolina.

Here are Dr. Walden’s forecasts for national, statewide and metropolitan unemployment.

WaldenUnempForecast0613