The HB2 of state budget and tax policy ideas

By: - June 1, 2016 5:00 am


If you think things are bad now for NC, wait till you see what might be coming next at the General Assembly

The damage to North Carolina’s economy, brain power and overall wellbeing from HB2 is rapidly spreading and accumulating. What started out as a handful of canceled entertainment events is fast becoming a bona fide all-purpose disaster for North Carolina that will impact the state for years to come. As one astute commentator noted last week in Raleigh’s News & Observer:

A study out of the North Carolina Budget and Tax Center says that the potential loss of federal funds in North Carolina could result in $2.4 billion in wages and 53,000 jobs. While those numbers seem staggering, they pale in comparison to the loss of brand equity HB2 is causing. We might be able to quantify job losses when organizations like PayPal and Deutsche Bank announce their plans to disinvest in North Carolina. We never will be able to calculate how much we lose when North Carolina gets crossed off the list in some corporate site selection meeting or the next great tech startup chooses to start elsewhere.

We won’t know of the untold thousands of people who wanted to come here to learn or invent or innovate until they heard about North Carolina’s intolerant ways.”

Amazingly, however, not only are legislative leaders not backing down, they’re preparing to up the ante and elevate North Carolina’s negative national profile still further. According to various reports, lawmakers may well be preparing to follow up on their enactment of the nation’s most notorious LGBT discrimination law with a new constitutional amendment that can only be described as “the HB2 of state budget and tax policy.” This is from the state policy newsletter, The Insider:

For the past 288 days, one of the most radical policy ideas in decades, the taxpayer bill of rights, or TABOR has sat in the House Finance Committee, but that could soon change. Senate Bill 607, ‘The Taxpayer Protection Act’ asks voters whether they want to place spending limits and savings requirements in the N.C. Constitution. TABOR became last year’s leading big picture policy debate after the Senate approved it along party lines 30-15 less than a week after it was introduced. House Finance Committee co-chair, Jason Saine, R-Lincoln, said it never moved from committee because lawmakers were engaged in a prolonged sales tax redistribution fight. This year’s session, however, could allow time for more substantive policy debates, like TABOR, he said.”

Rep. Saine’s comments come at the same time Senate leaders have been making repeated demands for consideration of TABOR in 2016 and, indeed, even hinting that they might make the far-reaching constitutional amendment a part of negotiations around the 2017 state budget. Yes, you read that right: there are reports from folks “in the know” on Jones Street that lawmakers are at least considering the idea of taking one of the most important and potentially damaging constitutional amendments in state history and ramming it through during the waning days of the 2016 “short session” as part of the horse trading that will accompany the passage of next year’s budget.

A TABOR refresher

For those who may have forgotten (intentionally or otherwise), a TABOR amendment would permanently and arbitrarily cap state spending so that it could never grow from year to year by more than the combined rates of inflation and population growth. While perhaps superficially appealing on some level, the practical results of this change would be utterly disastrous.

Simply put, TABOR would freeze state government at its current inadequate levels forever. This means that state teachers and employees could never again receive another significant raise unless there were significant budget cuts elsewhere. Add to this the fact that health care and many other services funded by government often rise at rates faster than inflation (and that groups like schoolchildren and seniors often grow faster than the general population) and one quickly sees why TABOR is a recipe for perpetual budget crisis and decline. What’s more, the main potential safety valve – jacking up local taxes like the property tax – has obvious negative ramifications. This is especially true for poorer areas of the state. State Treasurer Janet Cowell has stated that TABOR would even jeopardize North Carolina’s AAA bond rating.

In Colorado – the only state in U.S. history to enact such an amendment – the results have been predictably awful. As the Center on Budget and Policy Priorities reported last summer, Colorado:

  • fell from 35th to 49th in the nation in K-12 spending as a percentage of personal income,
  • saw its college and university funding decline as a share of personal income from 35th in the nation to 48th,
  • fell to near the bottom of national rankings in providing children with full, on-time vaccinations, and
  • fell to last in the nation in the number of low-income children in the state who lacked health insurance.

No wonder that even arch-conservative columnist J. Peder Zane described it last year as a “bad idea” and “undemocratic.”

The HB2 – TABOR similarities

In state after state, leaders of both parties – especially in the business community – have taken a look at these negative developments and said “thanks, but no thanks” to TABOR. In each state to put a TABOR amendment on the state ballot (Florida, Maine, Nebraska, Oregon and Washington) these leaders have rallied to help convince voters to reject it. As with HB2, they’ve quickly recognized TABOR for what it is – an extreme proposal from the ideological hard right that swims against the national tide and tries to take the state back to a bygone era.

As most North Carolinians have become well-aware in recent months, however, some members of the current state political leadership are not shy about elevating far right ideology over practical arguments and even the concerns of business leaders. Convinced, as they are, that government is inherently evil and a perpetual threat to “freedom,” this group remains perfectly happy to transform North Carolina into a conservative lab experiment (and even a national pariah) if it is in service of ideological objectives. Better to “go it alone,” goes their thinking than to “compromise.”

Happily, however, there is growing evidence that this brand of policymaking is wearing thin with voters and even many conservative politicians. Recent poll results indicate that North Carolinians are more than ready to abandon their state’s status as an outlier when it comes to LGBT equality and it stands to reason that they would resist it in the area of state fiscal policy too if they fully understood the proposal and its ramifications.

The problem, of course, is that making all of these arguments in the context of a statewide vote on a crowded November ballot would be extremely tough – especially over a proposal with a name like the “Taxpayer Bill of Rights” or “Taxpayer Protection Act.” As with HB2, the opportunities to demagogue and mislead would be plentiful.

A destructive parting gift?

At this point, the future of this potential disaster appears to lie entirely with the House of Representatives given that the Senate passed the proposal last summer and the Governor has no say over constitutional amendments. Scuttlebutt at the Legislative Building holds that some House members might be trying to negotiate a deal in which they would trade support for TABOR for a Senate agreement to take up certain House proposals – perhaps even another constitutional amendment. Add to all this the fact that several members involved in the drama – Senators Bob Rucho and Tom Apodaca and House Speaker Pro Tem Paul Stam to name three – are retiring after the session and looking to leave a “legacy” and the whole thing gets quite complicated.

The bottom line: Let’s hope that, in the end, lawmakers learn a lesson from the HB2 debacle and avoid heading off once more into uncharted ideological waters. Right now, North Carolina has clearly had its fill of being a national outlier.

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Rob Schofield
Rob Schofield

NC Newsline Editor Rob Schofield oversees day-to-day newsroom operations, authors and voices regular commentaries, and hosts the 'News & Views' weekly radio show/podcast.