NC will collect $6.5 billion more in taxes than expected. Where should the money go?
North Carolina continues to be in good economic shape coming out of the coronavirus pandemic.
A new forecast of state tax revenue shows more promising signs, with $6.5 billion more money than expected over the next two years, Gov. Roy Cooper said in a release. That means more funds are available for tax cuts or spending, which is what the Democratic governor and the Republican-led General Assembly are likely to argue over as budget time gets underway this summer.
The latest forecast was pushed back as Tax Day was postponed to May 15 this year.
The Legislative Fiscal Research Division and the Office of State Management and Budget, which is part of Cooper’s administration, put out a joint forecast Tuesday.
“Revenue collections have surged since the February 2021 forecast,” Emma Turner and Barry Boardman of Fiscal Research said in an email to lawmakers.
“This June 2021 forecast expects FY 2020-21 collections to be $29.5 billion, which is $1.9 billion higher than the prior forecast. With this increase, current year General Fund revenue is expected to be 23.3% greater than FY 2019-20 collections,” they wrote.
As for the next two years, Cooper said in a release that the joint forecast predicts $60.4 billion in revenue, with $29.7 billion the first year and $30.7 billion for fiscal year 2022-23. The new forecast amount is credited to the state collecting more individual and corporate taxes as the economy recovers and to an economic boost from the federal American Rescue Plan.
“These new numbers show unprecedented resources are now available to make transformational investments for our state,” Cooper said in an emailed release. He also criticized the likely tax cuts in the legislature’s budget.
“Even though the Republican Senate bill giving big tax breaks to corporations and the wealthy is bad policy, we have enough money to pass my entire budget plus all those tax breaks with more money still remaining. We must now negotiate a responsible bipartisan budget that addresses everyone’s concerns,” Cooper said.
Cooper wants to add $1 billion to the state Rainy Day Fund.
The news comes as the state Senate is expected to roll out its budget bill within a week. The Senate and House previously agreed on a total spending amount after months of drawn-out negotiations and a potential stalemate. The chambers finally agreed to spend $25.72 billion for 2021-22 and $26.7 billion for 2022-23. The Senate also already passed its tax plan, which if signed into law would cut income taxes for individuals and corporations.
House Speaker Tim Moore, a Kings Mountain Republican, said in a release that the economic outlook “is proof that Republican policies work, and it is no coincidence that our state is the number two destination for Americans fleeing other states with bleak economic outlooks.”
“North Carolina’s overall fiscal policy has set the stage for a commitment to conservative tax policies and we will continue to work collaboratively with the Governor and the Senate to keep our state on an upward trajectory of economic growth,” Moore said.
Senate leader Phil Berger, an Eden Republican, said in a statement that: “A huge surplus does not mean we’re spending too little. It means we’re taxing too much.”
The consensus revenue forecast that came out in February expected collections for fiscal year 2020-21 to be “well above” the May 2020 forecast. That forecast was a collections increase of 17.6% — $4.1 billion — and said the worst of the coronavirus pandemic’s economic impact was in the rearview mirror. The February forecast said the surplus was due to increased sales tax revenue along with delayed tax payments.
Budget plan
A new budget is supposed to be in place by the start of a new fiscal year in July, but there’s no chance that will happen.
Berger told The News & Observer on Monday night that he expects the Senate to vote on its proposed state budget by the end of next week. Then the House presents its own budget, and then the chambers vote on a joint budget, called the conference budget. Berger said that could come as early as the third week of July or as late as the first week of August. That’s the version that goes to Cooper’s desk to sign or veto.
Cooper told reporters on Monday that “we’re going to have major sticking points because it’s the budget.”
He said he hopes there will be a budget he can sign. “We’ll see what they do. I look at what they put out there as the beginning of this process,” Cooper said.
For more North Carolina government and politics news, listen to the Under the Dome politics podcast from The News & Observer and the NC Insider. You can find it at link.chtbl.com/underthedomenc or wherever you get your podcasts.
This story was originally published June 15, 2021 at 2:53 PM with the headline "NC will collect $6.5 billion more in taxes than expected. Where should the money go?."
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