It is deep summertime, and as usual, warnings of rip currents punctuate the flow of daily news. This summer, caution flags have gone up — in the form of two research reports — that alert North Carolina to worrisome fiscal and economic currents.
Neither is a report specifically on education. But both have implications for schools, colleges, and universities in a state that devotes around 57 percent of its General Fund to education.
One of the caution flags was hoisted by the General Assembly’s Fiscal Research Division. Responding to a request by Dan Blue, the Senate Democratic Leader, legislative staff projected that the state’s current budget-and-tax trajectory could result in a shortfall of revenue, in light of anticipated spending requirements, of $1.2 billion in two years, growing to $1.4 billion in four years.
The report touched off a round of partisan back-and-forth all too familiar these days, in Raleigh as well as Washington. Of course, the legislature will adhere to the balanced-budget requirement to keep spending in line with revenues. Still, the nonpartisan legislative staff’s research serves as a forewarning that, with another round of state tax cuts scheduled for 2019, more tight, austere budgets are in store.
The other caution-flag research comes from Michael Walden, a distinguished economist at NC State University. Walden’s new paper does not focus on budgeting and taxes, but offers a provocative analysis of an undercurrent of economic stress. Examining the period between 2001 and 2015, Walden finds that North Carolina’s per capita income and per worker earnings have declined in relation to national income and earnings. This decline, he writes, is “North Carolina’s U-Turn.”
What’s more, Walden detects important shifts in North Carolina’s employment composition — more high-pay jobs, more low-pay jobs, and a decline in middle-pay jobs. “Although North Carolina had a gain in high-pay jobs over three times greater than the nation,” he writes, “the state’s gain in low-pay jobs was almost twice as great as in the nation, and — perhaps more importantly — the state lost over 5 percent of its middle-pay jobs while the nation was adding almost 6 percent to middle-pay jobs.”
Walden’s new paper adds an updated dimension to what he wrote in his 2008 book, North Carolina in the Connected Age. That book shows North Carolina outpacing U.S. growth rates in employment, gross domestic product, real per capita income and other measurements between 1977 and 2005. Explaining that the state adapted to the decline of traditional industries and to the forces of the connected age, Walden wrote, “Some might call this North Carolina’s economic miracle.” This “miracle’’ took place under a tax system with rates that Republican legislators now say are too high and under government they depict as spending too much.
Walden pointed out that the state’s economic “miracle did not reach everyone everywhere.” Exacerbated by the two recessions in the 2000-10 decade, divisions between urban and rural, between rich and poor, between the prospects of people with higher education and those with no more than a high school diploma, between the skilled and the people with little chance of upward mobility, are part of North Carolina’s contemporary reality.
The state budget debate involves Republicans-versus-Democrats rivalry, to be sure. But the deep partisan differences have more to do with clashing worldviews and visions of how to stimulate the state’s economy.
Proponents of further tax reduction and limits on the public sector, mostly Republicans, contend they have made North Carolina more business-friendly by reining in state government and liberating individuals and businesses to spend more of their own money. The counter-argument, increasingly articulated by Democratic Gov. Roy Cooper, holds that, so long as the state has a fair and sufficient tax system, North Carolina will attract better jobs through stronger schools, wider access to health insurance, and modern infrastructure.
North Carolina is engaged in a great debate over specific education issues, but the future of the state’s education systems is also at stake in the clash of policy priorities amid fiscal and economic rip currents. North Carolina has long had a push-and-pull relationship with its education systems. The fiscal condition of the state and its communities has a direct influence on their educational capacity. In turn, education contributes not only to individual advancement but also to North Carolina’s civic and economic well-being.