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Pay raises and a taxing debate in a ‘blue moon’ cycle

When the General Assembly convenes next week, an out-pouring of public school teachers mostly from urban districts will do what won’t arise through the electoral system this year. Even though they are not “striking’’ as teachers have in other states, the North Carolina gathering will elevate education issues in the absence of a governor’s race and other statewide campaigns.

Still, 2018 being an election year for all 170 legislative seats, lawmakers have already baked into the budget another annual pay raise for public school teachers and principals. In seeking to hold onto their super-majorities, Republicans lawmakers hold out the recent series of pay raises as a counter-argument to Democratic challengers who say they haven’t done enough to bolster the teaching corps specifically, and public schools more generally, in their near-decade in power.

And yet, the next big turn in education policy is unlikely to come this year. Aside from a pay raise as well as mental health and school safety measures, the outlook is for a few tweaks here and there – a figurative treading of water – until after the November elections.

Not until 2019 will the state’s education policy makers, educators and parents learn the results of a multitude of studies of school-related issues. In particular, the myFutureNC commission seeks to develop attainment goals for young people as they make their way through the education pipeline from PreK to college or university.

Especially significant is the activity stemming from the long-running Leandro litigation. Superior Court Judge David Lee, now presiding in the case, has appointed a nonprofit research agency to advise him on what North Carolina could do to ensure all students their right to a sound basic education. As a separate entity, Gov. Roy Cooper has appointed an advisory commission to monitor the research work and to give him guidance on moving forward in light of whatever rulings the judge eventually issues.

Meanwhile, a huge issue looms – it’s called taxes – and the outcome will have a substantial influence on the state’s ability to meet educational needs and aspirations. The legislature’s Republican majority enacted a sweeping overhaul of state taxes in 2013, and the state has remained on a tax-cutting trajectory since. By most estimates, tax-reductions have resulted in the state’s collecting $3 billion less in revenue than it would have without the tax law changes.

Another round of tax cuts, postponed in 2017, is scheduled to go into effect in 2019 – reducing the individual income tax rate from 5.499 percent to 5.25 percent, and the corporate rate from 3 percent to 2.5 percent. Arguing that the state’s education and workforce needs should have a higher priority, Cooper, the Democratic governor, has said, “More of these tax cuts are going to hurt us.”  He has called on business leaders to help forestall further tax reductions.

Republican legislators, led especially by Senate President Pro Tem Phil Berger, have pushed back against any suggestion that the state should put off tax cuts or restore portions of what lawmakers have already cut. Such actions, he has said, amount to a tax increase.

Unlike some states that fell into such a deep fiscal hole that they needed to raise taxes to climb out, North Carolina’s state budget outlook is for a modest in-the-black balance. The state has continued its recovery from the Great Recession – fueled largely by the robustness of the Research Triangle and Charlotte metro areas – with business and population growth generating revenues.

The U.S. Bureau of Economic Analysis recently posted a profile of North Carolina that shows the state’s performance in line with national trends – but not surging ahead as tax-cut proponents contend. The state’s per capita personal income falls $7,000 below the national average. In one year, from 2016 to 2017, North Carolina per capita income rose 2.6 percent, the nation 2.4 percent. Over the 10 years from 2007 to 2017, North Carolina compound annual growth in per capita income was 1.9 percent, the nation 2.4 percent.

A nearly identical trend emerges from the BEA report on Gross Domestic Product. North Carolina ranks 10th among the states in GDP. Its one-year GDP growth came to 2.3 percent, the nation 2.1 percent. The 10-year compound growth rate in real GDP was 1 percent for North Carolina, 1.2 percent for the nation.

In reality, whether the North Carolina economy grows has less to do with state tax cuts and more to do with national dynamics and its own long-term community, educational and business strengths. But once-in-a-blue-moon – or every 12th year, to be precise – the state has an election cycle that doesn’t lend itself to spotlighting big policy decisions and to propelling a high turnout of voters.

The assembly of educators on Wednesday can turn on a bright spotlight, at least for a day. But, in looking ahead to 2019, the potent decisions this year will come in whether the state avoids further revenue depletion – and at the ballot box that concludes the “blue moon’’ election in November.

Editor’s note: Judge David Lee is Laura Lee’s father. Mebane Rash edited this article.

Ferrel Guillory

Ferrel Guillory is a founder and serves on the board of directors of EducationNC.