Revised forecast gives North Carolina a revenue boost
(The Center Square) – North Carolina’s Office of State Budget and Management and the General Assembly’s Fiscal Research Division released an updated revenue forecast Tuesday that showed the state is expected to collect $60.4 billion in revenue over the next two years, reflecting a $6.5 billion increase over previous estimates.
The new estimate comes as the General Assembly draws closer to the deadline for budget negotiations. Lawmakers must create a state spending plan for the next two fiscal years during this legislative session. Each fiscal year starts July 1 and ends June 30 the following calendar year.
The revised forecast does not include federal aid from the American Rescue Plan but economists credited the increase to the federal aid fueling the state’s economy. Analysts said they saw an increase in individual and corporate tax collections because of the state’s recovery.
Gov. Roy Cooper said the new forecast means the state has more money to spend on public services and investments. Cooper, in his budget proposal, has recommended spending more money on teacher and state employee salaries, infrastructure and Medicaid.
“These new numbers show unprecedented resources are now available to make transformational investments for our state,” Cooper said. “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.”
Republicans are pushing a proposal that cuts the flat income tax rate from 5.25% to 4.99% and increases the zero-tax bracket from $21,500 to $25,500 for couples filing taxes together. It increases the child tax credit by $500, bringing the total deduction to $3,000 for families that earn less than $40,000 per year. Cooper also supports cutting taxes for lower and middle-class North Carolinians.
The revised June consensus forecast anticipates the state will have $29.7 billion in its general fund in fiscal year 2022 and $30.7 billion in fiscal year 2023.
Cooper has recommended spending $27.3 billion in fiscal year 2022 and $28.7 billion in fiscal year 2023, in addition to adding $1 billion to the state’s reserves.
GOP legislative leaders also want to strengthen North Carolina’s rainy day fund, but they plan to spend no more than $25.7 billion in fiscal year 2022 and no more than $26.7 billion in fiscal year 2023. They also plan to prioritize infrastructure improvements.
Republicans often have pushed for overcollections to be returned to taxpayers, instead of reinvesting.
“A huge surplus does not mean we’re spending too little,” Senate Leader Phil Berger, R-Rockingham, said in a statement. “It means we’re taxing too much.”
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