Choices, Conflicts Amid Budget Squeeze

First it was Gov. Pat McCrory who tried to fashion a state budget giving teachers a badly needed raise while hamstrung by large tax cuts. Then the N.C. Senate took its turn. Yes, teachers willing to give up their job security could get a pay boost. But the proposed Senate budget fails tests of fairness and adequacy.

Now along comes the state House to take still another whack at the budget challenge. While its plan drops a couple of the Senate’s most dubious ideas, when it comes to teacher pay the House trades one bad idea for another.

Should North Carolina really encourage more gambling on the state lottery as a way to finance raises for its teachers, as the House would do? To those of us who see the lottery as a tool to generate revenue by taking advantage of people’s weaknesses and even their desperation, the answer couldn’t be more obvious.

It’s just as obvious that the House makes a good call in declining to follow the Senate’s lead on shrinking the state’s Medicaid rolls. Under the Senate budget, several thousand elderly, blind or disabled residents – people who also have precious little income or assets – would lose their Medicaid eligibility and thus have to scramble for the kind of health care that the more fortunate among us take for granted.

The Senate move would save some $29 million, and supporters say the state would still be in compliance with minimum eligibility standards for the joint federal-state Medicaid program. But the House correctly recognizes what a mistake it would be to make life even more difficult for a group of folks who already must carry heavy burdens.

In a hurry

Like their Senate counterparts, House leaders sent their budget proposal through the legislative hoops on a rush basis. (At least the House allowed for a day of hearings in its various appropriations subcommittees – a nicety the Senate dispensed with.)

The full House Appropriations Committee considered and approved the budget, which technically is the House substitute for Senate Bill 744, on June 11. Floor debate began on June 12 and concluded on June 13. Final passage came on a vote of 77-35. Now the fun begins.

The size of each chamber’s proposed budget is similar — $21.2 billion for the Senate, $21.1 billion for the House. McCrory’s plan, which sits on a legislative siding, is pegged at $21.0 billion.

But within those overall spending targets are embedded dramatic policy disagreements. Take teacher pay: The House plan offers raises averaging 5 percent. The Senate holds out the prospect of 11 percent pay hikes – music to the ears of those rightly concerned about North Carolina’s national rank of 46^th in average teacher salaries, a level that has many teachers heading for the exits and jobs in other states or other lines of work.

Still, the music turns harsh with the requirement that, to make the additional money, experienced teachers who had already demonstrated their competence would have to forgo their protections from arbitrary firing. Whether to give up their career status, otherwise known as tenure, so they could be paid closer to what they deserve is a choice teachers shouldn’t be forced to make.

Making matters worse, the Senate would in effect raise much of the money for the pay boosts by laying off more than 7,000 teacher assistants who help out in second- and third-grade classrooms. That would be bound to make the jobs of regular teachers in those grades – a stretch that’s seen as critical to students’ ongoing success – more difficult.

The House would keep those teacher assistants on duty, absorbing an ongoing annual cost of $233 million. It’s a hefty outlay, but consistent with the goal of giving regular teachers enough time to work with young students on essential skills, reading in particular.

Here’s where the lottery comes into play. The House needs to find $176 million to finance its teacher pay plan during the fiscal year that begins July 1.  Shazaam – increase the lottery’s projected take by $161 million, make a few other changes, problem solved. Sort of.

Touting those tickets

Crafting a budget always involves projections of how much money the state can expect to collect from its portfolio of taxes and fees. Those projections amount to educated guesswork whose accuracy hinges on swings in the economy.

The lottery, however, is supposed to be a different sort of animal. It was not intended to be a source of the recurring revenue from which ongoing programs are funded. That revenue was supposed to be generated by taxes fairly applied across the whole population, not by selling lottery tickets to people, typically people who don’t have a lot of money to start with, who hope against hope that they’ll soon be millionaires.

That principle has been eroded to the point where it hardly exists. Now, the House would gamble that by letting the Lottery Commission double the amount it spends on advertising from lottery receipts, from 1 percent of the total to 2 percent, it would enjoy a $161 million bump.

If the state raises a tax, it can calculate with reasonable certainty the effect on revenues. But it’s not at the same time encouraging people to spend more money at the mall, for example, so that they’ll pay more in sales taxes.

With the proposed lottery change, the state would in fact be trying to influence people to buy more tickets – thus spending money that could be spent on goods and services sold by private-sector businesses — to chase the jackpot dream. Or, maybe just to enjoy the sense of having some “action” that could return a few bucks with some lucky scratches.

Either way, it raises issues that made the lottery so controversial when North Carolina approved it almost a decade ago, becoming the last large-population state to join the lottery parade. Opponents, including the Council of Churches, argued then and would argue now that the lottery is an exercise in exploitation by the state of its own citizens.

Revenue crunch

Those opponents did manage to have restrictions on advertising written into the lottery law. At least ads for the N.C. Education Lottery are required to avoid the cynical hard sell that taints such advertising in many other states.

Ironically, the House budget that would allow a doubling of lottery ad spending also would tighten the rules on ad content. Changes pushed by Republican Rep. Paul Stam of Apex, a long-time lottery foe, mean that lottery customers would be warned even more specifically about the long odds against hitting it big.

And it turns out that the new lottery revenue estimates didn’t take those changes into account. So how reliable can those estimates be?

The real problem here for both the House and Senate, and for Gov. McCrory as well, is that they’re trying to meet the state’s real spending needs with revenue streams that have been rashly diminished by tax cuts amounting to some $500 million a year and chiefly benefitting well-off taxpayers.

Lower taxes are seen by their advocates as spurring job growth, a worthy goal. But considering the trade-offs, and the uncertain link between tax cuts and job creation, the cure could be worse than the disease if it means, for example, throwing impoverished old folks off Medicaid, or firing thousands of teacher assistants, or ramping up the state’s efforts to entice people to play the lottery.

As legislators now wrangle with conflicting versions of the upcoming budget, let’s hope they set aside their ideology and their power trips and make honest efforts to keep the civic damage to a minimum.