NC state budget update; income tax caps; increased state revenue; voter ID proposal | State Lines

Hinzugefügt: 2026-05-31

[00:00:01]We assess the 2026 [music] legislative session now that lawmaker attention appears to be focusing on a possible budget deal. And the governor says capping state income taxes will uncork a rise in sales taxes. This is Stateline.

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[00:00:31]>> Welcome to Stateline. I'm [music] Kelly McCullen. Joining me today, great crowd of analysts, Morgan Jackson of Nexus Strategies, Jim Perry of NC Capital [music] Strategies to his right, former North Carolina State Senator Mary Wills Bodey and Pat Ryan of Ryan Public [music] Relations NC 4.

[00:00:47]Hello everyone.

[00:00:49]It was supposed to be a week off for the legislature, but all kinds of stuff happened. Including people making comments, Morgan, people that you know and work with closely. But let's talk about the legislative session's activities first. They appear they'll be focused for now on passing that previously announced budget framework into a full-fledged state budget law.

[00:01:08]The current budget spends about $32 billion a year. Republican lawmakers haven't announced what the spending levels would be for a new budget bill.

[00:01:17]Law enforcement and teachers appear you'll be getting the largest pay increases among state workers. Medicaid is fully funded through June 30th. It looks like that program will need over $1 billion in new funding in any new budget bill. And that will begin July 1st. Pat Ryan, that's a few bills out there for the spring session. They have been focused. Few bills, large impact.

[00:01:37]>> For sure. And look, this is a long time coming, right? Um the the House and Senate were feuding pretty intensely for the last year and a half. That stalled a [snorts] lot of progress and a lot of policy items. And some of it got personal. Um but as Clemenza says in The Godfather, uh these things got to happen every 5 years or so, 10 years. Uh helps get rid of the bad blood. So, uh in that spirit, things are moving now, as you mentioned Kelly, which is a good thing. We have proposed constitutional amendments capping taxes, which we'll get into I think a little bit later.

[00:02:06]Um and I think this momentum hopefully will continue. And some of the personal issues that may have played out with the past year and a half are cast to the side and never to be thought of again.

[00:02:15]And everything can can move on.

[00:02:16]>> Mary Wills, you're no longer a senator, but you've been in it. Uh are Does Does the breakthrough give you hope that better governance is on the way? Or but but in but in truthfulness, the government has kept running in spite of everyone saying there's no budget and there's no activity.

[00:02:31]>> Sure. Yeah. So, um you know, the rest of North Carolina is paying for the dysfunction in the legislature. And the Republicans like to remind us that we have a function They have a functional supermajority in the house and a supermajority in the Senate, and they still can't get a budget passed. Um and that's a problem. So, teachers are still teaching in the classroom, corrections officers are still keeping us safe, thousands of North Carolina state employees are still showing up to do their jobs, uh but the legislature isn't. Um and that's affecting real people in their real day-to-day lives.

[00:03:03]And those real people are voters, and they're going to let their frustration be heard at the ballot in November because enough is enough. And we've been in a budget impasse for too long, and people have been kept in limbo for far too long as well.

[00:03:15]>> Jim, as an ex-Republican, uh senator, when does a policy When does all the work in Raleigh go from being just business to it gets personal? Like Pat says, uh you know, there gets to be personal beef between people.

[00:03:28]>> Yeah, I think that depends on the the parties involved and how long that conversation's been going on. You know, the same thing happens in your homes. If you're married, you have a spouse, let's not pretend you agree on everything that you talk about and that you're on the same sheet of music about every issue.

[00:03:45]And I think the longer that drones on, you you know, your patience tends to be worn down. But to Clemenza's earlier point, uh you do have these periods of time when you can hit refresh and you know, kind of flush some of those things out.

[00:03:59]>> Morgan, how does this affect the Democratic side of things? The GOP seems to be getting together and it looks like we will have a budget, we'll have some 8% pay raises, double digit pay raises for law enforcement, and things the governor actually likes.

[00:04:11]>> Mhm.

[00:04:12]>> Um does everyone get to declare victory if this budget passes the way it's intended or the way we're hearing it might?

[00:04:18]>> Well, I think you still have to wait till the devil's in the details. I mean, what we've seen so far, let's be clear, is a framework that was an agreement.

[00:04:24]We've seen this in the past where a framework is put together and it sounds on the face of it like a good budget and then when the the devil's in the details, you see all of the hidden policy things that are snuck into the budget as well as some slight. They may give teachers money, but then fund education less as far as what they give to public schools and I think there's the devil's always in the details of these things.

[00:04:47]Listen, I think, you know, Mary Wills makes an excellent point. It's been 2 years for a lot of folks since they've had a raise and look at what's happened on inflation in those 2 years. And so, while an 8% teacher raise is is really great and we all everybody wants to slap on the back about how great job, the truth is that's that's actually not keeping up with inflation from 2 years ago.

[00:05:08]And so, you you got teachers that effectively will even with an 8% raise that will be making less money than they were making 3 years ago because everything costs more. Everything they purchase from groceries to health care, to child care, to mortgage or or or rent, everything costs more. And so, you this is one of those things about the budget is I think you have to take it a reset and remember you have to invest in your people long-term if you want to keep a growing and thriving state.

[00:05:35]>> Pat, how can Republicans declare victory over a quote pay raise when most everybody now that's an adult has now dealt with an inflationary period and they know that even if it's an 8% pay raise, inflation's about 3 and 1/2% a year.

[00:05:47]>> Well, look, first of all, I think it's the largest teacher pay raise since 2005 or 2006, if I remember correctly. Um and second of all, look, it's it's it's easy when you're the opposition party, and I've been in that position as well, to to poke holes in anything. The Republicans in the legislature have to balance a budget that that prioritizes tax cuts, as they've done for 15 years, teacher pay raises, correctional officer pay raises, uh capital. It's a lot that goes in there, and there's always going to be something that somebody can say, "Well, you could have done more here."

[00:06:15]Um and that's what the opposition side can and does do in the legislature. And it's it's an easier job, messaging-wise.

[00:06:21]But I think on the whole, you look at the teacher pay raises, correctional officer pay raises, tax cuts, the state has been booming for 15 years now. All of that adds up to a a winning governing philosophy.

[00:06:33]>> Governor Josh Stein is warning North Carolinians that if income taxes are capped in a statewide vote, it's sales taxes that will eventually rise on you.

[00:06:42]The governor says regular North Carolinians will pay more when and if the state needs new revenue in the future under a tax cap. Everyone pays the sales tax, and I it's, you know, it's not progressive. It affects everyone.

[00:06:55]The governor was defending the need for pay increases for state employees, and in this case, correctional officers. The governor says the correctional officer turnover rate is now 24%. We talk about corrections officers, but but back to the tax cap.

[00:07:07]First time I heard um Governor Stein just really step out there, issue the one line. Cap taxes if you want, they're just going to raise the sales tax, increase fees. Now, the other side of the equation.

[00:07:17]>> Well, and I'll tell you >> the governor put a sort of finer point on it. He called it a political con job uh for voters, and that's the reality of what we're talking about, is there's nothing in the these amendments that will lower one person's tax this year.

[00:07:32]Nobody will pay less taxes because of these amendments. What it does is insulate uh the wealthy moving forward in the fact that their taxes can never be raised on their personal income tax. So, what it means functionally, we're going to have another recession. Listen, I don't care who's the governor, who's the legislature, the economy is cyclical. We all have lived through many in our lifetimes.

[00:07:53]>> [snorts] >> And what this puts in place is a lack of of availability to find additional revenue to keep paying for schools and police officers and correctional officers. And so, what happens is when the state needs to find more revenue, it means they're going to raise the sales tax. It means that everyday purchases will get more expensive and we've seen that. Again, we just we're talking about inflation. The sales tax going up is bad for working people. The second thing is like the property tax amendment, which we we're he was talking about a little bit as well.

[00:08:21]If you cap local government's ability to fund services at the local level, they have to raise prior they have to raise utilities rates on people. And you talking about talk about another crunch is people's utility rates, whether it's water or energy that keep going up with inflation. That's those bills are going to get more expensive. You're going to have to find revenue somewhere.

[00:08:41]>> Jim, how does a voter enter that, you know, enter the the ballot and go in there and they look at that tax cap. It looks like one thing, but a simple question can have some profound effect on the state. What's your take on the cap tax cap?

[00:08:53]>> I think nothing is more unifying in the state for Democrats and Republicans than paying less taxes. And those things are always so popular. No one wants to pay more.

[00:09:05]I I think it's a little much to to call it a con job. You know, I I I think people are smarter than many give them credit for and I think they know exactly what they're doing. They want to prevent their taxes from going up in the future.

[00:09:20]I think it is reasonable to say if they have a need for another revenue source, if there's a unforeseen expense that comes up, this could make it more difficult to raise money more quickly, but sales taxes will come in the door, you know, within what, 90 days to implement them, 180 days you could be you could receive income from sales tax.

[00:09:42]We saw sales tax was also popular in the city of Charlotte, you know, Mecklenburg County on their transportation tax that they passed. And I I think there's a lot of North Carolinians who would consider different fee structures or tax structures. It is change and change is hard. It's not how we've done everything forever.

[00:10:00]But I I think that there is a path forward that will please a lot of voters.

[00:10:05]>> What makes caps popular with both sides?

[00:10:07]It's a partisan debate in Raleigh, but voters and rural voters I don't see anyone who's just adamantly opposed to a tax cap of any kind if you drop that term. Liberal, conservative, it doesn't matter to me from what I hear.

[00:10:18]>> Yeah, I mean I think that people people are hurting. Things are more expensive and people want more money to spend on their families, their vacations, their everyday expenses. And so I think a cap kind of provides some relief. However, to James point, in places like Charlotte or in states like Tennessee and Louisiana where there's Nashville and New Orleans, sales tax can make sense because they rely on people coming from out of state that use their infrastructure, their police officers, their health care system, their roads.

[00:10:50]And that's a way to capture money back.

[00:10:53]But in North Carolina, increasing sales tax would be very burdensome to working families across our state. And if we do find our when we do find ourselves in a recession again, you know, people will go to South Carolina or Virginia to buy their goods.

[00:11:09]Local businesses will suffer and people are going to be buying less because we are in a recession. And so, you know, I think we need to be very thoughtful. The people of North Carolina are smart, but they're they're also looking for relief.

[00:11:23]And so I think, you know, elected officials need to reassure them that they're going to spend their money wisely, but also be preparing for the future Uh that is a big part of uh fiscal responsibility.

[00:11:34]>> So, I think people may well go to South Carolina and Virginia to buy goods in a higher sales tax environment, but they'll be living in North Carolina. And to to continue the theme of of states should uh use their tax policy to uh to to attract other visitors uh you mentioned New Orleans and Nashville. Well, North Carolina has used its tax policy tax policy to attract full-time residents and businesses because of their low income tax rate and low corporate income tax rate. So, just this year uh North Carolina government will have about $600 million extra alone from residents who moved here and therefore brought their income and their taxes here. So, So, lowering the the the income tax and capping it, which I think is a brilliant move, uh in some ways solidifies and and ensconces this uh this policy and governing philosophy that's resulted in families and businesses continuing to move here and bringing accumulated billions of dollars in tax revenue with them. And I think that's a good competitive way for a state to run itself.

[00:12:38]>> But, I don't think it's just because our corporate tax rate is low that people have moved here. People move here for our wonderful um higher education system, our safety, um you know, so many things. RTP, which existed long before the corporate tax rate went lower. Um our mountains, our beaches. I mean, there's so many things about North Carolina that bring them here. And it's not just the corporate income tax.

[00:13:00]>> There are beautiful mountains and beaches in New York. That's where I'm from.

[00:13:04]>> [laughter] >> But, you know what's >> I don't know about that.

[00:13:05]>> You know what's different is the tax rates and the the government regulation in New York.

[00:13:09]>> I don't think anyone's ever moved to a state because they had really nice high tax rates and they preferred to go there. I think that's fair, also.

[00:13:16]>> Well, I think there's a difference between being competitive and being extreme. And I think that I feel like that, you know, one place instead of increasing sales tax, we do need to actually increase our corporate tax in North Carolina. We have one of the lowest in the country and I think that if corporations are going to come to our state, then they need to pay their fair share and be a part of the fabric of our state.

[00:13:38]>> one has said sales taxes are going up.

[00:13:39]The governor says it's going to happen.

[00:13:41]I mean that's it's a very big bully pulpit. That hasn't happened yet, Jim.

[00:13:45]>> That's that's fair. I think when we start talking about revenue and spending, someone mentioned earlier that we we think the people want their money spent wisely.

[00:13:56]I I think what I've heard more of recently is they don't want their money spent. You know, they want to see some restraint at the local level.

[00:14:04]So, you know, there's a lot of different ways to make the soup, a lot of different ingredients, a lot of ways to get revenue or reduce expenses and I think everyone takes a different approach.

[00:14:13]>> Yeah, I mean that the governor's argument is premised on this notion that government needs constantly more revenue than it had the year prior, even accounting for inflation and population growth. I just reject the notion that government will somehow collapse or things will not work at all in this state in the near future but for yet more revenue to state government and we will have a tax rate next year of 3.49%.

[00:14:33]We talked about the litany of raises that state employees are getting at that tax rate. I see no reason why in the year following we must have a tax rate that brings in more revenue than we have this year. If things are working this year, then they'll probably work next year.

[00:14:46]>> Well, I think there's a problem in that premise and that the cost of things are increasing. And so, you look at Medicaid and you know, it's going to be what like a billion dollar shortfall starting July 1. You don't rely on Medicaid but many people across our state do and so that's why there's severe and significant concern when Medicaid could go unfunded because people can be without life-saving health care.

[00:15:07]>> Love to talk about health care costs.

[00:15:09]Yeah.

[00:15:09]>> And Morgan, people wonder how a governor makes an impact in a super majority state with the opposition party. Just one comment get everyone talking >> [laughter] >> The power of the word.

[00:15:19]>> I do I I I want to come you know, I'm going to go to I'm going to go to Jim on this one. But WRAL's political reporter, tip of the hat to you.

[00:15:26]Will Durant. He recently wrote an article about North Carolina enjoying a $2.6 billion revenue beat for the next 2 years. If you look at how the budget is constructed right now. So Senate President Phil Berger can get his bragging rights that tax cuts again have fueled the state economy that increases state revenues. Back to Governor Stein, he's has said Republicans you'll eventually cut taxes so deeply you'll create a structural state deficit.

[00:15:51]All right, Jim. What are realistic you know, options we have you know, 600 million here, 700 million next year. If you believe the fiscal analyst not the politicians who wrote the budget. We can spend it. We can save it as a state. We can refund it. We can cut taxes again.

[00:16:09]>> Yeah, so I think when we when we think about and consider revenue, uh I'd like to remind everyone something I learned in business school and that's about a forecast. And all forecasts have one thing in common.

[00:16:21]They're all wrong, right? So forecast to me, I'm I'm not really concerned about it. Don't put as much faith in it as I do actual cash. And we have collected more cash than anticipated as compared to the forecast. I think several things contribute to that. We have a strong stock market been helping returns that those one-time earnings. As people continue to move here, we have more people contributing to the soup. I mentioned earlier.

[00:16:51]So as population grows, wages grow, we have continued to see these wins that Senator Berger has always forecast and frankly he's been right every time. And people say, "Well, we haven't had a serious recession." And I'll stipulate that and say, "Yeah, I agree." But he has been right. Part of the problem with forecast and they have gotten better. You know, you can be off by a point point and a half, and it's several hundred million dollars. But, they started using regression analysis, and I think that that has helped us to be more accurate, but we still don't know, you know, what's going to happen in the future. Is that growth going to continue in population? Is that going to bring us more dollars?

[00:17:35]>> regression analysis? God knows how to do it.

[00:17:37]God >> [laughter] >> AI knows how to do it. What is regression analysis? Very quickly, can you explain that?

[00:17:42]>> Uh yeah.

[00:17:42]>> It's a way of looking at spending, but collecting >> and looks at the past, and it makes observations, and then it explains the differences in the observations. So, it it explains the errors when you compare what happened, and you you can explain why things happen by comparing two things.

[00:18:01]>> Morgan, the governor has said the stock market returns, and he just said at one time it was a good stock market year.

[00:18:06]That kind of goose the revenue surplus or overcollection. So, how does this play out? Tax rates will be 3.49%.

[00:18:14]They are still expecting revenue surplus.

[00:18:16]>> That's right. But, so the the here's the thing you have to understand is we've talked about a little bit. We're a growing state. People want to move here.

[00:18:23]The reason people want to move here, and you ask any economic developer who is talking to companies that want to come to North Carolina, they want to come here because of our workforce. It it they never ask about what your corporate tax rate is. They never ask about what your personal income tax rate. The first question out of every company's mouth is tell me, do you have the workers that my my corporation or my factory needs today, and are you going to continue to have them 10 and 20 years from now?

[00:18:50]And so, when we when we have these kind of years where we are able to bring in more money than expected, we need to be thinking about what are the investments we make in our people that make us a stronger state moving forward. And the answer can't always be let's just let's just cut more taxes, cut more taxes, cut more taxes. It has to be how do you pay people to keep good teachers in school, good law enforcement on the job, how do you keep people in health care? We were just talking about that earlier. You know, 700,000 people in North Carolina lost their health care in the last year because of the lack of the federal subsidies. The federal subsidies going away. Those people now don't have health care and aren't getting treated. That is not good for the our economy nor anybody's health care. And so I think ultimately you have to do some of both. You can save more money and that's the smart fiscal thing to do, but you also need to invest in your people if we want to continue to be a destination state. The only way that we're going to continue to bring in more revenue is by bringing more people here. And ultimately you still have to fund, which means infrastructure struggling, right? Look at Look at a lot of discussions around transportation right now. That takes more and more and more money to fund and build roads and and so that we don't end up Charlotte doesn't end up like Atlanta and places like that that start to stymie economic growth. And so you have to understand that taxes are part of the equation, but what what people who are coming here looking for are quality of life, workforce, can their kids go to good schools and and and living in a place like North Carolina, that's one of the reasons we're number one state for business the last several years in a row is because of our our workforce and our quality of life.

[00:20:28]>> Pat, the the tax rate is drawing people in and the economy's growing and you know, the voters have elected GOP majorities in the legislature. They like Democratic governors apparently for the last 10 years. So it it This is a difficult topic to to sort through because we are still growing. The tax rate's getting lower.

[00:20:45]But next legislative session, the one leader will not be there that has pushed the idea that if we continue lowering taxes, we continue bettering the economic and business climate. What happens in 2027? The house was much more cautious about future tax cuts.

[00:21:01]>> Yeah, I think there have always been differences of of degree if not opinion between the two chambers, but like go back to 2011 there have been what what three house speakers now? Each one of them has been an equal partner in advancing the governing philosophy that North Carolina has had for those 15 years. And so leadership turns over, things change, but I think what's been constant since 2011 in the state is is a philosophy of keeping taxes low and cutting them as often as possible.

[00:21:36]And the result has been Brian Balfour of the Locke Foundation added it up. In the last 10 years alone, surpluses have totaled 12.6 billion dollars. It's a lot of money for investments in people and infrastructure and higher education.

[00:21:48]>> Mary Wills is this If you lower taxes and lower spending, you can always you can always budget yourself a budget. Is the state spending enough money in infrastructure, schools, and and then how do you make an argument to increase government spending in infrastructure, schools, workforce, community colleges, and so forth because you're right, people are squeezed. They don't want to pay more taxes.

[00:22:05]>> Right, people don't want to pay more taxes, but they also rely on those services. And so I think it's up to you know elected officials to really take the time to explain to people and be responsible for where those dollars are going and how they're being fiscally responsible. I think you know I always say in in our with our own house budget, I don't mind spending money, but I don't want to waste money. You know, I'm okay with making an investment that's going to make a a difference, but I don't want my money wasted. And I think >> not having any taxes at all, Mary.

[00:22:33]>> [laughter] >> How about that?

[00:22:35]>> Um well, it you would have been hard for you to get here today without all those roads, Pat.

[00:22:40]>> Well, let's finish up with our final topic. North Carolina State Board of Elections will be accepting public comments on a proposal that could change some voter identification rules.

[00:22:48]One proposal would allow local boards of election to disqualify ballots of voters who can't or did not present a photo ID.

[00:22:56]That could be rejected by a simple majority vote. The current standard is a unanimous vote of the local board of elections. Now, as part of that, the board would then need to submit a fact-based, not emotion or any other kind of standard, fact-based written explanation for the ballot rejection.

[00:23:13]And then another rule, Mary Wills, would ban audio speakers, bullhorns, and the like sound equipment from voting site entrance areas.

[00:23:20]One I wanted to talk about, the other one, yeah, I don't care who you are. You don't want to yell at people.

[00:23:24]>> bullhorns?

[00:23:24]>> I don't [laughter] want I don't want somebody with a microphone talking even talking to me when I go into a ballot space. And that's that's if I'm biased for that, so be it, but >> I agree.

[00:23:32]>> Back back to the voter ID.

[00:23:33]>> Sure.

[00:23:34]>> Uh simple There's a big difference in simple majority and a unanimous vote to disqualify a ballot.

[00:23:39]>> Sure, certainly. And when we talk about the right to vote, our most sacred right, our most fundamental right, we need to be very careful when we're proposing changes. And so, in North Carolina, every county, all 100 counties have five people who sit on their board of elections, two Democrats, two Republicans, and then the auditor appoints one. So, conceivably, we could have a you know, a partisan split on um whether or not people want someone's vote to count. And I think we need to do everything we can to really inoculate the right to vote from that partisan toxicity. I mean, even Senator Berger's race, 23 votes. We've got some really tight elections in North Carolina, and it could come down to some partisan pressure at the Board of Elections.

[00:24:18]>> Jim, is this a problem at all at the local level? Most boards of elections, even when Democrats, when it was All this stuff, they all have gotten along for the most part over history of North Carolina voting. So, what What's the deal?

[00:24:29]>> You know, I I think it does get charged politically based on national politics and efforts to inflame it, but I think locally uh these people know each other.

[00:24:39]They go to baseball games together. They go to the same grocery stores. I think they get along better in the smaller towns and those smaller counties, and I don't see it being a huge problem.

[00:24:50]>> Morgan, but the process would still allow voters to come back and what they call cure the ballot, make it good. Is it Is Is this just a procedural matter for If you're If you're watching the State Board of Elections or is there something more deep in the policy of this that could affect North Carolina elections in a tangible way?

[00:25:07]>> Oh, totally. Listen, this is a solution in search of a problem. And the reality of it is since there's been voter ID on the books in North Carolina, this system has worked very well. Local Boards of Elections work very closely together regardless of your partisan stripe to make sure that legal votes are counted and those that aren't If you have an exemption that doesn't qualify under state law, your vote doesn't your ballot [clears throat] doesn't count. That's the law, straightforward. The The thing that is concerning about the timing of this is this has now come to head now that there are three Republicans and two Democrats on every single county board.

[00:25:40]This for whatever reason was not an issue and it was not something that Republican majority in the legislature cared about when Democrats were leading the Boards of Election. Now that Now that they have a majority, it's very clear and I think, you know, one of the one of the big concerns for people is that it you can make partisan decisions based on if three Republicans say let's don't count the vote, uh they don't get counted now and that's that should cause some concern to people.

[00:26:05]>> 20 seconds.

[00:26:05]>> Well, I'm old enough to remember when the Republicans tried for 5 years to get an equal number of Democrats and Republicans on Boards of Elections everywhere in the state and it was soundly rejected. Look, what we're arguing here about rules for what happens if you don't bring your ID to the ballot booth. You just got to bring your ID.

[00:26:20]>> There you go. Thank you, panelists.

[00:26:21]Thank you. What are your thoughts, by the way, if you've watched this show?

[00:26:23]The email address is [email protected].

[00:26:26]I'll read the email, share it with the crowd. I'm Kelly McCullen, thanks [music] for watching. See you next time.

[00:26:36]>> Quality Public Television is made possible through the financial [music] contributions of viewers like you, who invite you to join them in supporting PBS NC.