THE REFORM DECADETHE SUCCESS OF THE REFORM MAJORITY
In 2011, the new Reform Majority assumed leadership of the General Assembly for the first time in more than a century with a bold new vision to turn around a myriad of financial and economic crises. Their goal?
- Reduce the tax burden on businesses and families.
- Strengthen our business climate to empower the private sector to create new jobs and drive down unemployment.
- Stop spending and borrowing beyond our means, and pay back our debt to the federal government.
- Prioritize spending on public education and infrastructure, and invest in the Rainy Day Fund to be well-prepared for recessions, natural disasters, or any crisis.
- Put students first in our public schools, increase school choice options, and dramatically raise teacher pay.
- Tackle the affordability of college to give people the freedom to pursue their dreams.
What happened next is a story of determination and discipline to change the direction of state government in North Carolina while being constantly under fire from negative attacks from the traditional media and leftwing groups on the rise across the state. Here is the story:
Saving for our future and being prepared for tough times is clear evidence of responsible government. The Reform Majority has dramatically increased the balance of North Carolina’s Savings Reserve – starting from a low point of $150 million in 2009-10 to $2 billion in early 2020.
- The statutory goal in the State Budget Act is to maintain a certain balance in the Savings Reserve. Under the Reform Majority’s leadership, North Carolina met that savings goal for the first time in 2016-17.
- In 2017, to maintain our state’s commitment to saving for the future the Reform Majority passed a law to require 15% of each fiscal year’s estimated growth in State tax revenues be transferred into the Savings Reserve. Here is what has transpired – bearing in mind that the savings balance has adjusted as money has been taken out to address disasters like hurricanes that caused generational damage in underserved areas of North Carolina.
Fiscal Year Savings Balance Statutory Goal
2008-09 $150 million $1.635 billion
2009-10 $150 million $1.699 billion
2010-11 $295 million $1.522 billion
2011-12 $418 million $1.517 billion
2012-13 $651 million $1.577 billion
2013-14 $651 million $1.640 billion
2014-15 $1.101 billion $1.648 billion
2015-16 $1.575 billion $1.685 billion
2016-17 $1.838 billion $1.737 billion
2017-18 $1.838 billion $1.793 billion
2018-19 $2.010 billion $2.596 billion
2019-20 $1.341 billion $2.607 billion
2020-21 $1.964 billion $2.616 billion
SOURCE: Office of the State Controller General Fund Monthly Financial Report.
For years, from 2003 to 2008, liberal-led legislatures passed irresponsible budgets that raised spending to unsustainable levels – 7.74% growth in state spending – and relied on job-killing tax increases to pay for them, even during recessions. This led to major deficits and a prolonged economic recession after 2008.
Beginning in 2011, when the Reform Majority came into leadership, one of its core principles was controlling state spending. Responsible budgeting since then has resulted in the reform majority passing eight consecutive balanced budgets – all without raising taxes. The Reform Majority’s record speaks for itself, lowering the spending percentage from 2011 to 2018 to 2.88% — a 5% drop from the previous leadership’s 7.74% level of spending.
The numbers below show the boosts in state spending as they have unfolded over the past couple of decades.
Prior to 2013, taxpayers had to fund Medicaid cost overruns totaling nearly $2 billion – money that had to be taken from other state priorities, like education. To deal with that overwhelming cost load, the Reform Majority successfully reformed and restructured North Carolina’s chronically-troubled Medicaid program by:
- Forming a new Division of Health Benefits.
- Creating a new, insurance-like capitated system that replaced the old fee-for-service system.
In this chart, the “Cumulative Reserve” shows the additional non-recurring dollars set aside for Medicaid for the Medicaid Contingency Reserve and for Medicaid Transformation.
Fiscal Year Medicaid Contingency Medicaid Transformation Cumulative
Reserve Balance Fund Balance Reserve
2015-16 $186.4 million $75 million $261.4 million
2016-17 $186.4 million $225 million $411.4 million
2017-18 $186.4 million $300 million $486.4 million
2018-19 $186.4 million $425.3 million $611.7 million
2019-20 $186.4 million $183.3 million* $369.7 million
*SOURCE: Authorized Budget and Growth in Spending numbers come from the Fiscal Research Division’s budget summaries in the Annotated Committee Report done each fiscal year. Actual Revenues come from the Office of the State Controller General Fund Monthly Reports published at the end of each fiscal year for June. They include the total tax and non-tax revenues for that fiscal year.
SOURCE: Medicaid spending comes from 2009-2019 State Budgets. Reserve balances come from the Office of State Controller General Fund Monthly Financial Reports for June.
North Carolina has become a national leader in efforts to simplify, reform and modernize outdated and onerous tax codes. Since 2011, the Reform Majority has undertaken major tax reforms. The first step was eliminating over $1 billion annually in “temporary” sales taxes and income taxes that Gov. Perdue and legislative liberals levied on working families at the peak of the Great Recession. The Reform Majority initiated a plan that dramatically reduced income tax rates:
- Reduced the corporateincome tax rate to 5% and adopted single sales factor apportionment.
- Lowered the personalincome tax rate from a high of 7.98% in 2010 to a flat 5.25% in 2019.
- Increased the amount of tax-free income North Carolinians can claim as the standard deduction to $10,000 for single or $21,500 for married filing jointly.
Add it all up, and 99% of N.C. taxpayers pay less or no state income taxes at all thanks to the Reform Majority.
As a result of cuts in the state’s corporate income tax, North Carolina’s business tax climate is ranked higher than our bordering states in the Southeast. We’ve gone from 44th in the nation to 12th in just a few years.
SOURCE: Tax Foundation
*The Tax Foundation’s State Business Tax Climate Index enables business leaders, government policymakers, and taxpayers to gauge how their states’ tax systems compare.
The Reform Majority’s determination to help business create jobs and energize the state’s economy was kickstarted when the new leadership paid off a $2.8 billion debt to the federal government with a plan that maintains jobless benefits while creating an unemployment reserve that grew to $3.74 billion by October 2019. That reserve helped countless families across North Carolina make ends meet in the aftermath of the coronavirus outbreak that put over 1 million North Carolinians out of work.
The Reform Majority’s efforts lowered the state unemployment tax from $126 to $42 per employee. That’s a 67% reduction in unemployment taxes on job creators and businesses.
SOURCE: According to the Employment Security Commission the state began borrowing from the Federal Government in February 2009. Peak borrowing was in May 2012 at $2.8 Billion. Following the passage of S.L. 2013-2 (HB4) in 2013, under Republican leadership, that debt was retired by April 2015. The Unemployment Compensation Fund reported net position of $3.74 Billion at October 2019 according to the Office of the State Controller’s Comprehensive Annual Financial Report (CAFR).
One of the first priorities of the Reform Majority was to relieve businesses across the state from onerous and burdensome regulation. Legislation passed in 2011, 2012, 2013 and 2014 cut state government red tape and streamlined bureaucratic rules and regulations that stifle job creation.
Tort reform legislation in 2011, 2012, 2013 and 2014 helped stop frivolous lawsuits that threatened doctors, businesses and working families. This legislation helped keep businesses in the state and make North Carolina more attractive to the best and brightest doctors and medical professionals.
Prior to the COVID-19 crisis, North Carolina’s economy added jobs faster than the rest of the country. From November 2010 to August 2019, jobs grew from 4,129,762 to 4,899,701 in North Carolina – a 19% increase.
In the same period, to compare, jobs increased 17.87% in the other 49 states. According to the U.S. Bureau of Labor Statistics, the number of North Carolinians employed is above the national percentage and has been growing at a faster rate.
SOURCE: U.S. Bureau of Labor Statistics.
One of the key planks of the Reform Majority’s plan to turn around North Carolina for our families and businesses was reforming education. Legislators from both parties worked together to make changes that put students first:
- Invested an additional $3 billion additional state dollars in K-12 classrooms.
- Created the Read to Achieve program for K-3 students to strengthen literacy by third grade.
- Established a transparent A-F school grading systemto help keep parents better informed.
- Provided funding to reduce class sizes in grades K-3.
- Removed the cap on charter schools and created the opportunity scholarship program to provide more academic choices for families.
- Created a new North Carolina Teaching Fellows program to attract and retain new teachers to low-performing schools and STEM courses.
K-12 Education Spending:
SOURCE: 2008-2020 State Budgets
TEACHER PAY INCREASES
For years, the level of teacher pay has been one of the ways the public measures educational success in North Carolina. As a result, there was a concerted effort made to raise the average teacher pay across the state. The Reform Majority took the following steps to help teachers:
- Reformed teacher pay by collapsing the antiquated, 32-step pay scale.
- Passed teacher pay raises in each of the last seven years, totaling over 20%.
- Raised starting pay by $5,000.
- The average pay raise for the 2019-2020 biennium was 9%, bringing the average teacher salary in North Carolina to $54,606.
For the record, average teacher pay raises for NC teachers have risen every year since 2013:
2019 2.0% (held up by veto of state budget by Gov. Cooper)
2020 1.9% (held up by veto of state budget by Gov. Cooper)
Maybe just as important, the Reform Majority addressed our schools’ leadership pay as they worked to increase principals’ salaries by 6.2% – providing more than $16 million to raise pay levels for principals in 2019.
SOURCE: Average pay raise calculated by the Fiscal Research Division. Pay raises for 2019-21 are from the 2019 budget bill H966, vetoed by Governor Cooper.
COLLEGE TUITION REFORM
The cost of attending a public university has been on the rise nationally, with tuition and fees steadily increasing. In 2016, the Reform Majority passed the NC Promise Tuition Plan, giving North Carolina students access to more affordable public higher education options. There are four main pillars to this new NC Promise law:
- Guarantees no in-state tuition increases for a standard undergraduate college term (usually 4 years) at all 16 North Carolina public universities. This tuition guarantee would also apply to active members of the military based in North Carolina
- Freezes student fees – often used to fund non-academic expenses – at all North Carolina public universities at current levels and limits future increases to no more than three percent per academic year.
- Lowers tuition at select universities from the mountains to the coast to $1,000 per academic year ($500 per semester) for in-state students and $5,000 per academic year for out-of-state students beginning Fall 2018 at:
- Elizabeth City State University
- University of North Carolina at Pembroke
- Western Carolina University
- Directs $1.8 million annually to award up to 20 scholarships under the new Cheatham-White Merit Scholarship Program for students at North Carolina Central and N.C. A&T universities.
CHOICE AND CHARTER SCHOOLS
Opportunity scholarships and innovative public charter schools have helped create new and exciting educational opportunities for low-income or disabled students who are stuck in underperforming traditional public schools.
Soon after the Reform Majority ascended to leadership, the legislature allocated $10 million to launch a scholarship program that gave parents and families more educational options. And they lifted the previous legislature’s cap on the number of innovative public charter schools that can operate across the state.
READ TO ACHIEVE PROGRAM
Reforms passed in 2012 required students across North Carolina to read proficiently before the fourth grade, a benchmark proven to put children on a better path and help them achieve more promising outcomes.
The Read to Achieve law was improved in 2014 to offer flexibility to local districts and provide more accessibility for students.
In 2015 the Reform Majority overhauled the transportation funding model to remove politics from infrastructure funding decisions.
The Reform Majority also ended the quarter-century old, annual raid on gas tax revenue in the Highway Fund by eliminating $216 million in transfers.
The result: $1.6 billion more for better roads and bridges.
Funding was then increased funding for the Strategic Transportation Investment (STI) law by $230 million over the next two years, bringing the net appropriation level to almost $3 billion over the biennium. Other transportation improvements include:
- More than $23 million over the next two years in railroad infrastructure.
- Almost $530 million over the next two years in the Bridge Program. We are now under 10% deficient bridges for the first time in our state’s history.
- Provided $11 million to improve our state’s ports.