Governor Easley's upcoming State of the State address will be gloomier because of President Bush's State of the Union message and his proposed federal budget. Although a former governor himself, President Bush is leaving the nation's current governors in a lurch. President Bush proposed breathtaking federal deficits, but still did not include adequate funding for states. With a state budget shortfall of more than $1.5 billion, North Carolina's leaders must get serious about increasing essential revenues and decreasing non-essential expenditures. The North Carolina Commission on Modernizing State Finances, headed by Judge Tom Ross, made sensible recommendations leading to greater tax fairness and more realistic revenue streams. These recommendations should be implemented. Eliminating unfair tax loopholes for thriving corporations and wealthy individuals must get started. Eliminating assistance to vulnerable North Carolinians must be stopped.
Across the nation, state revenues from sales taxes and capital gains have dropped sharply over the past two years, while overall revenues have been flattened by tax cuts and a weak economy. States are trying to meet growing challenges with shrinking resources. North Carolina already has severely cut numerous programs vital to children and families. Deeper cuts will translate into deeper human misery. President Bush's priorities will only make our state's situation worse. How?
First, the President proposed 11 different tax cuts that automatically would decrease state revenues. These federal changes would affect North Carolina's revenues because our state taxes are directly linked to federal taxes. The President's proposed multi-billion dollar tax cut on dividends would give a millionaire $28,000 in "relief" - while giving a million families living on $28,000 a year no relief. One-third of North Carolina's taxpayers would receive nothing from the President's tax package. They would, however, be hardest hit by the cuts in government services and assistance. A new, $200 million dollar hole in our state's budget would result just from the President's "cure-all" dividend tax cut.
Second, the President refused to increase the federal government's share of key domestic programs, such as Medicaid and health insurance for children in modest-income working families. He proposed a rigid cap on federal programs helping already-hurting and at-risk people across our state. The predictable consequence is that North Carolina's local and state policymakers will have to cover the rising costs.
Third, the President and Congress keep issuing new mandates on state agencies and local communities without providing the money needed to meet these requirements. For instance, already-strapped state and local governments are expected to absorb most of the real costs of complying with the President's "No Child Left Behind" education initiative.
No one expects the federal government to solve North Carolina's budget problems. However, it is reasonable to expect the President to refrain from kicking the states when they are down. What was in the State of the Union address was a big disappointment. What was left out of the President's message was equally discouraging.
Neither the Temporary Assistance to Needy Families (TANF) Act nor the Child Care and Development Block Grant (CCDBG) -- both of which are administered by states -- rated a mention. These two major programs are up for reauthorization by Congress. Head Start, child nutrition, juvenile justice and IDEA (the federal law covering students with disabilities) also went unmentioned. These, too, are programs scheduled for reauthorization in 2003 - and ones that truly matter to tens of thousands of North Carolina's most "at risk" children.
These fundamental programs for children and families cannot be sustained by state funding alone. Fortunately, there is legislation in the U.S. Senate that would provide $20 billion in aid to states to help struggling families. Within the proposal is $10 billion to assist states with their Medicaid programs, and $10 billion to help with social services, such as child care for working parents. Unfortunately, we heard nothing from President Bush about this proposal, despite the bipartisan support it has attracted.
Finally, none of these facts and figures include the immediate costs of launching a war on Iraq -- let alone the longer-term costs of rebuilding after a war. Whatever one may think about the justification for this war, the financial consequences for our nation, our state and our children would be staggering.
Governor Easley and the North Carolina General Assembly have a very tough row to hoe in improving the State of the State. Being Bush-whacked by a withdrawal of federal funds is not the best the President can do, nor the best North Carolinians should expect -- or accept -- from our nation's leader.
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Sher is the President of the NC Child Advocacy Institute (www.ncchild.org). Copeland is the President of the National Association of Child Advocates (www.childadvocacy.org).
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