As a recession looms, GOP lawmakers need to prepare NC. They're not.

Yahoo

11-05-2025

Before he presented the Wake County budget on May 5, County Manager David Ellis weighed various national and state economic indicators, plus one he picked up at his barber shop.
'I listen to folks there,' he said. 'One was a car salesman who lost his job because they weren't selling any cars.'
That salesman's misfortune fits with what Ellis and others see coming for the economy and the nation, a serious slowdown and a possible recession.
Ellis had planned to draw a budget based on 3% growth in sales tax revenue. He dialed that back to zero. He wanted to propose a 5% raise for top employees. He capped that at 3.5%. 'During COVID, we had to adjust on a daily basis and that's something we're going to have to continue to do,' he said.
Around the state and the nation, public officials are girding for a downturn that could become a crisis. Trump's tariff hikes are likely to slow the economy and extending his 2017 tax cuts for the wealthy could require major reductions in federal aid for food stamps, Medicaid and a host of other programs.
But North Carolina legislative leaders are not among those preparing for the worst, despite the state being especially vulnerable. Years of tax cuts have hollowed state agency budgets. The vacancy rate among state employees is more than 20 percent.
If a recession hits, the state will have little room to cut expenses, even as it copes with lower tax revenue and less federal funding. Unemployment benefits, capped at a paltry $350 a week, won't be enough to sustain workers who are laid off or buffer local economies.
Alexandra Sirota, director of the nonprofit N.C. Budget & Tax Center, said she can't account for all of state history, but compared to recent decades, 'We are certainly the most under-prepared we've been for a recession.'
Despite the darkening economic forecast, the state Senate's proposed budget calls for accelerating tax cuts that would largely benefit wealthy individuals and large corporations and more spending on private school vouchers.
'The Senate plan is completely unacceptable,' Sirota said. ' It is not a serious proposal for the moment our state is in.'
The state House's budget proposal is expected to be released soon.
Gov. Josh Stein's proposed budget, which will have little sway in the GOP-controlled legislature, rightly calls for a freeze on tax cuts and voucher spending and an increase in unemployment benefits to a $470 weekly maximum, but the governor should be sounding a louder alarm about the trouble that looms.
The Urban Institute's latest tracking of state tax collections found that for median state tax revenues have declined compared to last year — and that's before Trump's tariffs have taken their effect. 'Recent federal policy actions and subsequent economic developments are poised to impact state tax revenues significantly,' the Institute's report said.
Between a tariff-related economic slowdown and federal cuts to make way for an extension of the 2017 tax cuts that will cost $4.5 trillion over the next decade, states are likely to face overwhelming revenue losses with huge consequences.
The Center on Budget and Policy Priorities ranked North Carolina 20th nationally in terms of federal funds as a percentage of state expenditures – 38 percent, or $34.5 billion in fiscal year 2024.
If Congress cuts a significant share of that funding, all states will be in trouble. If North Carolina goes ahead with tax cuts, it will only compound the problem. The response, inevitably, will be to further reduce or eliminate critical services.
A more humane response would be for the legislature to freeze scheduled tax cuts and impose an income tax of up to the state cap of 7 percent on very wealthy earners. That would claw back some of the savings they will get from an extension of the federal tax cuts. The NC Budget & Tax Center estimates that the state's top 1% of earners will save $1.8 billion in 2026 under the extension.
Tax hikes, of course, are not happening under this General Assembly. Republican lawmakers have cut taxes repeatedly at the expense of schools and services since 2013. But now that the jig is up, the state has no slack and those who brought us to this vulnerable point seem to have no plan for the trouble ahead.
Associate opinion editor Ned Barnett can be reached at 919-404-7583, or [e-mail]