Gov. Cooper will never sign a budget. That's OK (for now)

North Carolina isn't in crisis, and voters don't seem to care about the impasse

With the General Assembly hunkered down to hammer out a budget agreement, Raleigh’s ABC11 asked Rep. Grier Martin what legislators should do with North Carolina’s growing surplus.

"You've only got a budget surplus if you've got more money than you need to meet your needs," the Wake County Democrat told the TV station. "I don't think there are many North Carolinians that would say we're meeting our needs."

He’s dead wrong — and that’s why the state’s budget impasse is extending into its third year.

Gov. Roy Cooper, a Democrat, has vetoed every single state budget since he’s taken office — and Republicans who control the state legislature haven’t been able to override it since losing supermajorities in 2018. Thus, North Carolina hasn’t had a new budget in three years.

When no new budget is passed, North Carolina simply continues on with spending levels from the most recent one, under state law. That means our state is currently operating under the budget passed in 2018, with minor adjustments made here and there through smaller-scope bills passed by the General Assembly.

Nobody has really noticed. The wheels of government still turn. Teachers are paid, state parks are open, roads are paved and tax collections pour in.

Voters certainly seem to be fine with it.

The electorate returned Cooper to the Executive Mansion, while Republicans added seats in the General Assembly — including flipping a seat in deep blue Wake County. Both sides used the budget as a talking point on the campaign trail, to little or no effect. People just didn’t care.

‘Fortress balance sheet’

The fact that North Carolina can continue on relatively unaffected by a three-year political stalemate is a testament to the strong financial position Republicans have put the state in since taking over the General Assembly in the 2010 elections.

In that time, the General Assembly has plugged the Democrats’ $4 billion budget deficit, raised teacher pay, cut taxes, bolstered school choice, and set aside money for natural disaster response and other rainy days. There’s been no fiscal crisis, cliff, or crunch. North Carolina entered the COVID pandemic with plenty of room to spare.

CEOs call this a “fortress balance sheet.” Senate President Pro Tem Phil Berger calls it fiscal discipline. For Gov. Cooper, it’s been a lifeline with his political base.

The fact that North Carolina doesn’t particularly need a new budget has given Cooper the freedom to be picky, wielding his veto pen freely, finding relatively small disagreements — should teachers get a 5% raise or 9%? — to strike down what are on the whole solid appropriations bills.

The General Assembly has responded by putting forward narrowly focused “mini-budget” bills to adjust things here and there, raising state employee pay in bits and pieces, modestly increasing spending for transportation and community colleges, adding prosecutors and judges, and expanding rural broadband. Many of these were signed into law, others were vetoed themselves.

This year’s General Assembly budget proposal would do a lot of good things:

• Cut personal income taxes from 5.25% to 4.99%

• Gradually reduce the corporate income tax to zero, making North Carolina more competitive for jobs

• Increase the child tax deduction by another $500 for most taxpayers

• Dramatically increase the standard deduction, increasing the threshold for married filers paying zero tax to $25,500

• Invest $12 billion in infrastructure over the next decade

• Give teachers and other state employees small pay increases and larger bonuses

The numbers may change slightly as the General Assembly finishes its negotiations. But Gov. Cooper will veto this budget. He’ll veto next year’s, too, and the in the year after that. He won’t sign a budget, ever.

That’s OK. The General Assembly will put forward the above proposals in mini-budgets. Most of them will pass, though the tax cuts and teacher pay raises aren’t likely to. Gov. Cooper will again have to make the increasingly difficult case that no teacher pay raises are better than small ones.

In general, North Carolina voters would like to have lower taxes than dramatically increased spending, but it’s not an issue that animates most of them. They will have the chance in 2022 and 2024 to weigh in on whether they’ve had enough of the impasse, but it’s not likely to move the needle — at least not yet.

Eventually, North Carolina will absolutely need a new budget. Should voters continue to send a Democrat to the Executive Mansion, their decision will get more difficult. In times of stress, pressure will fall more heavily on the chief executive than on the body of the legislature.

Until then, North Carolina will survive.

5 Things of Note

1) Senate primary fields effectively narrow after Q2 fundraising totals. You can tell how a campaign feels about their fundraising by whether they trumpet their totals in a press release, or just wait for reporters to find their numbers in disclosure filings. Now that we’re in July, that’s starting again. Both parties appear to have narrowed their fields to just two candidates — though there’s still a while to go until March.

On the Democrat side, former Justice Cheri Beasley announced raising just under $1.3 million in the second quarter. She’s racked up endorsements and solidified her status as the clear front-runner in the race. The other main candidate to declare a total was N.C. Sen. Jeff Jackson, who raised $700,000. However, he entered the race earlier and is now over $2 million in the cycle. Former N.C. Sen. Erica Smith, who lost to Cal Cunningham two years ago, announced she will declare $110,000 in fundraising. Her lane is essentially closed.

Two years ago, Jackson likely would have dominated the Democrat primary and could very well be a U.S. Senator today. This year, he’ll have a much tougher time. Beasley is likely to have the “establishment” behind her and most of the outside money, which often decides these races. Jackson is taking the grassroots approach, touching down across the state in a strategy that can work in a close race. The third quarter will give us a good indication of who will ultimately win.

Among Republicans, former Gov. Pat McCrory is the only one to tout his haul — reporting $1.24 million in the second quarter. Interestingly, U.S. Rep. Ted Budd has not said what he’ll bring in, despite earning the surprise endorsement of former President Donald Trump at the state GOP convention. Presumably, that means money hasn’t flowed in as fast as hoped, though the Club for Growth has said it will spend some $5 million on Budd in the primary. Budd’s fundraising isn’t up on the FEC site yet, but must be in the next week or so. Without an announcement, it will almost certainly be less than McCrory’s, giving the former governor much more hope.

Like Smith, former U.S. Rep. Mark Walker finds his lane closing rapidly as well. He’s a strong candidate taking the grassroots approach and even won the straw poll handily at the NCGOP convention. But the Budd endorsement was a huge blow, and Walker hasn’t said what he has raised in the second quarter.

2) New social studies curriculum will be a wild ride. North Carolina’s education bureaucracy is fast moving toward a new curriculum for K-12 social studies after approving controversial new standards earlier this year. The State Board of Education has just approved a set of “unpacking documents” that add some flesh on the bones of what students will learn. Looking through them, there are a host of topics that can either be taught well or very, very poorly. For example, from the civics class: “The teacher provides instruction on the shifting platforms of both the Democratic and Republican parties.”

Or how about this sample assignment: “Students create a Public Service Announcement (PSA) highlighting the factors that led to the creation of the Affordable Health Care Act. The PSA should be sure to share how the Affordable Health Care Act impacted governmental change.”

The real impact will be felt when school districts create their specific curriculums. These are a lot harder to supervise — Charlotte-Mecklenburg Schools, for example, doesn’t publish most of their curriculums online. Expect more scrutiny in the coming year.

3) Bokhari: Republicans shouldn’t give up in big cities. Republicans are on the verge of extinction in the state’s largest city. Charlotte has no Republican members of the General Assembly, no Republicans on the county commission, and just two each on the City Council and school board. As a conservative, why not just give up and move to Union County? In an excellent 11-minute speech at this year’s NCGOP convention, Republican councilman Tariq Bokhari takes on that question, saying Republicans need to keep trying in deep-blue cities not just because conservative policies are what’s best, but because he believes even urban dwellers will come back to them eventually. “Giving up on a place like Charlotte … leaves these authoritarian laboratories unchecked to do whatever they want,” he said. “We cannot give up in these top 20 cities.”

4) Democrats now on board with voter ID, but not in NC. South Carolina civil rights hero and Democratic U.S. Rep. Jim Clyburn told CNN this week that his party is “always for voter ID” and that he doesn’t “know of a single person who is against ID'ing themselves when they go to vote.” I can think of a few in North Carolina. Democrats here have been silent on voter ID in the past few months as their party appears to embrace it. You’ll recall that North Carolina added a photo voter ID requirement to the state constitution, and polling shows it is popular among all demographic groups. However, the law to implement voter ID remains blocked in the courts and voters still don’t need to show one to cast a ballot. Once we get a new court ruling on the issue, it will be fascinating to see how N.C. Democrats turn themselves in knots to continue opposing voter ID.

5) Government oversight team to expand. The General Assembly said in February that it would move more government oversight functions in-house in order to have a faster-moving watchdog than the Program Evaluation Division was. Leaders are now hiring a team of Government Operations Investigative Analysts to do just that. The team is led by the excellent former John Locke Foundation senior fellow Joe Coletti, who is now the House Majority Staff Director. It will be fascinating to watch what they tackle first.