McCrory's latest challenge
Published May 10, 2015
by Chris Fitzsimon, NC Policy Watch and NC SPIN panelist, May 8, 2015.
The unexpected good news this week that the state will have a $400 million surplus at the end of the fiscal year presents another interesting test of Governor Pat McCrory’s leadership ability.
McCrory wants to use part of the surplus to reinstate the tax deduction for medical expenses for seniors, give raises to prison guards and other select groups of state employees, restore the state historic tax credit program, and fund infrastructure projects.
House leaders seem inclined to go along with the proposal from McCrory, who also wants to put a significant percentage of the surplus in the state’s savings account.
Senate leaders are all for the savings idea, but don’t seem too thrilled with restoring the tax deduction for medical expenses and have said many times they oppose bringing back historic tax credits even though the program creates jobs and is popular with developers and conservationists alike.
McCrory has been crisscrossing the state for months trying to build support for the tax credit program but key senators have so far been unwilling to soften their opposition.
And the problem isn’t money anyway, it is philosophical. Senate leaders are resisting any changes to the 2013 tax reform package that ended several credits and deductions while giving corporations and wealthy individuals huge tax breaks.
Despite McCrory’s effort to reinstate the historic tax credit, the battle over the medical deduction for seniors may be the most explosive politically. Lawmakers were flooded by calls from seniors around Tax Day upset that the end of the deduction meant they were paying more in state taxes despite the claims by legislators that everybody received a tax cut.
Restoring the deduction would cost roughly $40 million a year.
One other factor complicating McCrory’s request is that the budget surplus is one-time money that shouldn’t be used to pay for ongoing expenses like tax credits and salary increases.
Lawmakers could use some of the projected revenue growth in next year’s budget to pay for McCrory’s ideas and save the surplus for one-time expenses, which would be the more prudent course.
But that would still mean that senators would have to soften their philosophical opposition to the tax credits and deductions and there’s no sign of that on the horizon.
And all this comes as McCrory continues to flounder in his number one objective, to convince lawmakers to approve a package of incentives to help attract new jobs to the state.
McCrory made it clear before the General Assembly session began that he wanted the House and Senate to approve incentive legislation in the first two weeks of the session that began in January. It is now May and no new incentive legislation has reached his desk.
The House has passed a plan that includes much of what McCrory is seeking in the short run, but the Senate hasn’t passed any incentive plan, despite numerous hearings before the Senate Finance Committee.
McCrory’s supporters are working hard to counter the conventional wisdom that McCrory is not really in charge in Raleigh and is often overpowered by legislative leaders.
The new talking point is that he has exerted himself more with the General Assembly this year, “getting his sea legs” as one GOP political consultant put it in a recent story in the National Journal.
But that’s hard to see given that Senate leaders continue to reject McCrory’s top priorities and ignore his deadlines.
The newly realized budget surplus gives McCrory some momentum. Let’s see if he can use it to finally take charge of the state he was elected to lead.
