RALEIGH — Proposed constitutional mandates on taxes, government spending and reserves received tentative support Tuesday from the North Carolina Senate following tense arguments over which party faces blame for fiscal irresponsibility.
The chamber voted 30-15, firmly along partisan lines, to put a referendum on the statewide ballot in November 2016. Thirty votes were needed to meet the three-fifths majority for a proposal to change the state constitution. Five senators were absent.
If ultimately approved, the referendum would amend the constitution to narrow limits on how much state spending can grow. Lawmakers also would be required to set aside hundreds of millions of dollars annually for several years. And the maximum income tax rate allowed would fall from 10 percent to 5 percent in 2020.
Spending limits are favored by the conservative movement. Under the referendum, annual spending increases would be capped at a percentage rate equal to inflation and population growth, averaged separately over the three previous years. The current annual rate is less than 3 percent, for example. The limit could be overridden by a law passed by at least two-thirds of the members of each chamber.
Republicans argued the spending and tax limits promote accountable government and discourage out-of-control spending.
The three changes “would strengthen the fiscal integrity of our state and protect our taxpayers from government overreach,” said Sen. Brent Jackson, R-Sampson, co-chairman of the Senate Appropriations Committee, who shepherded the bill. He said the proposals would push lawmakers to “spend sensibly, save wisely and tax sparingly.”
Democrats criticized the saving and expenditure limits, saying they hamper the state’s ability to respond to natural disasters, and would keep spending artificially low by maintaining the deep spending cuts that were made to government programs in response to the recent recession.
Barring bipartisan support in a natural calamity, Republican lawmakers will be hard-pressed to vote to increase spending beyond the cap for fear they’ll be targeted in a Republican primary as too liberal, according to Sen. Jeff Jackson, D-Mecklenburg.
“We don’t need to put ourselves in a small crisis where a small minority can deny us a majority vote,” said Sen. Floyd McKissick, D-Durham.
State Treasurer Janet Cowell, also a Democrat, warned lawmakers last week that the bill could threaten North Carolina’s top bond-rating score, which helps keep borrowing costs low. In a statement issued Tuesday, Cowell said “nothing has changed” to relieve her concerns about the bill.
Sen. Bob Rucho, R-Mecklenburg, used the debate to blast Democrats for failing to put aside enough money in the state’s current rainy-day reserve fund nearly 10 years ago when the budget surplus reached $2 billion.
“If we don’t pass it, then the problems that we have seen in the past will continue,” Rucho said.
Under the constitutional mandate, lawmakers would have to set aside an amount equal to 2 percent of the prior year’s state expenditures — or more than $400 million — and continue similar transfers annually until the fund reaches an amount equal to 12.5 percent of annual expenditures, or at least $2.6 billion.
The bill needs another vote today before heading to the House, where Republicans have introduced similar tax and spending limits in the past.