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North Carolina is charging ahead of California and the reason why is surprising

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Earlier in May, two starkly different fiscal news items highlighted the divergent paths taken by North Carolina and California. While North Carolina celebrated news of projected revenue surpluses in 2024 and 2025, California is grappling with a $44.9 billion budget deficit. How did these two states end up in wildly different places?  

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The contrast is emblematic of the philosophies governing these states. North Carolina’s conservative fiscal policies, emphasizing low taxes and restrained spending, widely differ from California’s high tax rates and expansive spending programs. The recent outcomes suggest that North Carolina’s approach offers a model of responsible governance from which other states, including California, could learn. 

North Carolina’s success results from deliberate and sustained conservative fiscal policies. The state embarked on a series of tax reforms, which started in 2013 and were the largest in its history. These reforms included reducing the personal income tax rate from a progressive structure topping out at 7.75% to a flat rate of 4.75%, scheduled to drop further to 3.99% by 2026. Corporate tax rates were also slashed from 6.9% to 2.5% — the lowest in the nation for states that levy such a tax — with plans to phase it out entirely by 2030. 

CALIFORNIA HAS YET TO PROVIDE 1,200 TINY HOMES FOR STATE’S HOMELESS THAT WERE PROMISED IN MARCH 2023

These tax cuts were not merely superficial adjustments but were coupled with prudent spending measures. North Carolina’s general fund spending has been managed to ensure essential services are funded without resorting to excessive borrowing.  

The massively slow and expensive construction of the California bullet train project is photographed in Corcoran, California, left, and Hanford, California, right. (Robert Gauthier/Los Angeles Times via Getty Images | George Rose/Getty Images)

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Fiscally conservative policies retired 40% of state debt within a decade, reducing general fund-supported debt from $6.5 billion in 2012 to $3.9 billion by 2021. Moreover, the state has avoided budgetary gimmicks and one-time fixes, focusing instead on long-term fiscal sustainability. 

Spending restraint has been a hallmark of North Carolina’s approach. State legislators have maintained strict controls on spending growth, ensuring expenditures do not outpace revenue. This disciplined approach has allowed North Carolina to build substantial reserves, including a savings reserve (or “Rainy Day Fund”) that currently stands at $4.75 billion, equivalent to just over 15% of the 2023-24 state general fund budget.  

This fiscal prudence has positioned North Carolina to weather economic downturns without resorting to drastic cuts or tax hikes, avoiding volatility in the lives of state workers. 

The result? North Carolina has seen robust economic growth. According to the John Locke Foundation’s 2024 North Carolina Budget, Tax, and Economic Highlights, from 2016 to 2022, North Carolina’s per capita income grew at an average annual rate of 5.3%, higher than the national average and highest among its neighbors. North Carolina’s real GDP increased by a total of 11.4% from 2017 to 2022, which is also higher than the national average. 

In contrast, California has pursued a high-tax, high-spending approach. The state imposes some of the highest tax rates in the country, including a top personal income tax rate of 13.3% and a corporate tax rate of 8.84%. According to the California Policy Center, “In just the last ten years, the General Fund budget has grown by 84 percent after adjusting for inflation and for population growth.”  

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California ranked No. 49 in the Fraser Institute’s 2023 economic freedom report, which evaluates states and provinces based on variables such as government spending, taxes, labor market freedom, and more. North Carolina ranked No. 13.  
 
A significant portion of California’s tax revenue comes from capital gains taxes, making the state highly dependent on the stock market’s performance. In boom times, this can lead to substantial windfalls; however, it also means that revenue is highly volatile and can plummet during market downturns, leading to substantial budget deficits. 

Its expansive spending on social programs, education and healthcare exacerbated California’s fiscal woes. While these programs initially aimed to provide a high level of public service, they have also led to fiscal instability. 

Gavin Newsom speaking at bill signing ceremony.

Democratic California Gov. Gavin Newsom leads a state that has gone from surplus to a huge deficit. (Justin Sullivan/Getty Images)

A key issue is that high tax rates have not translated into stable revenue streams. The Golden State’s reliance on high-income earners and capital gains means that its revenue is highly volatile, fluctuating significantly with economic cycles. The New York Times said, “When the rich do well, the state government reaps a bonanza. But when the stock market slumps or initial public offerings dwindle, revenue plummets.”  

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This volatility makes budgeting challenging and often results in substantial deficits during economic downturns. 

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California’s budget process is further complicated by the state’s commitment to numerous unfunded mandates and pension liabilities. The state’s pension system is underfunded by billions of dollars, putting additional strain on the budget. Despite high tax revenues, the state frequently finds itself in a fiscal crisis, forced to make painful cuts or propose tax increases to balance the budget. 

When a state’s budget is volatile, the effects on state workers such as teachers, state park employees and correctional officers can be profound and destabilizing. Budget unpredictability often leads to cycles of boom and bust, where periods of fiscal surplus may result in temporary increases in salaries, hiring and program funding, only to be followed by sharp cutbacks, layoffs and pay freezes during downturns.  

California ranked No. 49 in the Fraser Institute’s 2023 economic freedom report, which evaluates states and provinces based on variables such as government spending, taxes, labor market freedom, and more. North Carolina ranked No. 13.  

This instability can create a climate of uncertainty and low morale among state employees, who may face the constant threat of job insecurity and reduced benefits.  

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North Carolina’s fiscal discipline offers a blueprint for other states, demonstrating that conservative fiscal policies can lead to economic stability and growth. By maintaining low taxes and controlling spending, North Carolina has created an environment conducive to business and investment, fostering economic resilience even during challenging times.  

California, on the other hand, illustrates the pitfalls of high taxes and expansive spending without adequate fiscal controls. As the nation observes these contrasting outcomes, it becomes clear that responsible budget management, as exemplified by North Carolina, is essential for economic prosperity. States should adopt similar conservative fiscal policies to achieve stable and sustainable economic growth. 

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Alaska

US: Two dead in plane crash in Alaska

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US: Two dead in plane crash in Alaska


San Francisco, June 20: Two men were presumed dead after a small plane crashed into Crescent Lake on the Kenai Peninsula, US state of Alaska, state troopers said.

 Two hikers witnessed the crash and reported it to troopers on Tuesday afternoon. The rescue team took a helicopter and a float plane to the area and located debris in the lake, with no signs of survivors in the water or on the shore, reported Xinhua news agency, citing troopers.

Efforts to recover their bodies were underway on Wednesday.

A Piper PA-18 Super Cub plane with two men aboard had been reported overdue in the area. The plane had departed from Moose Pass and was expected to return to the same area, according to troopers’ spokesman Austin McDaniel.

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The National Transportation Safety Board is investigating the crash.

(The content of this article is sourced from a news agency and has not been edited by the ap7am team.)



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Arizona

Arizona Freeway Dust Detection System Hindered by Bureaucracy

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Arizona Freeway Dust Detection System Hindered by Bureaucracy


A $6.5 million high-tech system designed to reduce dust storm-related accidents on Interstate 10 has been delayed by bureaucratic issues. Although operational since 2020, the system’s Doppler radar has not sent any data to the National Weather Service. Morgan Loew looks into the challenges faced and the potential life-saving benefits of this system.



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California

Lakers News: LA Reveals Schedule for July’s California Classic Summer League

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Lakers News: LA Reveals Schedule for July’s California Classic Summer League


The 2024 NBA offseason is officially underway. This summer will be the biggest to date for the Lakers, as they have a bunch of vital decisions to make in the coming weeks. While all the talk will be on the decision-making of Los Angeles brass regarding the roster and coaching staff, basketball will be played this summer, starting with the 2024 California Classic Summer League.

It will give us our first chance at getting a look at the rookies and undrafted players the Lakers targeted.

The Lakers will participate in three games, all held in San Francisco. The Lakes will play from July 6-10, starting with the Sacramento Kings at 1:30 p.m. P.T. The next game will be on July 7 against the Golden State Warriors at 3:30 p.m. P.T. The final game before the team heads to the Las Vegas Summer League, L.A., will play the Miami Heat on July 10 at 4:00 p.m. P.T.

The NBA will have the California Classic Summer League in Sacramento from July 6-7 and 9 and in San Francisco from July 6-7 and 10. The NBA will also hold the Salt Lake City Summer League from July 8-10. The NBA 2K25 Summer League in Las Vegas will be from July 12-22.

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The Lakers will look to hit on all cylinders this summer, including Summer League.

More Lakers: Key Offseason Dates for Los Angeles



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