House panel takes brief budget detour to debate keeping the trust

Preserving legislative integrity and maintaining public trust were central to a legislative debate led by state Rep. Julia Howard, R-Davie, on Tuesday.

It was an important conversation to embrace, and one that deserves further attention. Unfortunately for Howard, it was drowned out by the much larger issue at hand in the House Finance Committee — the partial unveiling of the House’s proposed $22.9 billion 2017-18 budget.

Howard wanted to amend the House’s substitute bill for Senate Bill 257, the Appropriations Act of 2017. The amendment would have returned deed stamp tax revenue to a dedicated fund for specific purposes instead of channeling it to the General Fund to be spread across the spending spectrum.

Deed stamps, sometimes called excise or revenue stamps, are recording fees charged when buying property. They are assessed at $2 per $1,000 of the purchase price.

Howard argued that the deed stamps were increased by $1 in 2013, with the understanding they would be allocated directly to the Parks and Recreation Trust Fund and the Clean Water Management Trust Fund.  Meetings were held with Realtors, home builders, coastal organizations and other stakeholders, and legislation was passed to enable that action.

Over time the money was shifted to other purposes in the General Fund.

“That’s not the way we should do things around here” after giving legislative assurances about the reason for which a tax is imposed, Howard said.

The deed stamps are expected to generate $68.3 million in 2017-18, and $70.4 million in 2018-19. The House budget would allocate $32 million of those 2017-18 revenues to farmland preservation, parks and recreation, clean water, and a coastal storm fund.

Howard’s amendment would have divvied up ALL the deed stamp tax money like this: 30 percent to parks and recreation, 30 percent to the clean water fund, 30 percent to the coastal stormwater mitigation fund, and 10 percent to agricultural development, farmland preservation.

There was immediate pushback by Rep. Jason Saine, R-Lincoln, Finance Committee senior chairman, and Rep. Nelson Dollar, R-Wake, the House chief budget writer.

Saine said the amendment should have been heard in an appropriations policy meeting first. When told that it had been, he said he was not comfortable changing appropriations levels at this late date, and that he did not believe that was in the purview of the Finance Committee.

Dollar said best budgeting practices here and in other states are to channel revenues to the General Fund to strengthen it, and then redirect money to where it’s needed most, when it’s needed most.

He said the House has made a concerted effort to rein in multiple dedicated funding streams that were approved over many years, and convert them to General Fund revenues.

Dollar repeatedly told committee members that if the deed stamps money was taken out of the General Fund that other programs would have to be cut to make up the difference. He warned lawmakers some of their favorite programs could fall under that ax.

But Howard said the budget still has a long way to go to be finalized, and there is time amid those negotiations to accommodate the return to the original intent of using the deed stamp revenue as a designated fund for limited items.

She found an ally in Rep. Becky Carney, D-Mecklenburg, who noted that Howard’s amendment wouldn’t even affect this budget biennium because its effective date isn’t until 2019.

Carney expressed discontent with Saine’s committee turf tussle.

“This is what we do in here” in the Finance Committee, Carney said. And she concurred with Howard’s larger, philosophical point. She said it’s wrong to pull a legislative switcharoo after garnering public support to increase a tax by telling those subjected to the taxation that it would be used to support programs vital to them.

“I look at this as an opportunity to go back to the public and say, ‘Trust us with what we’re doing,’ ” Carney said. “If we’re going to say we’re going to do something, let’s do it.”

While Dollar said budget writers are trying to eliminate dedicated funds, Howard said one such fund for cancer research was passed this year. She asked, without getting an answer, if that fund would be absorbed into the General Fund, too, if it grows.

Howard’s amendment failed. But her point remains valid. The public feels misled after being promised one thing by elected officials, only to witness legislative sleight-of-hand down the road.

Dollar also makes a valid point. Parceling out state revenue to specific areas can weaken the General Fund, depriving lawmakers of the flexibility to prioritize projects and needs as known and unforeseen circumstances arise.

It would be good to reconcile those competing views into a single coherent strategy. That might be easier said than done. For example:

The House version of the budget would dedicate proceeds from an 8 percent tax on short-term motor vehicle leases or rentals to the State Highway Fund instead of the General Fund. Most of those rentals take place at airports. The tax would raise $156.2 million over two years to be used specifically for enhancing major airport infrastructure.

For now, anyway.