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What is in the Taxpayer Bill of Rights

The current version of Senate Bill 717 would add a Taxpayer Bill of Rights to the state constitution and provide two conforming amendments to carry it out. You can compare it to Colorado’s Taxpayer’s (possessive) Bill of Rights, past attempts to protect taxpayers in North Carolina, and some of the key points for expenditure limits in my paper on the topic here.

The biggest change would add Article V-A, the “Taxpayer Bill of Rights.” 

  • Spending Limit: This would limit spending and provide rules on the three allowable uses of excess revenue. Under this provision, state spending per person in all categories (General Fund appropriations, Highway Fund and Highway Trust Fund appropriations, and total spending) could not increase faster than inflation. That would keep the cost of government per person flat or falling over time.
  • Inflation and population growth: It includes two small but significant differences from the current way of comparing budget to inflation and population growth Instead of using forecast inflation and population growth, the amendment would look to the average growth over the three calendar years prior to the start of a fiscal year. For FY2021-22, the rate would be based on the average for 2018, 2019, and 2020. The proposed measure of inflation is the broader implicit price deflator for Gross Domestic Product instead of the traditional measure of urban consumer price index (CPI-U), which varies more from year to year.
  • Savings Reserve: Echoing current law, legislators would be required to deposit 15 percent of any tax revenue increase in the Savings Reserve until it reached 15 percent of prior-year General Fund appropriations. For FY2021-22, because tax revenue is expected to dip a little, there would be no constitutional requirement for a deposit. Based on FY 2020-21 appropriations, the Savings Reserve would top out at $3.672 billion. 
  • Unfunded liabilities: Once the Savings Reserve reached 15 percent of General Fund appropriations, additional revenue would pay down the unfunded liabilities for retired state employee pensions and health insurance. The language leaves room for legislators to reform both pensions and retiree health insurance to reduce liabilities without pouring billions more dollars into the funding gaps. 
  • Tax rebates: After ensuring the financial health of state operations and retired state employees, legislators would return any remaining surplus to taxpayers. A $5 billion surplus divided among 5 million tax returns would result in each tax filer receiving a check for $1,000.
  • Legislative votes on spending: Legislators could increase spending more than the allowed rate with a vote of 2/3 of all members, not just those present, in each chamber. The same 2/3 vote would be needed to spend money from the Savings Reserve. 

Two other sections make amend existing constitutional provisions. 

  • Voter approval for tax increases: Section 1.(b) would amend Article V on the “power of tax” to require voter approval of tax increases in a November election of an even-number year. In November, Colorado passed a provision to subject large new fees and surcharges to voter approval.
  • Three legislative votes to make changes: Section 1.(c) would amend Article II to require three readings of bills to divert or spend money from the Savings Reserve or to increase the fiscal year spending limit.

Joseph Coletti / Senior Fellow, Fiscal Studies

Joe Coletti is a senior fellow at the John Locke Foundation focused on fiscal policy issues. He previously headed the North Carolina Government Efficiency and Reform initiativ...