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Publication Title:

Tax Reform, Revenue Adequacy, and Early Childhood Education in North Carolina


Kelly O'Donnell, Ph.D.

Date: November 2015

Publication Type: Issue Briefs & Policy Reports

Policy Area: Economic Studies

Page Count: 20

Publication Excerpt:

Extensive changes to North Carolina’s tax code adopted in 2013 profoundly impacted state revenue and thus limited the state’s ability to fund numerous essential services, including early childhood education (ECE). These changes came just as the state was beginning to restore ECE services and funding lost during the recession. Additional tax cuts passed during the 2015 state legislative session reduced state revenue by another $1 billion. On the spending side, no progress was made toward restoring lost funding support for in ECE.

During the economic downturn, total funding for child care subsidies, Smart Start, and NC Pre-K declined by 18 percent and the state’s share of funding declined 44 percent. The structural deficit created by the 2013 tax cuts and deepened by the 2015 cuts has kept these services at recession levels, imperiling the state’s legacy as a national model for early education and, more importantly, the future prospects of its youngest residents. The struggle to restore early education to pre-recession levels and serve the state’s growing number of low-in-come children and families is hampered by the tax cuts of recent years, the very real threat of additional cuts, and limitations on local government taxing authority recently imposed and under consideration by the state. Although in the current fiscal climate the likelihood of securing a significant new source of state funding for ECE is small, there are steps that can be taken to protect young children and struggling families in North Carolina from further harm due to loss of services and unfair tax policies.

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