Theresa Opeka
Carolina Journal
North Carolina Governor Roy Cooper, a Democrat, received a D on the Cato Institute’s 2024 Fiscal Policy Report Card on America’s Governors.
The report, which is done biennially, examines state budget actions since 2022. It grades them on their fiscal policies from a limited-government perspective. Governors receiving an A have reduced taxes and spending the most, whereas governors receiving an F have increased taxes and spending the most.
In Cooper’s case, the report cites the major differences between him and the Republican-led General Assembly.
Grading was based on seven variables: two spending variables, one revenue variable, and four tax-rate variables.
The report’s tax and spending data, which came from the National Association of State Budget Officers (NASBO), the National Conference of State Legislatures, the Tax Foundation, the budget agencies of each state, and news articles, accounts for tax and spending actions that affect short-term budgets but don’t account for longer-term or structural changes that governors may make, such as reforms to state pension plans.
It excludes Louisiana’s Republican Governor Jeff Landry because he only took office in January and Alaska’s Republican Governor Mike Dunleavy because of what Cato says are peculiarities in that state’s budget.
The Libertarian think tank studied state governments’ budgets between January 2022 and August 2024, noting that they have grown substantially with the influx of federal aid during the COVID-19 pandemic. While that aid has waned, rising tax revenues have fueled continued budget growth. At the same time, large surpluses in many states have prompted the passage of major tax cuts and reforms.
Cooper took office in 2017 after serving as the state’s attorney general for 16 years.
The report points out that he and the Republican-led General Assembly, most recently with a supermajority, have disagreed over many issues, leading him to veto over 100 bills, the most of any governor in the state’s history, with legislators overriding him most of the time.
He vetoed the budget in 2018 because it cut the individual income tax rate from 5.5 percent to 5.25 percent and the corporate tax rate from 3.0 percent to 2.5 percent. Cooper wanted to retain higher rates to fund more spending, but the legislature overrode him.
He changed his tune in 2021 when he signed the $25.9 billion budget plan into law, the first one he had signed into law since taking office.
Among the highlights were tax cuts, including lowering the personal income tax rate from 5.25% to 3.99% by 2027 and phasing out the corporate income tax beginning in 2025 and ending in 2031. Tax cuts, which saved taxpayers an average of $2.7 billion a year for the first five years, were one of the priorities for Republican leadership over the past decade and a point of contention for Democrats. The tax package also increased the standard and child deductions and simplified the franchise tax. Cooper has proposed cutting unemployment taxes on smaller businesses.
However, he didn’t sign the budget in 2023 but let it become law, citing the importance of Medicaid expansion.
“Make no mistake, overall, this is a bad budget that seriously shortchanges our schools, prioritizes power grabs, keeps shady backroom deals secret, and blatantly violates the constitution, and many of its provisions will face legal action,” Cooper wrote in a press release.
It accelerated the scheduled personal income tax cuts, which will fall a year earlier, in 2026. If revenue thresholds are met, the rate will fall even lower. The legislature also trimmed the state franchise tax and repealed the state privilege tax on certain professions.
In his final recommended $34.5 billion budget proposal in April, Cooper proposed replacing the flat-rate individual income tax with a two-rate system, freezing future reductions to the corporate tax rate, and cutting the state’s school voucher program. The legislature rejected his proposal but failed to pass a budget bill of its own, with both the House and the Senate coming up with dueling budget bills that neither side could compromise on, leaving the 2023 budget in place.
One of the trends the report examined was the expansion of school choice programs. More than 30 states now support private schooling through various tax and spending mechanisms, and a dozen states have made eligibility for their school choice programs universal or near-universal for all students, including North Carolina, where Cooper’s veto of HB 10 is awaiting an override from legislators on Oct. 24.
The bill, which was passed in the GA last month, allocates an additional $248 million in nonrecurring funds to Opportunity Scholarships for the current school year, $215.15 million in recurring funds for scholarship awards for the 2025-2026 fiscal year, and $24.7 million in recurring funds to clear the waitlist for the Education Savings Account or ESA+ program.
Cooper vetoed the bill on Sept. 20.
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