We didn’t borrow any money. We didn’t raise taxes. We spent what came in. – Rep. Brubaker, House floor debate on H.B. 950, the FY2012-13 continuation budget.
That would be true if Rep. Brubaker had added, “… and a bit more, besides,” to the end of his statement. Every year, state budget writers sum up on a single page how they raise the billions of dollars that fuel the state budget – the availability statement – while the rest of the state budget requires hundreds of pages of detail. For all its importance, the availability statement itself gets relatively less scrutiny and public debate than the rest of the budget. The Budget and Tax Center has analyzed the availability statement proposed within the House budget and found the following items to be noteworthy:
- The $19.7 billion that “came in.” Base revenues of $18.9 million – primarily from the state income tax, sales tax, and corporate income tax – and nontax revenues of $773 million constitute what’s expected to “come in” in FY2012-13. The House budget’s spending side requires $20.2 billion. That alone left approximately $503 million that budget writers had to “find” in order to balance their budget – a number that increases when current-year liabilities like the nearly $200 million Medicaid shortfall come into consideration.
- The state’s $479 million credit balance. The House was able to craft its budget proposal with a healthy current-year credit balance consisting of $41.2 million in unappropriated funds; $205.5 million in anticipated state agency reversions; and a $232.5 million revenue surplus. In total, House budget writers began their work with $479.2 million available in the General Fund.
- Non-tax revenue shortfalls. Several key sources of non-tax General Fund revenue have been revised significantly downward since last year’s budget. Notably, judicial fees, which were steeply increased as part of last year’s budget, are expected to come in $20 million below projections, suggesting that last year’s budget writers’ expectations fell somewhat short of reality. Also, state investment income suffered this year – this nontax revenue had been budgeted at $59.4 million for the current fiscal year, but is now projected to come in at less than half that amount, at $21.6 million.
- Transportation funds raided for $248 million. The House proposes taking a total of $247.8 million from the state’s two major sources of transportation funding, the Highway Fund and the Highway Trust Fund. This isn’t a new budget tactic by any stretch, but when combined with ever-declining gas tax collections, a current-year and projected transportation budget shortfall, and the House budget’s inclusion of a cap on the state’s gas tax, taking significant amounts of funding from the transportation budget only increases the strain on North Carolina’s crumbling transportation infrastructure.
- The $42 million Education Lottery surplus. The NC Education Lottery is projected to yield a $42 million surplus this year, which House budget writers would divert to increase General Fund availability. Lottery funding for class size reduction, early childhood education, and need-based college scholarships would not change from the level appropriated in last year’s budget, but the House budget would once again bypass the statutory 5% transfer to the Education Lottery Reserve Fund (per G.S. § 18C?164) and plow the entire lottery surplus into the General Fund.
What’s clear from this availability statement is that House budget writers are relying heavily on resources that won’t be available in the long-term. This piecemeal approach to funding North Carolinians’ education, well-being, safety, and quality of life can’t be sustained. Revenue must be part of the solution.
UPDATE: House availability in the final budget would deposit $62 million in the state’s Repairs and Renovations Reserve Account, which is approximately 1/8 of the state’s FY2011-12 credit balance. Funds would not be withdrawn from either this account or the state’s Rainy Day account to increase General Fund availability in the FY2012-13.