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A bare-bones state budget of last resort

The General Assembly is preparing for any number of possible budget end games this year, including passage of a budget of last resort – Senate Bill 866, a bare-bones modification to the 2011 Appropriations Act (a.k.a. the continuation budget) that would take effect if the recently passed legislative budget (House Bill 950) is vetoed by Governor Perdue and the General Assembly is unable to override. This bare-bones budget would leave the state’s $479 million credit balance unappropriated – meaning, no new one-time money for any purpose – and would effectively let the second year of the continuation budget passed in 2011 stand as guidance for the upcoming year. The bill would also authorize the following budget actions:

  • Appropriation of federal block grant funding
  • Appropriation of state education lottery proceeds similar to, though not exactly as set forth in, the House budget*
  • Appropriation of funds from the National Mortgage Settlement to various state agencies
  • Authorizes that Employment Security Commission Reserve funds can be used to fund the interest payment on the state’s debt to the federal government for unemployment benefits paid

In every other sense, if this bare-bones budget were to become law, the continuation budget as passed in the 2011 legislative session would take effect. This would mean an LEA Adjustment increasing to $503 million in addition to the expiration of $259 million in federal recovery funding, leaving North Carolina schools three-quarters of a billion dollars short of what they had to operate on this past year. It would also mean insufficient cash to pay both present and near-future Medicaid claims since the shortfall in the program would remain unaddressed.

Legislative leaders weren’t kidding when they said yesterday that this budget is less desirable than the one they recently passed. But neither this budget nor the one currently on the governor’s desk reflect the needs of North Carolina and the desire of its residents to rebuild in the wake of the recession. The measure moved from the Senate to the House this morning and although it’s not been placed on the House calendar, could be heard as early as this afternoon’s session.

* Under this bill, projected lottery surplus numbers have decreased: S.B. 866 appropriates $441.4 million in total lottery proceeds to statutorily funded purposes as well as $16.4 million to offset the LEA Adjustment as in the Senate budget. It would also make an additional appropriation of $25.6 million to UNC Need-Based Financial Aid. Between these two provisions, the entire $42 million lottery surplus would be spent.

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