Falling Behind in NC, NC Budget and Tax Center

Overview of the House budget proposal, with an eye to the impact on low-income North Carolinians

Late last evening, the House leadership released their full $20.6 billion budget proposal (with money report) for the next fiscal biennium. This proposal includes a placeholder for their long-awaited tax reform plan, which anticipates deep reductions in tax rates and significant revenue losses, putting North Carolina on an unfortunate path to mediocrity.  Along with the effort to repeal the estate tax, the House tax plan represents a major tax shift and would strip the state of more than $525 million that could be used to fund vital public services, help get North Carolinians back to work, and build a strong economy.

North Carolina cannot afford to pay for tax cuts for the top at the expense of teacher layoffs, growing waiting waits for critical public services, and higher tuition rates. As the chart below illustrates, state spending under the House proposal would continue to remain well below pre-recession levels even though spending over the base budget would slightly increase thanks to the slight uptick in revenue. See this chart to see how the House proposal compares to the Senate and Governor’s proposals.

CHART-House Proposal Compared to Base Budget and Pre-Recession_June10pptx

The full House Appropriations Committee will meet tomorrow morning to review, discuss, and vote on the appropriation items and special provisions. Here’s a short list of noteworthy items in the major budget areas:

K-12 Education

  • Fully funds projected growth in student enrollment over the biennium.
  • Provides $16 million for school safety measures in elementary and middle schools.
  • Provides $50 million over the biennium for private school vouchers as part of the Opportunity Scholarship Act, a two-year pilot program. Also provides nearly a half-million dollars to develop chart schools in rural areas.
  • Cuts $24.6 million for teacher assistant positions for FY 2013-14. The money report does not specify how many positions would be eliminated.
  • Phases out the salary incentive for certain teachers with advanced degrees if her/his position does not require an advanced degree for licensure.

Community Colleges and UNC System

  • Raises tuition at community colleges by $2.50 per credit hour. Also, raises tuition for out-of-state residents in the UNC System between 6 percent and 12.3 percent depending on the university.
  • Eliminates the senior citizens tuition waiver at community colleges.
  • Mandates a $191.7 million management flexibility reduction to the UNC System over the biennium.
  • Diverts some of the least qualified freshmen accepted into the UNC system to community colleges. After the two years, these students would be guaranteed admission as a transfer student to the UNC campus (s)he would have otherwise attended.
  • Provides $15 billion over the biennium to increase degree attainment in the UNC System among high school graduates, adult learners, and military veterans.
  • Phases-out the tuition grant for NC Science and Math graduates, and increase need-based aid to both public and private college students in the UNC System.

Health and Human Services

  • Provides $434 million in FY2014 to fully fund the projected enrollment growth in the number of people eligible for the Medicaid Program. And similar to the Senate proposal, it limits the number of doctor visits covered for participants from 22 to 10 visits, raise co-pays, and lower reimbursement rates for providers. It keeps pregnant women on Medicaid, diverging from the Senate proposal.
  • Allocates lottery funding to temporarily keep 5,000 slots in the NC Pre-K program. These “additional” slots would come just as 5,000 slots expire at the end of June, meaning the number of slots would remain the same.  And, the proposal scales back income eligibility and excludes students with disabilities or who are limited English proficient from participation in the program.
  • Eliminates the Child Fatality Task Force in FY2015. This is a long-running legislative study commission whose aim is to reduce child fatalities by pushing life-saving policy recommendations such as child seat belt laws and anti-poisoning measures.

Natural and Economic Resources

  • Prioritizes traditional, growth-oriented economic development—focused on industrial attraction—over more community-based economic development that targets lower income and more disadvantaged communities.  For instance, the proposal doubles the liability cap for the OneNC incentive program to $28 million per year while completely defunding several key minority economic development entities, including the Community Development Initiative, the Minority Economic Development Institute, and the NC Association of Community Development Corporations.
  • Restores the Rural Center’s $16 million appropriation, which was eliminated in the Senate proposal.

Justice and Public Safety

  • Provides no funding to restore local drug treatment courts—one of the Governor’s major priorities—but allocates nearly $5 million for substance abuse treatment for offenders who are at high risk of recidivism.
  • Closes two detention centers, two youth centers, and for prisons—eliminating nearly 800 jobs for guards and administrators.
  • Reduces the Prisoner Legal Services contract by $231,000 “to reflect decline in number of inmates.” diverging from the Senate proposal’s full elimination of entire contract.


  • The proposal allocates 5 additional vacation days to state employees but no pay raise, and it provides provide $50,000 to each survivor of North Carolina’s forced sterilization program.
  • Eliminates the Displaced Homemaker Program, which provides important workforce development services to residents with barriers to self-sufficiency. Funding would be re-directed to the Domestic Violence Center Fund.

The North Carolina Budget and Tax Center will continue to closely examine the House proposal.  And tomorrow, we will break down the general fund availability statement to give you an idea of how the House leadership pays for their budget.

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