NC Budget and Tax Center

Follow the money: How the House pays for its budget

The full House Appropriations Committee is currently debating the House’s proposed budget. Legislators spent more than two hours providing an overview of the proposal but skipped over how the House pays for its proposal. As we pointed out during the Senate budget process, this is not uncommon. How the state raises the billions of dollars that fuel the state budget gets relatively little scrutiny compared to the rest of the budget during the budget process.

But because the House budget includes tax cuts for the rich that significantly reduce resources to pay for vital services, it is more important than ever to examine how the state will make up for the tax cut’s $528.6 million price tag in the next biennium and $1.5 billion over the next five years.

Here’s what’s important for you to know about how the House pays for its budget:

  • The state expects to receive nearly $20.5 billion in base revenues. $19.6 billion will come in from taxes, primarily from the state income tax, sales tax, and corporate income tax, and $837.5 million will come from other non-tax sources. But, the House’s budget spends $20.6 billion, leaving the state approximately $106.9 million short.
  • The state loses hundreds of millions due to tax cuts. By repealing the estate tax and linking their tax cut for the wealthy to their budget proposal, the House would reduce resources by $90.5 million in FY2014, and $438.1 million in FY2015. The House’s tax-cut plan is not true reform as it would result in a tax shift, requiring, on average, low-and middle-income families to pay more while the highest income families pay less.
  • The House uses funds left over from this year. The House budget includes $162.5 million in unspent funds from this fiscal year, money they anticipate being returned by state agencies, a revenue surplus from this year, and various other sources (see the chart below).
  • The budget borrows from the Highway Fund. The House proposal transfers $218.1 million from the Highway Fund, which is one of the state’s two major sources of transportation funding. Most of this money is will support the State Highway Patrol, which was shifted to the Justice and Public Safety section of the budget in 2011. This transfer is reflected in the non-tax revenues section of the availability statement.
  • The House uses budget gimmicks and increases fees. They raise $203.6 million by scrounging up revenue from a wide variety of sources, including fee increases and repeals and transfers of special fund set-asides for public school buildings, clean elections, economic development and others.
  • The budget leaves money unspent. There is an unspent General Fund balance of $144.2 million.

The General Fund availability statement is summarized in the chart below.

House_Revenue Chart_June 11

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