Falling Behind in NC, NC Budget and Tax Center

State budgets can increase total state spending but still fall far short of what’s needed

It is true that the final budget reinvests in some programs and services to achieve an overall slight increase in General Fund appropriations. This reinvestment was made possible by using unspent dollars from last year’s budget, budget gimmicks, the reliance on tuition increases and fees, as well as reductions in other areas of the budget. However, state investments in most areas of the budget—including education—are failing to keep up after years of budget cuts.

There are two primary vantage points for analyzing the final budget and making comparisons over time.  One method is to measure the final budget against the actual dollars that were appropriated last year in the 2013 budget.  The other method measures the final budget against the continuation—or base—budget, which reflects the dollars needed in the next year to maintain current service levels.  The Governor’s Office of State Budget and Management, which is headed by Art Pope, collaborates with the various departments and agencies to determine the continuation requirements.

So, which vantage point makes for the best comparison?

Hands down, the continuation budget provides a better baseline because it indicates what is necessary to maintain residents’ current experience of public service. It does this by accounting for the changing costs required to deliver the same level of services approved by the previous General Assembly. For example, the continuation budget covers education enrollment growth as well as inflation on mandatory expenses such as gas and electricity for state-owned cars and buildings.

The chart below contrasts the final budget to each of these vantage points.

Final_falling behind_Baseline_TWO_July30_NoFY08Comparison

The final budget may invest more than last year’s budget in pure dollars but it still falls short of what is needed to maintain current service levels for several major areas in the budget. The reality is that with a diminished baseline, comes diminished expectations. In no area of the final budget is this clearer than in the education budget where adequacy can make or break a child’s ticket to economic mobility.

Even though the budget increases overall K-12 spending compared to last year’s budget, it is noticeably not enough of an increase to meet the overall continuation needs for the K-12 system. We all should be concerned about adequacy because adequate investments can help build economic opportunity for all students. Adequacy matters because class room size matters; every teacher assistant matters; the quality of a textbook matters; professional development for teachers matters. A budget that falls short of what is needed truly matters for students’ classroom experience.

Both of the vantage points discussed above, however, are limited in a historical context. Nearly four years into the economic recovery, the final budget falls far short of restoring the damaging cuts from the Great Recession and rebuilding the foundation for sustained economic growth. Deep cuts on top of a growing population—i.e. more children to educate, more seniors to take care of, and more citizens to serve and protect—means that state spending is farther behind than where it should be. K-12 spending alone is below pre-recession levels (FY2008, adjusted) by approximately 6.4 percent, or $534 million.

We all want to put the budget on a sustainable path but this budget puts the state on a path to mediocrity. And let’s not forget that there would have been hundreds of millions of dollars to help address this gap if legislators had not pursued a series of ill-advised tax cuts that drained available revenues.

6 Comments

  1. Doug

    July 31, 2013 at 2:47 pm

    Don’t forget that the opposite is true as well. In my 17+ years of budgeting in a private corporation, every department with their budget requests overstates their “needs” by at least 10-15% on average. The same path is taken in government programs to attempt to market for overspending on their department, and to feed to the media lemmings to publish propaganda like is here on the watch.

  2. Mary

    July 31, 2013 at 7:16 pm

    What Doug says can be true but not always. Years ago while advocating for adequate funding for public education we discovered a bizarre practice. Public officials were urged to only ask for a predetermined amount. They complied and their requests were cut by 10% in an effort to demonstrate “fiscal oversight.” Of course, we thought the schools were getting what they needed (or close to it). After all that is what they asked for.
    Of course, the public was in the dark about the real needs, making it easy to blame the schools for not doing their jobs. As we caught on to what was going on, we urged officials to adopt good budgeting practices and ask for what they estimated they needed to do their job. At least that way, the public knew the true needs and could respond accordingly.
    I disagree that the public agencies subscribe to the same practices that businesses do. Public requests are just that – public – and under constant scrutiny.
    I suggest you talk to your pubic officials and find out the real story.

  3. Alex

    August 1, 2013 at 7:23 am

    You never budget based on needs in any organization. Budgeting should always be based on revenues available after priorities are established. To do it any other way is asking for fiscal disaster. Just ask the folks in Detroit.

  4. Doug

    August 1, 2013 at 3:05 pm

    Here is another, more encompassing explanation of the maneuverings to get to a budget…and the maneuverings by media and blogs like the watch to mis-state the true budget situation.

    http://www.carolinajournal.com/articles/display_story.html?id=10384

  5. Doug

    August 1, 2013 at 3:10 pm

    Mary,
    If you do not believe the same thing goes on in the public sector you are quite gullible. I would propose that it is more so because they are doing in with OPM rather than basing it on a recipts vs. desired level of spending…at least until now when the NCGA seems to have begun some fiscal restraint.

    As far as a private buiness vs. government spending, that is under the same scrutiny if not more as the stakeholders have invested their own money there and have a choice and an actual voice. Management usually has some real “skin in the game” where their livelyhoods depend on efficiency to deliver a great product people will want to buy, otherwise they are out on the street. That situation is nowhere to be found in government.

  6. Another view of the budget | NC Women Matter

    August 12, 2013 at 12:05 pm

    [...] Check this post from the NC Justice Center to get a handle on how the final changes have affected the services the state government will be able to provide. [...]