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Overview of NC House budget proposal

This morning, the House leadership released their $21.1 billion 2015 fiscal year budget [1] for the period that runs from July 2014 to June 2015. It marks the midpoint between the Senate budget [2] of $21.16 million and the Governor’s budget [3] proposal of $20.99 billion. Similar to these other budget proposals, the House proposal leaves too many vital public services at diminished levels—failing to catch up with the needs of kids, working families, and communities five years into the official economic recovery.

As I wrote during the Senate budget process, at this point, budget proposals that put the train on the wrong tracks should come as no surprise. Due to tax changes enacted last year, budget writers are constrained in major ways. This is effectively a self-imposed budget challenge. The state is facing a revenue shortfall of $191 million in the 2015 fiscal year (not to be confused with the nearly half-a-billion shortfall for the current 2014 fiscal year that ends in June). In the upcoming fiscal year, the tax plan will drain available revenues to the tune of $437.8 million in the 2015 fiscal year. Estimates suggest that the revenue losses from the tax plan, particularly stemming from the personal income tax changes, could reach $600 million in next fiscal year [4].

Yet, rather than prudently recommending the halting of future tax cuts [5] that are scheduled to go into effect in January 2015, the House, Senate, and Governor all choose to keep this next round of tax cuts in place despite the diminished revenue picture.

State spending under the House proposal would continue to remain 6.5 percent below pre-recession levels, as illustrated in the chart below. It’s clear that the misguided tax cuts are making it harder to catch up on lost ground.

House Budget_Falling behind [6]

Budget and Tax Center’s analysis of the House’s budget proposal. The author modified the originally recommended base budget for FY2015 that was published last year to reflect the decline in student enrollment in all areas of education and the decline in projected base salaries for K-12 personnel. The author excludes the salary raises from the core areas of the budget and assumes they are in the Salaries and Reserves section of the budget to follow precedent and to avoid artificially inflating spending levels for the core areas of the budget.

My colleagues and I at the Budget and Tax Center gave the proposal [7] a cursory look and put together a short list of noteworthy items in the major budget areas (with an eye towards low- and moderate-income North Carolinians):

Miscellaneous

Public Education

Higher Education

Health and Human Services

Justice and Public Safety

 Natural and Economic Resources