NC Budget and Tax Center

State lawmakers extend budget deadline for second time

Last week state lawmakers extended the 2015-17 fiscal year budget negotiation deadline from August 14th to August 31st, which is 61 days after the original budget deadline of July 1st. House and Senate leadership need additional time to work on the final budget deal because they have not been able to iron out the stark differences in their budget and tax priorities. If lawmakers were to approve a budget at the end of August, the 2015-17 budget would be the latest-approved two-year budget since 1998 and second-latest one going back to 1961.

More important than when the final agreement is reached is whether the final budget most closely reflects the priorities of North Carolinians for quality educational experiences, safe and vibrant communities, and healthy environments.

In the meantime, the new stop-gap measure—known officially as a Continuing Resolution—keeps state programs and services operating largely along the same lines as the first stop-gap measure approved at the end of June. Similar to the first temporary measure, the new measure funds current programs and services at existing levels, with four major exceptions that are listed below.

  • Budget cuts to programs, services, and vacant positions do not receive funding if the House and Senate included identical cuts (i.e. items that are not in controversy). Filled positions that are cut and not in controversy in the proposals should have received a 30-day notice before termination. It is unclear if any or how many positions were cut.
  • Programs funded with one-time money in the 2015 fiscal year lost that funding if the House and Senate proposed budgets did not renew that funding at the same level. This guideline means that the pre-kindergarten program must operate without the $5 million boost it received last year. It also means that the state is no longer funding a $1 million appropriation for water and sewer grants in economically struggling communities or a $1 million boost provided to the Biotechnology Center.
  • Public schools receive additional money to cover the costs of student enrollment growth. There is no additional money for Teacher Assistants, driver’s education, or reduced classroom sizes—which are major points of contention between the House and Senate approved budgets. Local school districts are left waiting for a complete budget picture for the new 2016 school year; some districts already implemented layoffs amidst the budget uncertainty.
  • Beginning teachers receive another boost in pay, to $35,000 from $33,000. But the deal freezes pay for the remaining teachers and all state employees. Lawmakers are negotiating those raises.

Unlike the first temporary measure, the new measure would also make the allowances that are listed below.

  • The Department of Health and Human Services (DHHS) is authorized to invest $3.65 million in emergency federal block grant funds to support the child care subsidies program, which provides affordable options to moderate- and low-income working families.
  • DHHS must also revise its income eligibility guidelines for the child care subsidy program to exclude the income of a nonparent caretaker who does not reside with the child. This reverses a new rule enacted in 2014 that is making it harder for some families to qualify for the program.
  • State agencies are authorized to spend grants that are below $2.5 million if the grant does not require state matching funds or is not used for a capital project.
  • Lawmakers authorized additional spending on incentives, including $10.3 million for the JDIG reserve and $5.1 million for the One NC Fund to satisfy grant obligations and statutory transfers.

As expected, absent from the continuing resolution is any sense of where the leadership is headed on the differences between the House and Senate budgets. The primary points of contention between the two sides are on tax cuts as well as education spending and policy, according to reports from major news outlets.

As I mentioned during the coverage of the first stop-gap budget measure, state legislators should heed the advice of Governor McCrory and make no further significant corporate and personal income tax cuts in their final spending proposal. They should also reject the Senate leadership’s latest push for severe and arbitrary spending restrictions.

By rejecting those two ideas, lawmakers would take a more fiscally-responsible path to funding North Carolinians’ priorities. In the end, doing so may make the budget negotiations last a bit longer but would allow the state to meaningfully rebuild and reinvest in public education, health safety, justice, and the other building blocks of a strong economy.

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