2017 Fiscal Year State Budget, NC Budget and Tax Center

Read fine print: How the state Senate spends federal the dollars in its budget

When state lawmakers put together a budget proposal, they decide how to spend state dollars on the public investments that help children, families, and communities thrive. These are things like public education, public health and safety, and transportation services and programs. Lawmakers also allocate federal aid that is passed to the state in the form of block grants, with the details appearing in the budget bill as “Special Provisions.”

These federal dollars are an important tool for helping communities thrive but on their own are insufficient to make sure that state goals that benefit everyone are met. Critical state investments are needed to build a more inclusive economy. Yet in some instances, lawmakers shifted away from using federal aid to meet long-standing priorities such as affordable housing while failing to make sure that the state makes catalytic investment. In other cases such as early childhood education, the state recently began to swap out a portion of state funding for federal aid. Supplanting—rather than supplementing—state dollars is troubling when waiting lists and unmet needs persist.

Block grants have been around since the late 1960s and are a specific amount of funding to assist state governments in addressing broad policy goals and purposes—such as improving economic mobility and quality of live through social services, public health, and community economic development investments. The federal government sets general guidelines on how states can allocate the money while giving give states a great deal of flexibility in the use of the funds. In North Carolina, most of the block grant dollars are passed to the state’s 100 counties to administer the services and programs.

The Senate budget governs the use of federal block grants across the board but it is worth highlighting specific changes that signal a change in the reliance and allocation of federal funds.

With the Community Development Block Grant (CDBG), the budget allocates $43.5 million in funding. The Senate budget directs that $10.6 million in de-obligated CDBG funds to be allocated to public services and facilities, training for local governments, water and sewer infrastructure for public schools, and investment in the state Broadband plan. The last two purposes are new.  The core allocation of CDBG in the upcoming fiscal year remains the same: State Administration $1,037,500; Economic Development $15,737,500; Infrastructure $26,725,000.

In the past, state lawmakers included affordable housing as a core purpose of CDBG funding and allocated specific levels of funding accordingly but that is no longer the case. For example, in the 2008 fiscal year lawmakers allocated $13.2 million specifically for scattered site housing and $2 million for housing development.

With the Temporary Assistance for Needy Families (TANF) Block Grant, the budget allocates $309.6 million in funding. Nearly half goes to the state’s Work First program, adoption services, child protective services, and a new child welfare initiatives program. The remaining dollars go to early childhood education, teen pregnancy initiatives, administrative costs, and transfers to the Child Care and Development Fund Block Grant and Social Services Blog Grant.

As lawmakers deal with self-imposed budget constraints due to prioritizing tax breaks, they have “freed up” state funds by relying more and more on TANF aid to fund early learning programs. The swaps have been dollar-for-dollar and as such have done nothing to address persistent wait lists. You can explore how the state has spent TANF dollars over the years in this interactive platform.

In the event of an unanticipated increase in TANF federal funding for the current or upcoming fiscal year, the Senate budget requires those dollars to be allocated to the North Carolina Child Care Subsidy program to pay for child care in four- or five-star-rated facilities for four-year-old children. That is a noble goal but it is important to lift up how the Senate budget failed to propose a boost in spending for this subsidy program for the upcoming fiscal year when state investments for this program have been on a downward trend since the recession and more than 20,000 children remain on the waiting list.

While federal aid provides opportunities to invest in the things that help us all thrive, there are clear challenges with the state’s increasingly reliance on federal funds for some core services.  First, federal funds have been subject to significant cuts in recent years through federal sequestration (impacts CDBG but not TANF) and other austerity measures that Congress continues to pursue. Second, federal funds in North Carolina are subject to our state’s compliance with various laws of the land, including for example, the US Civil Rights Act. Laws passed in violation of those acts put at risk those funds.

At base, state policymakers must build up the successes of federal aid and commit to investing state dollars for local priorities that will build thriving communities.

2 Comments


  1. Alex

    June 11, 2016 at 7:44 am

    The states send in their tax dollars to the federal government who in turn rake off about half of this money to support the bloated bureaucracy in Washington. Then they make a big deal about sending half of it back to the states as “public investments ” along with a mountain of rules and restrictions. Pure and simple, it is nothing more than a wasteful money laundering operation.

  2. Hmmm

    June 11, 2016 at 2:19 pm

    Alex: Citation, please.

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