2017 Fiscal Year State Budget, NC Budget and Tax Center

Preliminary review of Governor’s Health and Human Services Budget: Supporting the health, safety and well-being of North Carolina Families

Public investments in health and human services of the state budget provide protections for the health and well-being of North Carolina families, children and seniors.  By strengthening healthy outcomes and ensuring access to high quality health services, North Carolina policymakers can improve the quality of life of all North Carolinians and build healthy communities that support thriving economies.

The Governor’s budget is able to make investments in targeted programs and services within health and human services and other areas of the budget because of the reductions in Medicaid costs resulting from lower enrollment and utilization.  This $318 million reduction in Medicaid is being driven primarily by an improving national economy that means less folks are qualifying for Medicaid and by lower utilization that could be resulting from better preventive health care.  Recent policy decisions like cutting reimbursements, raising copays and eliminating optional services over the years have likely also contributed to this lower utilization.

Here are key highlights (and missing items) in the HHS budget:

  • Expand Support for Alzheimer’s Patients and their Families through Project CARE ($1 million)
  • Expand support for Alzheimer’s Patients and their Families through Community Alternatives ($3 million)
  • Serve more four year olds through NC Pre-K through lottery receipts although there still would remain a waiting list of at least 5,000 at-risk children ($4 million)
  • Improve quality of child care in NC by pushing adding 7 FTEs to conduct criminal records verification, fraud prevention and detection and 3 FTEs to invest in training of child care staff ($663,435)
  • No funding to expand access to child care subsidies to ensure quality early childhood experiences for children and support low-income working parents
  • Support Children’s Developmental Services Agencies that serve young children with developmental disabilities ($2.5 million)
  • Ease transition to new state funding model for local public health departments ($17 million)
  • Fund two new positions to support the Maternal and Child Health Block Grant work to reduce infant mortality ($97,597)
  • Enhance child safety through Federal Improvement Plan implementation which will address deficiencies identified in the Child and Family Review ($8.6 million)
  • Provide rental assistance benefit for vulnerable citizens including low-income, elderly and disabled individuals ($459,000)
  • Invest in Medicaid reform to support administrative efforts to transform the Medicaid and Health Choice programs to reach $6 million ($1 million)
  • Address backlog and expand services for individuals with developmental disabilities ($2.5 million)
  • No Medicaid expansion to serve nearly 500,000 North Carolinians without health insurance
  • Implement Governor’s Task Force for Mental Health and Substance Use Recommendations ($30 million)
  • Mental health investments to enhance the community health system ($20.2 million)
NC Budget and Tax Center

Statement on Governor’s released budget proposal from Alexandra Sirota, Director of the Budget and Tax Center

Now with the Governor’s budget proposal released, it is clear that unanticipated revenues available due to a recovering national economy and the lower than anticipated costs in Medicaid are allowing the  Governor to pursue small, targeted investments to promote child well-being and support improved educational outcomes.

These additional investments represent a small fraction of what is needed to realize Governor McCrory’s principles of preparing for future growth and helping those who are struggling in today’s economy.

It is certainly unclear how the Governor will sustain any new public investments with the already scheduled phase-in of additional cuts to the personal and corporate income tax and the heavy reliance on Medicaid “savings” as a primary source of dollars.

The Governor is limited by the costly income tax cuts implemented since 2013 that primarily benefit wealthy and profitable corporations, which result in at least $1 billion less in revenue each year than what would otherwise have been available to build the solid foundation that North Carolina needs to ensure the economy works for everyone.

This makes it impossible to build into the budget much-needed pay increases for all teachers and state employees and make the smart investments that will support a high quality of life and allow North Carolina to compete. Specifically, the tax cuts force bad choices like providing bonuses versus salary raises, selecting only certain public employees and not everyone to receive a pay raise that will also boost local economies, leaving certain waiting lists unaddressed and keeping in place many of the tuition increases and fee increases that have been implemented over the years.

It is, however, very important that the Governor has chosen to seek even this modest reinvestment over more tax cuts that would primarily benefit profitable corporations and the wealthy, shift the tax load  onto middle- and low-income taxpayers and only further distance North Carolina from achieving our potential.

The General Assembly should choose reinvestment over tax cuts for the wealthy or arbitrary spending targets as well and commit to building an economy that works for everyone.

NC Budget and Tax Center

Statement on Governor’s Budget Announcement from Alexandra Sirota, Director of the Budget & Tax Center

If the Governor follows through with the modest additional investments in his budget announcement today, it will represent a pragmatic, yet still constrained, approach to the state’s need for public investments.  With the unanticipated revenues that are available due to a recovering national economy, the Governor is seeking to make smart investments in key areas to promote child well-being and support improved educational outcomes.  But this additional investment represents a small fraction of what is needed to realize his principles of preparing for future growth and helping those who are struggling in today’s economy.

Without the budget proposal fully available for analysis, it is difficult to say whether these new investments highlighted come at the cost of other critical areas. Certainly, it is unclear how the Governor will seek to sustain any new public investments with the already scheduled phase-in of additional cuts to the personal and corporate income tax and the needed servicing of the Connect NC bond.

Even without the full budget proposal, we know that the Governor is limited by the costly income tax cuts implemented since 2013 that primarily benefit wealthy and profitable corporations. These cuts result in at least $1 billion less in revenue each year than what would otherwise have been available to build a solid foundation for a North Carolina economy that works for everyone.

We therefore question whether the state will be able to realize the full benefits of these public investments while policymakers allow tax cuts to continue that primarily benefit the wealthy and profitable corporations.

It also remains to be seen whether the Governor can deliver on even the few small promises made in today’s announcement.  We hope that the General Assembly will choose reinvestment over harmful tax cuts or arbitrary spending formulas and commit to building an economy that works for everyone.

NC Budget and Tax Center

ICYMI North Carolina ranks high for states with declining middle class

Last week, USA Today highlighted new analysis of Census data identifying where the middle class is dying across the country due to the failure of wages to grow for this group.  The analysis looks at income earned before taxes of those households in the third quintile, the middle 20 percent of earners in each state.

North Carolina ranked 4th among states for its decline in income for those in the middle of the distribution. From the analysis:

The highest earning 20% of North Carolina households have an average income of more than $166,000, up 3.3% since 2010. Meanwhile, the income of a typical middle class North Carolina household fell by 1.8%, more than twice the comparable national income decline of 0.7%.

As the story makes clear, the challenge for the broader economy of such declines in income for the middle class is real since consumption comprises a significant component of growth as measured by GDP.  To read more, check out the original analysis here.

NC Budget and Tax Center

Focus on wages to ensure the future of work works for all North Carolinians

The Institute for Emerging Issues wrapped up its forum on the future of work yesterday. The forum brings together leaders from across the state each year to discuss issues of importance to the well-being of the state. This year the topic was the future of work– the ways in which automation and technology are changing how we work and the relationship between workers, employers, consumers and communities.

Despite the projections and well-intentioned guesses about what the future will bring, no one knows for sure what the outcome will be.  What we do know is what we do today can support better economic outcomes for more families, businesses and communities in the state.  Research is clear that wage growth and public policy will be key to ensuring that the future of work has the number and quality of jobs that can boost the economy for everyone.

If this sounds familiar, it should. North Carolina’s wage problem is front and center in the daily lives of workers and the communities where they live today.  Without wages that ensure workers can provide for the basics and spend locally, employers struggle to see the demand for goods and services that allow them to expand and communities are challenged to support the opportunities that build the long-term potential for children’s economic success as adults.  North Carolina’s uneven recovery and elevated hardship today are indicators of what happens when policy doesn’t focus on wages or the ways in which all communities can connect to economic opportunity.

On the first day, a panel of policymakers, Senator Chad Barefoot and Speaker Tim Moore, were joined by Rick Glazier with the North Carolina Justice Center and John Hood with the John Locke Foundation to discuss just where policy can ensure that the future of work delivers greater opportunity and shared prosperity.

John Hood highlighted the critical goal of ensuring that workers have the “capital” to meet their needs and make investments that support advancement of themselves, their families and build assets in their community.  This is indeed the goal and a broadly shared one that is the concern of the vast majority of North Carolinians. A workers’ ability to make ends meet and spend is what the economy needs to function well and expand.  That is why a focus on boosting wages and what communities need to do so, not on reducing the size of government, is needed.

The solutions are readily available to North Carolina policymakers today. They are proven ones that will strengthen the economy for the future. To grow wages, North Carolina must: Read more