NC Budget and Tax Center

Federal spending matters to North Carolina’s bottom line

Governor McCrory and legislative leaders have failed to acknowledge the critical role that federal investments play in North Carolina, as shown in their shortsighted response to the letter from the U.S. Department of Justice that notified the state that repeal of House Bill 2 was required to keep the state in compliance with the U.S. Civil Rights Act.

For years, policymakers in North Carolina have refused to acknowledge the role that federal dollars play in building a stronger economy for our state, whether it be in the demonstrated stabilization delivered by the Recovery Act or the support that could have been received from Medicaid expansion to rural communities and health care providers.

The willingness to defy the federal government so that the state can continue to discriminate puts at risk billions of dollars.

A recent analysis from the Williams Institute suggests that number would top $5 billion. Those are dollars that help to ensure hungry children have access to nutritious food, that children can receive a good education regardless of the wealth of their community, that housing can be kept to code and accessible to seniors and people with disabilities, and that higher education can be accessible to more North Carolinians.

By jeopardizing federal funding, North Carolina policymakers are once again creating their own self-made fiscal crisis. A few facts on federal funding to North Carolina from Pew Charitable Trust’s Fiscal Federalism Initiative:

• In 2014, the last year for which data is available, North Carolina received $16.6 billion in federal grants ranging from funding that went to transportation, health care, housing and education.

PEW_Funding_from_Federal_Grants_Varies_as_a_Share_of_State_Budgets_v1 ffi-1

• These federal grant dollars alone represented 3.5 percent of the state’s GDP, with total federal dollars flowing to North Carolina representing one-fifth of the state’s GDP in 2014.

PEW_Funding_from_Federal_Grants_Varies_as_a_Share_of_State_Budgets_v1 ffi-2

North Carolina has already experienced the loss of federal funding through sequestration—a decision made by Congress—that has resulted in cuts to child care subsidies and housing investments. A self-imposed reduction to federal investments is fiscally irresponsible in light of the already long list of unmet needs in the state and the very poor fiscal responsibility adopted by our leaders with their commitment to tax cuts for the wealthy and profitable companies.

Perhaps this is a good time to remind policymakers in Raleigh that North Carolina benefits tremendously from the investments that the federal government makes in our state’s communities and the well-being of our residents from infants to seniors. To put at risk those dollars so that the state can discriminate will only drive up the costs for us all in the immediate and long-term.

2017 Fiscal Year State Budget, NC Budget and Tax Center

North Carolina deserves better

Just two weeks into the legislative session, North Carolinians already are seeing how limited policymakers’ aspirations are for the future of communities and families.

First, the Governor proposed a state budget that fell far short of what North Carolina needs to have thriving communities and broad prosperity.

Then, yesterday, leaders of the House and Senate agreed on setting their sights even lower.

As if the limitations forced by tax cuts that mostly benefit the wealthy weren’t enough, legislative leaders went a step farther in the wrong direction by tying their spending targets to a flawed formula that replaces judgment with rigid numbers.

In deciding that what the state spends in a year can’t increase by more than the percentage growth in population and inflation, legislative leaders set a target at a little over $22 billion – less than the governor’s.

Such a formula is similar to one that has been severely reducing the quality of life in Colorado. A report from Colorado just this weekend found this inflexible policy is seriously diminishing educational opportunity. Students are trying to learn with outdated technology, and schools are having a hard time attracting or keeping the best teachers. The state’s ability to compete in the global economy can only suffer as a result. Read more

2017 Fiscal Year State Budget, NC Budget and Tax Center

The Governor’s priorities

“Don’t tell me what you value, show me your budget and I will tell you what you value.” –Vice President Joe Biden

Governor McCrory made his vision for our state clear when he announced a summary of his budget two weeks ago, saying that his proposal followed the highest priorities he has for the state’s economic success and delivery of a high quality of life to all.  Unfortunately, however, the priorities in the Governor’s proposal are wholly out of sync with North Carolinians’ priorities for a stronger more inclusive economy, as well as unlikely to deliver the outcomes he desires.

The Governor’s clearest priority places deep tax cuts for wealthy and profitable corporations above important investments that could help build an economy that works for all. His decision to allow corporate income tax rate cuts to phase in over the next two years and personal income tax rates to drop to 5.499 percent  means the loss of at least $786 million in 2017 for the state. Since 2013, the tax changes add up to nearly $2 billion, despite the evidence that such tax cuts for the wealthy and profitable corporations do little to grow the economy and do exact a huge cost in our effort to build thriving communities.

The Governor’s budget proposal has several other examples of how his priorities do not match the priorities of a strong, thriving North Carolina: Read more

2017 Fiscal Year State Budget, NC Budget and Tax Center

Delivering efficient, effective, equitable public services

The operations of government and the targeted deployment of public services for public goals is the purpose of the General Government budget area.

In year’s past, the General Government area of the budget has supported important investments in affordable housing development and the supports to managing efficient and effective core functions of government.

Here are a few of the key items to highlight in the General Government budget:

• Creates a statewide network that develops and leverages existing NC entrepreneurial management talent and recruits investors, entrepreneurs and managers to NC ($2.5 million).

• Translates University research and development for commercialization through non-profits or housing entities ($2.5 million).
• Provides funding to conduct a School Facility Needs Assessment for low-wealth counties (despite an existing assessment indicating that $8 billion is needed for school construction). In 2013, lawmakers eliminated a dedicated school construction fund via the corporate income tax revenue in order to pay down the cost of the income tax rate cuts ($1 million).

• Funds to support access to permanent, community-based integrated housing for individuals with disabilities, directly supporting Olmstead Settlement ($5.5 million). Provides no additional funding for the Housing Trust Fund or the Workforce Housing Fund, despite pressing needs.

• Provides additional funding for the Human Relations Commission, which lawmakers placed on a continuation review last year ($788,076).

• Expands elections outreach to help ensure fair elections (but leaves in place recent election law changes such as Voter ID) and implements a new campaign e-filing process (more than $900,000).

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)