2018 Fiscal Year State Budget, NC Budget and Tax Center

Final budget a mixed bag of give, take, and disregard for courts and public safety

The final budget released by state leaders this week includes a mixed bag of give, take, and neglect in regards to public investments that promote safe and healthy communities. At the same time that public investments are made for particular initiatives of interest, lawmakers cut state funding and totally neglect boosting public investments in other areas of the Justice & Public Safety (JPS) budget.  For fiscal year 2018, the JPS section of the final budget is a modest 1.6 percent year-over-year increase in state spending when excluding additional state funding to provide pay raises to state employees.

Here are notable takeaways from the JPS section of the proposed final budget.

  1. Provides around $58 million in additional state funding for pay raises to state employees. The majority of the pay increase funding consists of a $1,000 salary increase for eligible state employees.
  2. Provides $250,000 for a limited pilot project with the City of Wilmington to address the needs of opioid and heroin overdose victims. This is the same level of funding included in the House and Senate respective proposed budgets. Whereas lawmakers acknowledge the seriousness of the opioid abuse issue in the state, a modest amount of state funding is included in the budget to prevent and combat this issue.
  3. Provides no additional state funding to enhance access to mental illness services for offenders. This missing investment in the final budget aligns with the House and Senate proposed budgets, which also excluded such funding. The Governor’s recommended budget provided $5.8 million for fiscal year 2018 to enhance services for mentally ill offenders.
  4. Includes $519,600 in one-time state funding for planning in regards to implementation of Juvenile Justice Reinvestment Act (JRA). The JRA was passed in 2011 and made major changes to sentencing and corrections in North Carolina in an effort to reduce state spending on corrections and to reinvest the savings in community programs that decrease crime and strengthen neighborhoods. The Governor’s budget included a total of $4 million in state funding for various support initiatives that continue the implementation of JRA.
  5. Provides $13.2 million in one-time state funding to support the “Raise the Age” initiative. The funding would be used to construct a new youth development center in Rockingham County in response to “Raise the Age” and is included in the Capital section of final budget. The respective House and Senate proposed budgets provided no state funding to support the “Raise the Age” initiative. Thus, the inclusion this funding is one positive outcome in the final budget.
  6. No additional state funding provided for indigent individuals to have access to private counsel representation. This missing investment in the final budget aligns with the House and Senate proposed budgets, which also excluded such funding. The Governor’s recommended budget included $2.9 million in state funding for fiscal year 2018 to increase compensation paid to private counsel representing indigent people who are unable to afford access to legal counsel.
  7. Includes a $10 million state funding cut to the Department of Justice budget and generates another $4.1 million in savings from eliminating 79 positions within the Department of Public Safety.

For more news and analysis during the budget debate, follow the Budget & Tax Center on Twitter @ncbudgetandtax.

Cedric Johnson is a Policy Analyst with the Budget & Tax Center, a project of the NC Justice Center.

2018 Fiscal Year State Budget, NC Budget and Tax Center

Final budget fails to strengthen the foundation of North Carolina’s public schools

The final budget that lawmakers have proposed fails to strengthen the foundation of North Carolina’s public schools. While the public schools area of the budget seems to have a lot going on – one could argue that a lot of special pet projects made it into the final budget – the reality is that little is achieved in ensuring that every student receives a high quality education, regardless of where they live in the state. Consequently, educators will embark upon the upcoming school year with the familiar challenge of doing more with fewer and inadequate resources.

Here are some highlights of the public schools budget that reflects the austerity budget approach state leaders continue to pursue despite an improving economy. Read more

2018 Fiscal Year State Budget, NC Budget and Tax Center

Lawmakers’ approach to paying for final budget means long-term fiscal challenges for North Carolina

The negotiated conference budget expects the state’s tax system to raise $22.3 billion in base General Fund revenue. This available base revenue is greatly constrained by previously approved tax cuts in recent years, and additional tax cuts in this final budget further reduce available revenue. In addition to base revenue, lawmakers rely on revenue collections coming in above what officials anticipated ($580.6 million); money they anticipate agencies will return to the state (known as reversions, estimated at $271 million); non-tax revenues ($849 million); and unappropriated dollars from the most recent fiscal year ($208.6 million). In total, $23.6 billion in revenue is available to lawmakers for public investments for fiscal year 2018 (FY18).

The second year of the budget uses $499.2 million of available revenue for FY18 to fund public investments for fiscal year 2019 (FY19). This reliance on prior year’s revenue raises concern, as the state’s tax system already falls short of raising adequate revenue to meet the growing needs in the state. This reality of an inadequately structured tax system and the use of prior fiscal year revenue, reflects the long-term challenges the state will face in ensuring that adequate revenue is available to meet the basic responsibilities of a growing state.

Year-over-year annual General Fund appropriations increase by $621 million in the final budget. However, around $1.1 billion in additional revenue will be needed in going from the first to the second year of the two-year budget to account for enrollment growth in public education, to pay for rising costs in the delivery of Medicaid services, to meet retirement and health plan obligations for public employees, and to fund the teacher pay plan. This suggests that existing obligations will either not be fully funded or cuts to public services are on the horizon, or a combination of both, in order to fund these ongoing obligations.

How do lawmakers pay for the final budget?

The final budget includes a required transfer of $100.9 million of General Fund dollars to the state’s Savings Reserve fund, per the special session disaster relief bill passed by state lawmakers in December 2016 to aid communities harmed by Hurricane Matthew. Furthermore, lawmakers stash an additional $263 million in available revenue into the Savings Reserve fund and another $125 million is set aside in the state’s Repair and Renovations fund.

More tax cuts in the final budget builds onto tax cuts in recent years that have reduced available General Fund revenue. Tax cuts in the final budget largely begin in the second year of the budget and will reduce annual revenue by $521 million for FY19. The full cost of the tax cuts – reflected by the loss of annual available revenue – is not reflected in the final budget because the tax cuts will only be in place for the second half of FY19. Accordingly, the cost of the tax cuts will be higher than the $521 million price tag included in the budget, meaning a further reduction in available revenue for public investments in the years beyond the two-year budget.

Cedric D. Johnson is a Public Policy Analyst for the Budget & Tax Center, a project of the North Carolina Justice Center.

NC Budget and Tax Center

At the legislature: One step forward after three steps back in funding local government

Wednesday, members of the House Finance committee voted in favor of House Bill 900 (HB900), which allows North Carolina cities and towns to increase their local sales tax by a quarter cent. This local sales tax increase would have to be approved by a majority of local residents via a local referendum.

The proposal is being considered on the heels of state lawmakers steadily limiting and restricting revenue options for local government in recent years. The repeal of the local privilege tax in 2014, for example, resulted in nearly $63 million in less annual revenue for cities and counties across the state. Corporate income tax dollars were no longer dedicated to school building and infrastructure after the 2013 tax changes. And overall, tax cuts passed since 2013 that largely benefit the highest income earners in the state and profitable corporations have resulted in around $3 billion less in available revenue for public investments and that impacts local governments as well as state public programs and services.

The argument by proponents of the bill is that it provides a needed revenue option to cities and towns so that they can invest in infrastructure and bring jobs to their communities. It does, but is unlikely to fully address the unmet needs in communities and alleviate the fiscal pressures that local governments face. So, one step forward after three steps back – that’s not progress.

The diminished revenue resulting from tax cuts has served as an excuse for state lawmakers pushing the cost of public investments, like public education, down to counties, cities, and towns. For the 2018-19 school year, approximately $293 million in additional funding would be needed to fully fund state-mandated class-size requirements for K-12 classrooms in public schools. If state lawmakers fail to provide the needed additional funding, the cost and burden will fall onto local communities across the state.

Local municipalities need all the support they can garner to help ensure they have adequate resources to meet the needs of their residents and communities. Accordingly, HB900, even in its limiting form, is probably welcomed news for local officials.

However, it is important that we acknowledge the big picture and consider how we get back to being able to invest in the schools and businesses and workers who together drive our economic future forward. For that, we need a reconsideration of North Carolina’s failed tax-cut experiment.

Cedric D. Johnson is a Public Policy Analyst for the Budget & Tax Center, a project of the North Carolina Justice Center.

NC Budget and Tax Center

Two innovative programs that fight child hunger and promote learning

Ensuring that children begin each school day with food in their stomach is an important component of providing a high quality education to all North Carolina students. Combating child hunger helps address the unfortunate reality that 1 in 5 North Carolina children do not have reliable access to an adequate amount of affordable, nutritious food each day, which threatens their classroom learning experiences, well-being and life outcomes.

More than half of the more than 1.4 million students that attended North Carolina’s public schools for the 2015-16 school year qualified for free or reduced cost school meals – that’s around 749,000 students. However, far too many students don’t eat school meal programs for several reasons, such as a lack of time, the stigma associated with the traditional delivery method that schools use to serve school meals, and a lack of awareness about school meal programs.

Two particular anti-hunger initiatives have come to North Carolina in recent years that aim to increase the number of students eating school meals. The Community Eligibility Provision (CEP) initiative enables eligible schools that serve a high concentration of low-income students to offer a healthy school breakfast and lunch at no charge to all students. Furthermore, the Partners for Breakfast In Classroom (PBIC) initiative provides grants to eligible school to adopt breakfast delivery programs that allow students to eat school breakfast in the classroom after the first bell. The Budget & Tax Center is a state partner in the PBIC initiative. Read more