Back to School Series, NC Budget and Tax Center

This is part of a Back to School blog series that highlight various issues to be aware of as the 2014-15 school year kicks off. (See Part 1, Part 2, Part 3, and Part 4)

Little things can make big differences in children’s lives. Something as simple as arriving to class with food in your stomach can enhance a child’s learning experience. Many schools across North Carolina recognize this and are offering breakfast and lunch to all of their students at no charge this school year.

As part of the nationwide Community Eligibility Program (CEP), high-poverty schools in at least 36 school systems across North Carolina will provide breakfast and lunch to all students free of charge. This effort not only aims to help end childhood hunger – one in five American schoolchildren can’t count on getting enough nutritious food at home – but also aims to enhance the classroom experience of students. Ensuring that children show up in classrooms each day fed and ready to learn increases the chances of students being more focused, attentive, and engaged.

The school year marks the first year in which eligible schools nationwide can participate in CEP. With all students provided breakfast and lunch free of charge, participating schools are no longer required to collect school meal applications, which reduces administrative costs. These cost savings can now be directed towards covering the cost of the school meals that are provided. Read More

NC Budget and Tax Center

It hasn’t taken long for the costly tax plan passed last year to replace grandiose promises with an unfortunate reality. State officials recently confirmed that the 2013 tax plan passed by state policymakers will cost at least $200 million more each year than initially projected, with a price tag of at least $5.3 billion over the next five years. Our own estimates point to the potential for the total revenue loss to reach $1.1 billion by 2016.

As the prolonged negotiated budget for fiscal year 2015 highlights, North Carolina’s revenue challenge hampers our ability to invest in public education, healthcare services, and other public investments that serve as the foundation of economic growth.

The General Assembly’s Fiscal Research Division (FRD) was charged with assessing the fiscal impact of the tax plan and confirms that the personal income tax rate reduction is having a greater immediate impact on revenue collections. FRD attributes the larger-than-expected eventual revenue shortfall to slower wage growth. But it’s difficult to imagine that the income tax cuts are not driving the greater revenue losses given what we know about who benefits from the tax changes and slower wage growth suggests that the tax changes should cost less, not more. Moreover, slow wage growth raises additional concerns about the reality of a Carolina Comeback. Read More

Falling Behind in NC, NC Budget and Tax Center

Governor McCrory signed a final budget into law for the current 2015 fiscal year, which runs from July 2014 through June 2015, this morning. The $21.1 billion budget includes new spending initiatives – largely pay raises for teachers and state employees – but fails to include additional revenue to sustain this spending in the long-term. Contrary to fueling North Carolina’s economic comeback, as Governor McCrory claims, the final budget continues to fund core public services at diminished levels, well below pre-recession levels, and compromises the ability of the state to get ahead and prepare for the future.  Moreover, it puts North Carolina on a fiscally irresponsible path that will continue to create budget challenges in the years ahead, largely as a result of the tax plan that was little debated and discussed in the final budget.

North Carolina faces a revenue challenge, and actions taken within the final budget make this reality clear. The final budget signed by the Governor spends every available dollar and uses dollars from last year’s budget as a result of the Governor requiring agencies to cut their respective budgets. No funding is available to build up the state’s Savings Reserve fund, which is meant to position the state to weather a future economic downturn. Furthermore, the budget relies on one-time funding sources that, once depleted, cannot be replenished with such low revenue and shifts funding for core public investments such as K-12 education to lottery receipts and early childhood programming to federal block grants.

Such budget decisions are driven largely by the tax plan the governor signed into law last year, which significantly reduces revenue available for public investments. Revised analysis by the General Assembly’s Fiscal Research Division estimates that the income tax rate cuts in the plan will cost at least $200 million more annually than initially expected – more than $1 billion less in annual revenue once the plan is fully implemented. The Governor and state policymakers failed to account for this reality in the final budget, which means that, absent new revenue, more budget cuts to core public services are likely to occur in future years as the tax plan continues to be implemented. Another round of tax cuts is set to occur in January 2015.

Under the final budget signed by the Governor, state spending remains 6.6 percent below pre-recession levels (see chart below). Read More

NC Budget and Tax Center, Poverty and Policy Matters

With a new school year approaching, many local school boards across North Carolina will join an effort to help end childhood hunger. For the 2014-15 school year the nation-wide Community Eligibility Program (CEP) allows high-poverty North Carolina schools to eliminate collecting school meal applications and offer breakfast and lunch to all of their students at no charge.

One in five American schoolchildren can’t count on getting enough nutritious food at home, which can have a negative impact on a student’s academic performance and development. Ensuring that children show up in classrooms each day fed and ready to learn increases the chances of students being more focused, attentive, and engaged.

At least 36 school systems across North Carolina have confirmed their plans to adopt CEP for the upcoming school year. (See map below) Some local school boards plan to adopt CEP district-wide while others will offer a universal meal program in selected schools within their district.

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A big kudos goes to these school systems that will adopt CEP next year. This serves as a positive step in helping ensure that all North Carolina students are afforded a high-quality, enriching education.

A listing of all North Carolina school districts and individual schools that are eligible for community eligibility for the 2014-15 school year can be found via the NC Department of Public Instruction website.

NC Budget and Tax Center

Gov. McCrory’s proposed budget for fiscal year 2015 and respective budgets by the House and Senate include significant cost savings from closing and downsizing various correctional facilities. Savings from these changes total around $14.2 million in both the House and Senate budgets and $14.9 million in the Governor’s budget.

Savings generated from these changes could have been used to promote safer communities across the state.  However, lawmakers went down a different path. For instance, Gov. McCrory advocated for state funding for drug treatment courts to be included in the state’s current fiscal year budget. These courts cost a fraction of the nearly $28,000 it cost to keep individuals in prison. However, the final budget passed last year by state policymakers did not include funding for drug treatment courts.

All three budget proposals for fiscal year 2015 – which begin July 1, 2014 – fail to include funding for drug treatment courts. The House and Senate budgets, however, go further and cut funding for programs that promote fair and equitable access to the justice system and safe communities across the state.

Funding cuts to Justice and Public Safety in the House and Senate budgets include:

  • Elimination of the Access to Civil Justice Fund, which supports the representation of poor North Carolinians in civil cases.
  • Reduction of administration funding for Indigent Defense Services, which in part oversees the provision of legal representation to indigent defendants and others entitled to counsel under North Carolina law.
  • Reduction of administration funding for Administration of the Courts

Due to tax changes enacted last year, state policymakers are constrained in major ways. This is effectively a self-imposed budget challenge. Nevertheless, as demonstrated with choices made within the Justice and Public Safety area of the budget, where there’s a will, there’s a way.

Budget writers found revenue by making significant changes to the operations of various correctional facilities as well as by cutting state funding for programs that work to enhance the efficacy of the state’s justice system. These state funding cuts would limit service providers’ ability to assist individuals and families in need to legal representation.

What is clear from all three budgets is that state lawmakers are continuing down a dangerous path of more state funding cuts rather than reinvestment as the state recovers from the Great Recession. One can only hope that as budget writers work to negotiate a final budget for the upcoming 2015 fiscal year, state funding is restored for these programs that were put on the chopping block in the House and Senate budgets.