2018 Fiscal Year State Budget, NC Budget and Tax Center

NC Senate budget fails low-income housing, military and veterans; eliminates public sector jobs

[Note: The following analysis pertains to North Carolina’s general government agencies. Every state across the country has general government agencies that provide core public services and functions for citizens and government. In North Carolina, these agencies consist of: Administration, Auditor, General Assembly, Governor, Housing Finance Agency, Insurance, Lieutenant Governor, Military and Veterans Affairs, Office of Administrative Hearings, Revenue, Secretary of State, State Board of Elections, State Budget and Management, State Controller, Treasurer.]

The Senate’s budget provides for development of low-income housing units but falls $4 million short compared to Governor’s request

The Senate’s proposed budget provides $16 million next year in non-recurring money to the Workforce Housing Loan Program (WHLP). In contrast, the governor recommended $20 million in funding for the WHLP to assist with the development of low-income housing units across the state. According to the Senate’s budget, the funds for this program were received by the state from a settlement agreement with Moody’s Corporation.

The Senate’s budget fails the NC Department of Military and Veteran’s Affairs

The Senate’s budget also falls $1.7 million short of what the Governor recently recommended for the Department of Military and Veterans Affairs. This is unfortunate given that one of North Carolina’s goals is “to be the most military friendly state in the country,” and that our state is home to nearly 800,000 veterans, 145,000 military defense personnel, and several major military installations.

The Governor proposed providing the Department an additional $3.9 million over the next biennium. However, the Senate’s budget would only provide the Department $2.2 million of what the Gov. requested. As one example, while the Gov. requested $4 million to support efforts to retain and enhance North Carolina military bases through the Base Realignment and Closure (BRAC) process, the Senate only provides $2M to the Military Presence Stabilization Fund (which assists communities in investment efforts to sustain and maintain the state’s military programs and activities).

To make matters worse, Read more

2018 Fiscal Year State Budget, NC Budget and Tax Center

How much does NC invest in you? Three things to know before the NC Senate releases its proposed budget

How much does NC invest in you? The short answer: not enough.

1) The State of North Carolina ranks 43rd in the country in total state expenditures per capita.  In other words, there are 42 other states in the country that invest more on each individual living in their state. This is not good news for North Carolinians.

NC SPENDING PER CAPITA2) North Carolina spent $4,364 on making sure each individual North Carolinian had good schools in their community, their families and neighbors were cared for, their environment was protected, their communities were safe and infrastructure was sound during the 2015 fiscal year. Meanwhile, the U.S. average per capita state spending was higher: $5,777. In other words, our state falls below the national average. This is not good news for North Carolinians.

3) When compared to all of its neighboring states in the Southeast, North Carolina does not fare any better. Analysis shows that North Carolina spent less per capita than Virginia, South Carolina, Georgia, and Tennessee. This is not good news for North Carolina.

It has been clear that the state is forgoing the needs in communities. Now, it turns out that North Carolina’s investment levels are woefully inadequate to deliver the same level of opportunities as residents of our neighboring states experience. The NC General Assembly (Senate and House) should heed these numbers and invest to achieve greater outcomes. This is critical in order for North Carolina to become a more competitive state in the 21st century.

NC Budget and Tax Center, Trump Administration

Analysis: GOP health care bill will exacerbate budgetary challenges to all states and local governments

As reported yesterday, members of the U.S. House narrowly (217-213) pushed through the Republican plan for repealing and replacing the Affordable Care Act. The latest version came without any analysis by the nonpartisan Congressional Budget Office.

One of the major implications of this bill is the fact that it shifts financial burdens of uncompensated care onto states and local governments. To this point, yesterday, the National League of Cities President, Matt Zone, released the following statement that makes it clear that cities across America cannot afford the proposed bill:

“Congress cannot promise to fix the American health care system and stick the bill on local governments. By threatening Medicaid funding, withdrawing services for drug addiction and mental health during the nation’s deadliest drug epidemic, and reducing funding for preventative medicine and wellness programs, today’s health care bill threatens to leave millions of Americans uninsured.

When the federal government pulls back on its commitment to health care, local governments, states and health care providers are left to pay the bills of increasing rates of unreimbursed care.

Local governments simply cannot afford this health care bill. We urge the Senate to stand with cities and American families and scrap this flawed piece of legislation. The National League of Cities calls on senators to fight for a health care bill that protects and promotes healthy communities without passing the financial burden onto local governments.”

Fitch Ratings, a global leader in credit ratings and research, agrees. Yesterday Fitch released a statement that concludes that as a result federal funding cuts to Medicaid, all states are at risk of facing serious budgetary challenges, which will likely accelerate for all states over time.

Their statement calls out major concerns with recent amendments to the original American Health Care Act (AHCA), such as the inclusion of Medicaid block grant option and the state incentive to establish high risk pools. Fitch reports:

“Fitch is concerned that given prior state and federal experience with high-risk pools, the federal funding proposed under the AHCA may be insufficient to fulfil the statutory requirements. Those states that choose to establish such pools under the AHCA may face pressure to provide additional funding to support them.”

“States generally maintain significant flexibility to deal with fiscal challenges, including shifts in federal funding, while maintaining fundamental credit quality. As Medicaid represents approximately one-third of state budgets, the fundamental changes proposed could challenge that flexibility. Negative implications for entities that rely on state support, including school districts, cities, counties, and public higher education institutions could be more significant given their generally more constrained budgetary flexibility.”

“Fitch will continue to closely monitor legislative developments around the AHCA, which could have implications for states’ credit quality and for the credit quality of related public finance entities that depend on state funding. Medicaid changes that significantly reduce federal funding to states will cause states to consider a broad mix of spending cuts or revenue increases to maintain long-term fiscal balance. In a time of already muted revenue growth, spending cuts could affect K-12 and higher education the most, as those are the other largest areas of state spending outside of Medicaid.”

In North Carolina, the federal government currently pays for 66 percent of Medicaid’s costs, and the state pays the remaining 34 percent, resulting in a 2 to 1 federal “match.” Any cut in federal funding to the Medicaid program would shift costs to North Carolina and pose a risk to the state and its ability to balance the budget and meet other existing needs.

NC Budget and Tax Center, Trump Administration

Federal Budget: The good, the bad, and the 10 major state and local grants that would be cut the most this year

It is expected that House and Senate leaders in Congress will push through a federal omnibus spending package this week before a government shutdown deadline Friday evening. If passed by Congress and signed by President Trump, the legislation would keep the federal government running for the rest of the 2017 fiscal year, which ends on Sept. 30.

The good news: Funding levels for many of the federal programs that state and local governments rely on are largely unchanged from the previous fiscal year in the roughly $1 trillion spending deal. Additionally, it appears that Congress may have an understanding of the negative impact of Trump’s proposed budget cuts because the spending package agreed to by Republicans and Democrats does not align with many of Trump’s stated goals.

The bad news: This week Congress will pass the easy bill. It gets much harder later this month when the 2018 fiscal year budget cycle starts. Additionally, it does not help that President Trump made the dangerous and irresponsible suggestion this week that he would support a government shutdown this fall, despite his administration saying repeatedly in recent weeks such an outcome was never desirable.

The cuts: The table below shows the 10 major state and local grants that would be cut the most this fiscal year compared to last year’s budget (2016 fiscal year). Read more

NC Budget and Tax Center, Trump Administration

Trump’s proposed $4.4 billion budget increase for Veterans Affairs is critically needed in North Carolina

President Trump, after slashing the budgets for 15 major agencies (e.g., Agriculture, Labor, Health & Human Services, Commerce, Education, Housing, Transportation, EPA, etc.) and completely eliminating funding for 19 other agencies, has proposed increasing the VA budget by $4.4 billion. In other words, the U.S. Department of Veterans Affairs (VA) is one of the very few agencies in government that could see its budget grow in the 2018 fiscal year – by 6 percent. (Note: Over the past 9 fiscal years under President Obama, the VA’s total budget grew by nearly 86 percent, increasing from $97 billion in 2009 to $182 billion in 2017). 

Given that one of North Carolina’s goals is “to be the most military friendly state in the country,” and that our state is home to nearly 800,000 veterans, 145,000 military defense personnel, and several major military installations, additional funding for the VA to expand health services and modernize its benefit claims system is a good step forward on the significant challenges affecting our state’s veterans and military retirees.

Challenges Affecting North Carolina Veterans

Last year the VA’s Office of the Inspector General (OIG) discovered in North Carolina: Read more