2017 Fiscal Year State Budget, NC Budget and Tax Center

Budget falls short of being a visionary plan for North Carolina’s economic future, finds a new report from the NC Budget & Tax Center

North Carolina lawmakers approved their state budget this month, a budget constrained by limited aspirations. The pursuit of a rigid spending formula combined with another round of tax breaks prevented lawmakers from proposing an adequate budget, let alone a bold one, as we explain in our new Budget & Tax Center report.

The new tax breaks in the budget come on top of recent tax breaks, which together are projected to cost more than $2 billion annually once fully implemented. While the budget reinvests in some worthy programs and services, these investments are just a small fraction of what we need to build thriving communities and boost economic opportunity in North Carolina. The reality is that without tax giveaways to the wealthy and powerful, much more could have been possible to improve North Carolinians’ quality of life and to build a stronger, more inclusive economy for all.

Read the report to learn more about what lawmakers prioritized in the 2017 fiscal year budget, areas where investments fall short of what’s needed to help North Carolinians thrive, and what lawmakers’ fiscal decisions mean for the state’s ability to boost quality of life and shared prosperity.

NC Budget and Tax Center

House lawmakers approve stricter penalties for SNAP recipients

A new rule also requires DHHS to investigate modest lottery winnings

Last week, House lawmakers undercut SNAP, the Supplemental Nutrition Assistance Program, which is the nation’s most important anti-hunger program and plays a critical role in ensuring that North Carolinians have enough to eat. They made it more difficult for those who receive SNAP to access this critical nutritional support by increasing disqualification periods to the maximum level allowed under federal law. The bill also requires the Department of Health and Human Services to investigate unreported lottery winnings in excess of $2,250 among SNAP recipients.

The approval comes just two weeks before some of North Carolina’s poorest adults, who are already living on the edge, stand to lose food assistance as the SNAP time limit returns to the state’s most-economically struggling counties. The time limit kicked in earlier this year for the 23 counties with healthier economies.

The bill that the House approved has three major sections:

1. The bill includes a work penalty provision. Under this bill, SNAP recipients that are not in compliance with work requirements would be disqualified from benefits for three months for the first issue of noncompliance, six months for the second instance, and permanently for three instances. Examples of work requirements include registering for work, participating in an employment and training program, and not voluntarily quitting a job or reducing hours to below 30 hours per week without good cause. Some people are exempted, such as children, older adults, and people unfit for work.

The reality is that 4 out of 5 SNAP participants are working or not expected to work. Nearly half of the folks on SNAP are children who—like older adults and people with a disability—are not expected to work. And work rates are high among SNAP households that can work. Rep. Bert Jones, the bill sponsor, amended the bill to only subject the head of household to the disqualification period to ensure that children are not penalized for the challenges that their parents’ face in finding work or staying on the job.

2. The bill requires the State Lottery Commission to report cash lottery winnings of $2,250 or more to the Department of Health and Human Services, who then must crosscheck that information with SNAP recipients on a monthly basis. If the department discovers that there has been a case of unreported winnings, staff would investigate the SNAP household to determine fraudulent misrepresentation, which can carry a criminal charge.

Proponents of the bill cited fraud as a motivator of this provision despite data that shows error rates are at a near modern low.  Any amount of fraud is unacceptable. The lottery provision in this bill is in line with curbing fraud, and it is in line with federal law. However, it is worth nothing that less than 1 percent of SNAP benefits go to households that are ineligible, according to the Center on Budget and Policy Priorities.  That means that 99 percent of SNAP benefits go to households whom SNAP is designed to help put food on the table. The lottery cases are overblown in the media.

3. The bill authorizes a legislative study to review a federal option called categorical eligibility, which allows some North Carolina families with modest assets and low incomes—but high expenses such as child care, rent, and utilities—to be eligible for federally-funded food benefits. This policy makes sense because it enhances efficiency, saves North Carolina money, and helps at least 22,000 low-income people become eligible for food aid. Eliminating categorical eligibility, as the original bill would have done, is a substantial policy change that requires significant study. As such, the bill sponsor was wise to convert this provision into a study.

Let’s hope that the study committee reviews the compelling body of evidence demonstrating the harsh impact such a change would have on families, the operations of social service offices, and the broader local economy.

In general, the bill continues a shift in state policy designed to eliminate and/or limit public assistance and eligibility to the minimum level that is allowed. Lawmakers axed a modest but vital working family tax credit, drastically cut jobless benefits, required drug testing for some recipients of cash assistance, banned state waivers from the harsh SNAP time limit, and now again have their sights set on scaling back food assistance.

It is important for lawmakers to pivot and focus just as much attention as they have had on dismantling the safety net to growing jobs, ensuring that adults have access to jobs that pay enough to afford the basics, and investing state money into job training programs that can help these jobless workers regain their footing on the economic ladder.

2017 Fiscal Year State Budget, NC Budget and Tax Center

Read fine print: How the state Senate spends federal the dollars in its budget

When state lawmakers put together a budget proposal, they decide how to spend state dollars on the public investments that help children, families, and communities thrive. These are things like public education, public health and safety, and transportation services and programs. Lawmakers also allocate federal aid that is passed to the state in the form of block grants, with the details appearing in the budget bill as “Special Provisions.”

These federal dollars are an important tool for helping communities thrive but on their own are insufficient to make sure that state goals that benefit everyone are met. Critical state investments are needed to build a more inclusive economy. Yet in some instances, lawmakers shifted away from using federal aid to meet long-standing priorities such as affordable housing while failing to make sure that the state makes catalytic investment. In other cases such as early childhood education, the state recently began to swap out a portion of state funding for federal aid. Supplanting—rather than supplementing—state dollars is troubling when waiting lists and unmet needs persist.

Block grants have been around since the late 1960s and are a specific amount of funding to assist state governments in addressing broad policy goals and purposes—such as improving economic mobility and quality of live through social services, public health, and community economic development investments. The federal government sets general guidelines on how states can allocate the money while giving give states a great deal of flexibility in the use of the funds. In North Carolina, most of the block grant dollars are passed to the state’s 100 counties to administer the services and programs.

The Senate budget governs the use of federal block grants across the board but it is worth highlighting specific changes that signal a change in the reliance and allocation of federal funds. Read more

2017 Fiscal Year State Budget, NC Budget and Tax Center

Read the fine print—Key policy choices in the Senate budget

The state budget includes more than just spending decisions on crucial public investments such as education, public health, safety, and transportation. It also includes policy decisions—known as special provisions—that in many cases “follow the money” to clarify how state agencies should use state funds and federal aid. In other cases, the budget includes policy decisions that are not related to fiscal matters and thus are not following the regular bill process.

It is not unheard of for massive programmatic changes to be included in the special provisions section of the state budget. And unless you are a full-time lobbyist working at the legislature, it is hard to find these special provisions and figure out their effects.

Here we detail a few of the significant special provisions in the Senate budget that contain major policy decisions that warrant a separate deliberation and debate process (with the exception of the first bullet). Read more

2017 Fiscal Year State Budget, NC Budget and Tax Center

Missed Opportunities: Investments that are MIA in the preliminary House budget

Deep tax cuts, the pursuit of additional costly tax cuts, and an arbitrary spending limit are preventing House leadership from proposing a bold, visionary state budget for the upcoming 2017 fiscal year, as I explained yesterday.

Once accounting for these three limitations, there are few public dollars available for anything else after the House budget writers set money aside for basic—but again uneven—salary increases and bonuses for teachers and state employees. The 2013 and 2015 tax cuts alone are draining more than $1 billion in revenue annually, squeezing out much-needed reinvestment in the programs and services that help children, families, and communities thrive.

Without those tax cuts, much more could have been possible for North Carolina.  There has been plenty of coverage of what is in the House budget over the last few days; however, what’s not in their budget has gotten little coverage. Below is a short list of investments that are missing in action but still greatly needed to build a stronger, more inclusive economy for us all. Read more