NC Budget and Tax Center

As we edge closer to the 16th anniversary of Hurricane Floyd, it is important to review the vital role that state emergency funds play when disaster strikes. Lawmakers in North Carolina tapped into state “rainy day funds” to help cope with the storm’s aftermath: the cost of providing assistance to families in need and rebuilding destroyed communities. Unfortunately, the North Carolina Senate is seeking to weaken access to our rainy day fund, even in times of true emergency.

Floyd, which hit about a week and a half after Tropical Storm Dennis, caused some Tar Heel families to lose loved ones, jobs, and all of their possessions in drowned cities. The storm caused $6 billion in damage and destroyed entire communities, including homes, farms, and businesses. Response efforts also put stress on the state budget, causing mid-year budget freezes and cuts totaling $504 million.

There is no doubt that the state’s response would have been far weaker in the absence of state and federal emergency funds. Then-Governor Hunt called a special session and North Carolina lawmakers approved nearly $286 million to be pulled out of the rainy day fund, which supplemented $838 million in federal emergency funds to support the response efforts. Read More

NC Budget and Tax Center

Legislators approved a third budget extension today as the House and Senate leadership continue efforts to iron out a final budget deal. The existing temporary budget, known officially as a Continuing Resolution, is set to expire on Monday. If signed by the Governor, the newest extension will keep public programs and services operating through September 18th, which is 79 days after the original budget deadline of July 1st.

The third budget extension will keep state government operating exactly as the second stop-gap measure approved earlier this month. I outlined those details in a previous blog post.

Leadership in the House and Senate chambers already agreed to a topline spending target of $21.735 billion for the 2016 fiscal year that runs through June 30, 2016. That means state investments as a part of the economy would remain below the 45—year average, impeding the ability to restore previous cuts and make progress in a significant way. Read More

NC Budget and Tax Center

Last week state lawmakers extended the 2015-17 fiscal year budget negotiation deadline from August 14th to August 31st, which is 61 days after the original budget deadline of July 1st. House and Senate leadership need additional time to work on the final budget deal because they have not been able to iron out the stark differences in their budget and tax priorities. If lawmakers were to approve a budget at the end of August, the 2015-17 budget would be the latest-approved two-year budget since 1998 and second-latest one going back to 1961.

More important than when the final agreement is reached is whether the final budget most closely reflects the priorities of North Carolinians for quality educational experiences, safe and vibrant communities, and healthy environments.

In the meantime, the new stop-gap measure—known officially as a Continuing Resolution—keeps state programs and services operating largely along the same lines as the first stop-gap measure approved at the end of June. Similar to the first temporary measure, the new measure funds current programs and services at existing levels, with four major exceptions that are listed below. Read More

NC Budget and Tax Center

Revenues that fuel the state budget are growing so slowly that they are not even keeping pace with population-plus-inflation growth, according to Barry Boardman who is the chief economist for the state legislature’s non-partisan Fiscal Research Division. Weak economic growth and tax cuts are keeping state revenues low, Boardman explained during a presentation that he gave to lawmakers earlier this week.

More tax cuts are looming too—a move that will sustain the damaging trend of slow revenue growth that makes it harder to meet basic needs and build a stronger economy. The House and Senate leadership put forward budgets that included additional tax cuts totaling approximately $652 million and $950 million, respectively, over the next two years.

The presentation shows that during the immediate years before the Great Recession, state revenues were growing faster than the inflation-plus-population benchmark. At that time, the state tax code was better suited and comprised of a progressive income tax based on ability to pay. The trend reversed after the 2008 fiscal year, with the population-plus-inflation growth rate outpacing revenue growth. The economic downturn caused revenues to plummet. And before revenues were able to fully recover back to pre-recession levels, lawmakers cut taxes deeply as part of the 2013 tax plan.

Revenues are not expected to outpace population-plus-inflation growth in either of the next two years; they are expected to remain below the long-run historical average. Read More

NC Budget and Tax Center

North Carolina is losing ground on key economic indicators such as child poverty and family economic security. A new report from NC Child  paints a bleak picture of how children are suffering from the fallout of an economy that is downright broken for many North Carolina families, as well as state lawmakers’ recent policy decisions. Genuine progress is within the state’s reach if lawmakers make smart investments and enact better policy choices.

More than a half of a million children belong to families that are living in poverty and struggling to pay the bills, even though the state just entered into the sixth year of the official economic recovery. In fact, child poverty is higher now than it was when the recession hit: 1 in 4 children currently live in poverty compared to 1 in 5 children in 2008. And, poverty has the fiercest grip on children of color and children under age five here and across the United States.

Previous research shows that three-quarters of these children have at least one parent that works, but low wages and unstable employment keep families in the economic struggle. This economic reality is further confirmed in the NC Child report, which finds that nearly 1 in 3 children live in families that lack secure employment, an increase since the recession hit. Read More