NC Budget and Tax Center

Yesterday, the North Carolina house unveiled its $21.11 billion budget proposal for the 2015 fiscal year that begins in June 2014 and ends in July 2015. The proposal is moving through the committee process with the expectation of a final vote on the House floor by Friday. Surprisingly, there is a considerable difference in how the House leadership pays for its budget compared to the Senate’s and Governor’s paths. In particular, the House anticipates a smaller revenue shortfall for the current fiscal year and a far larger amount in agency reversions (which is money sent back to the state at the end of the year).

How the state raises the billions of dollars that fuel the state budget gets relatively little scrutiny compared to the rest of the budget during the budget process. Examining how lawmakers pay for the budget is more important than ever in light of last year’s tax plan that drains $438 million from the state’s coffers in the upcoming fiscal year. This is on top of the fact that lawmakers are facing a half-billion current year revenue shortfall and a projected revenue shortfall of $191 million for the next 2015 fiscal year—not to mention the fact that the shortfall could be as high as $600 million (see section at the end of this post). It is also on top of the Medicaid shortfall, which lacks agreement among the Governor, House, and Senate on its actual cost. Their estimates are far apart.

For the most part, the House pays for its budget proposal in the same way as the Governor and the Senate pay for their budgets. The similarities and differences are summarized below.  Read More

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This morning, the House leadership released their $21.1 billion 2015 fiscal year budget for the period that runs from July 2014 to June 2015. It marks the midpoint between the Senate budget of $21.16 million and the Governor’s budget proposal of $20.99 billion. Similar to these other budget proposals, the House proposal leaves too many vital public services at diminished levels—failing to catch up with the needs of kids, working families, and communities five years into the official economic recovery.

As I wrote during the Senate budget process, at this point, budget proposals that put the train on the wrong tracks should come as no surprise. Due to tax changes enacted last year, budget writers are constrained in major ways. This is effectively a self-imposed budget challenge. The state is facing a revenue shortfall of $191 million in the 2015 fiscal year (not to be confused with the nearly half-a-billion shortfall for the current 2014 fiscal year that ends in June). In the upcoming fiscal year, the tax plan will drain available revenues to the tune of $437.8 million in the 2015 fiscal year. Estimates suggest that the revenue losses from the tax plan, particularly stemming from the personal income tax changes, could reach $600 million in next fiscal year.

Yet, rather than prudently recommending the halting of future tax cuts that are scheduled to go into effect in January 2015, the House, Senate, and Governor all choose to keep this next round of tax cuts in place despite the diminished revenue picture.

State spending under the House proposal would continue to remain 6.5 percent below pre-recession levels, as illustrated in the chart below. It’s clear that the misguided tax cuts are making it harder to catch up on lost ground. Read More

Falling Behind in NC, NC Budget and Tax Center

This is the second post of a Budget and Tax Center blog series on public services and programs that face cuts in the budget process or have been underfunded in past years. See the first post here.

State funding that helps older adults who want to stay in their home would be slashed under the Senate budget that was passed last weekend. The Senate leadership wants to cut the Home and Community Care Block Grant (HCCBG) by nearly $1 million. This move would result in cuts to non-Medicaid in-home and community-based services—such as home-delivered meals, in-home aide, and transportation assistance.

State lawmakers established the HCCBG in 1992, and it is made up of both federal and state dollars.  The Senate’s $1 million cut would be on top of a $2 million cut enacted last year as part of federal across-the-board cuts known as the sequester. HCCBG services are available to people ages 60 and older but the “average” client is nearly 80 years old and the services are well-targeted to those who are near-poor and socially needy, according to DHHS.

The Senate passed a $1 million budget cut to HCCBG services despite a waiting list of roughly 16,000 people, according to a survey conducted by the NC Department of Health and Human Services. The demand for these vital services is likely to keep on the uptick as the so-called graying of North Carolina continues. Meanwhile, the growing cost of delivery shows no signs in subsiding. A $1 million budget cut will only serve to push additional older adults onto the waiting list. Read More

Falling Behind in NC, NC Budget and Tax Center

This is the first post of a Budget and Tax Center blog series on public services and programs that face cuts in the budget process or have been underfunded in past years. 

There would be 70 fewer school nurses in North Carolina’s public education program under the Senate budget, even though the statewide average nurse-to-student ratio has been far below national standards for at least a decade. In addition to this 30 percent cut to the School Nurse Funding Initiative, the Senate budget would shift the remaining 166 nurses to the state’s most economically lagging counties, known as Tier 1 counties.

Apparently, the Division of Public Health “asked” for this cut in response to the Governor’s directive to cut spending by 2 percent, per the comments made today by the Fiscal Research Division staff. Senate budget writers factored agencies’ responses to the Governor into their budget proposal.  Again, this is just another decision by leadership that makes clear the harmful choices that must be made when policymakers reduce the availability of revenue—which is what occurred when lawmakers passed last year’s tax plan that drains available revenue for public investments.

There is a mountain of research that shows that health and education go hand in hand. That’s why the state instituted comprehensive school health services in public schools, per the state Division of Public Health: Read More

NC Budget and Tax Center

The North Carolina Senate passed their budget just past mid-night, in the wee hours of Saturday morning. The Senate budget puts into clear perspective the high price ordinary North Carolinians will have to pay for last year’s tax cuts that primarily benefit the wealthy and profitable corporations. Despite progress in some areas, the proposal leaves too many vital public services operating at diminished levels—failing to catch up with the needs of kids, working families, and communities five years into the official economic recovery. Our overview of the Senate budget can be read here.

State spending under the Senate budget would be 6 percent, or $1.4 billion, below the last budget that was enacted before the Great Recession, adjusting for inflation. Yet, there are more students to educate, citizens to serve and protect, and older adults to help care for.

Due to tax changes enacted last year, budget writers are now dealing with the consequences of a self-imposed budget challenge. State lawmakers created a structural deficit in which revenues are falling short of what is needed to meet critical needs across budget areas. The state is facing a revenue shortfall of $191 million in the 2015 fiscal year (not to be confused with the nearly half-a-billion shortfall for the current 2014 fiscal year that ends in June).

The driver of these revenue shortfalls—despite an economic recovery—is the series of tax cuts that lawmakers approved and Governor McCrory signed into law last year that will drain available revenues to the tune of $437.8 million in the 2015 fiscal year. As we reported earlier this month, estimates suggest that the revenue losses from the tax plan, particularly stemming from the personal income tax changes, could reach $600 million in next fiscal year.

It is important to put these revenue losses into the context of foregone public investments that are the building blocks of a strong economy, as the table below does. Read More