2018 Fiscal Year State Budget, NC Budget and Tax Center

How to make a program irrelevant: The N.C. Office for Historically Underutilized Businesses

If you want a program which “advocate(s) actions which increase opportunities for historically underutilized businesses and promotes diversity and inclusion in state government procurement and contracting” to not do its job, you do it quietly.

The Historically Underutilized Business (HUB) Office was established by Executive Order 150 in an effort to remedy past and ongoing discrimination in the procurement and contracting markets in North Carolina. After being codified in 2001, the initiative aimed to 1) increase the amount of goods and services acquired by state agencies from HUB firms, 2) make progress towards eliminating barriers that reduce participation of HUB firms, 3) encourage purchasing officers and relevant personnel to identify and utilize HUB vendors and contractors, 4) educate HUB firms on doing business with the State of North Carolina and 5) provide resources for HUB firms.

Since its inception, the program has experienced very modest success but has been plagued with persistent inequity. A study commissioned by NCDOT in 2014 found ample evidence that race and gender remain barriers to the full and fair opportunity to participate in NCDOT’s contracts. NCDOT’s study employed a ratio measure to determine how HUB enterprises were utilized relative to white-male owned enterprises, where ratios below 80 percent indicate a disparity. For every 100 contracts awarded to white-male owned businesses, white women got 79.87 contracts, Black-owned businesses received 49.94 contracts, and Hispanic-owned businesses got 18.25 contracts. Read more

2018 Fiscal Year State Budget, NC Budget and Tax Center

Price tag for tax cuts in final budget tells half the story

The Locke Foundation was having fun with math yesterday in an effort to defend a fiscally irresponsible package of tax cuts in the final budget lawmakers are close to approving. Why? because—wait for it—they would like you to think they haven’t just given another green light to tax cuts that further pump up the gains for wealthy taxpayers while making virtually no progress in addressing the tax load carried by middle- and low-income taxpayers.

Amidst their convoluted and selective use of the numbers, they try to confuse their readers about three primary facts regarding the state’s tax code after the passage of this budget:

  1. The average tax cut received by the taxpayer in the top 1 percent (whose average income is $1 million) compared to the pre-2013 tax code is nearly $22,000, which is more like 96 times the tax cut that the middle-income taxpayer in North Carolina will receive each year as a result of tax changes since 2013. The average tax cut for middle-income taxpayers is $225.
  2. Once the final budget passes, one in three of net tax cut dollars goes to the top 1 percent of taxpayers, whose average income is a million dollars. Under the final budget, nearly 80 percent of net tax cuts since 2013 will flow to the top 20 percent of taxpayers once all the latest tax code changes are fully implemented.
  3. When we look in isolation at this year’s tax plan, policymakers may have paid attention to their egregious track record when it comes to addressing the tax load for most North Carolinians but they have fallen short of setting our tax code right. Their final tax plan still gives the wealthiest taxpayers the majority share of the net tax cut compared to current law. And their full track record shows their failure to put middle- and low-income taxpayers front and center as they make their tax policy decisions. Budget writers and supporters don’t want to talk about all the changes that have happened since 2013, the loss of the personal exemption and other credits and deductions that benefited working families, including the Earned Income Tax Credit and the Child and Dependent Care Tax Credit, as well as the broadening of the sales tax.

Still worse, with this final budget they continue to push us further towards a single revenue option in addressing future downturns—raising the sales tax, which will inevitably mean asking more from low- and middle-income taxpayers again.

Rather than try to present and sell tax cuts that largely benefit the wealthy and profitable corporations as the everyman approach to growing the economy, which it isn’t, a more urgent math problem needs to be worked out, sooner rather than later. Read more

2018 Fiscal Year State Budget, NC Budget and Tax Center

Standards and accountability lose as earmarks proliferate in budget deal

By a conservative count, there are over $32 million in earmarked special projects funded in the conference budget being debated this week. After years of railing against patronage and backroom deals, House and Senate leadership have suddenly become big fans of earmarking funds for legislator’s pet projects back home.

This list of projects is just the tip of the local need iceberg. After years of tax cuts and hemming in local governments’ ability to raise funds, there is a deep backlog of important local projects that deserve state support. While many of the earmarks address local priorities that have gone unfulfilled in recent years, this budget does little to address the structural deficit in our investment in local communities.

Earmarking funds for pet projects is no the way to do good policy. There was no public process that determined which projects address the more striking needs, which projects will have the largest social and economic impacts, and which projects have the broadest community support.

These earmarks also lack accountability. In well-administered programs, recipients of public funds are obligated to document that funds were used appropriately and actually achieved the intended goal. These types of accountability standards often help to refine programs over time, make it more likely that good stewards of public funds receive support in subsequent years, and provide an empirical basis for evaluating the effectiveness of the program. Unfortunately, many of the earmarks in this year’s budget lack even these most basic features of good governance.

— Budget & Tax Center Staff Report

2018 Fiscal Year State Budget, NC Budget and Tax Center

NC General Assembly’s joint budget falls $188.7 million short of Governor’s proposal for promoting the health of North Carolinians

The N.C. House and Senate have released their joint budget deal and the numbers don’t lie: NC’s Department of Health and Human Services will receive $93.7 million less next year than what the Governor proposed back in March. Over the next two years, the gap is $188.7 million.

This significant gap in funding for a department tasked with providing essential services to improve the health, safety and well-being of all North Carolinians is unfortunate, especially considering our state already lags behind on health compared to other states. For example:

  • NC Ranks 32nd in the nation for overall health (it was 31st in 2015. The state ranks 30th for senior health and 30th for the health of women and children).
  • NC ranks 33rd in the nation for child well-being (placing NC among the poorest performing states in outcomes for children and youth).
  • NC ranks 48th in the nation in the overall effect of state policies and practices on promoting independence for people with intellectual and developmental disabilities.

Here are several ways in which this final budget will make it more difficult to improve our performance on many of these key health indicators.

First, the Division of Medical Assistance will receive $44.6 million less next year than what the governor proposed. This division uses the resources and partnerships of Medicaid to improve health care for all North Carolinians. In light of the current efforts underway at the federal level to further shift costs to the states, the failure to adequately ensure that Medicaid is positioned to deliver health care to our most vulnerable is troubling. Unfortunately, it is no surprise legislative leaders opposed the Governor’s proposal to expand Medicaid to cover 624,000 additional individuals and secure NC’s share of federal resources to inject over $4.4 billion in direct spending into the state.

Second, despite the bipartisan support for addressing the challenges of mental health and substance abuse in our state, the Division of Mental Health, Disabilities, and Substance Abuse will receive $18.4 million less next year than what the governor proposed. This division provides quality services to promote treatment and recovery for individuals with mental illness and substance use disorders. It is unfathomable that, given the current opioid crisis in our state, our legislators are still unwilling to making significant investments to address mental health and substance abuse issues. The fact that NC has four cities listed in the top 25 worst cities in the U.S for opioid abuse is not something to be proud of. Neither is the fact that prescription opioid poisoning deaths have increased statewide by over 256 percent, going from 234 in 2000 to 854 in 2015.

Third, the Division of Child Development and Early Education will receive $18 million less next year than what the governor proposed. This division implements quality standards for child care and increases access to families and their children across North Carolina. With its budget, the General Assembly will exclude approximately 1,714 at-risk 4-year-olds across the state from high quality pre-kindergarten classes. Furthermore, the legislature also limits the value of the Smart Start by funding only a third of what was requested, even though this program provides support and flexibility at the local level to all 100 counties in an effort to improve early childhood educational outcomes and better prepare children for school.

Overall, based on the General Assembly’s joint budget, it is clear that the health of North Carolinians is not a priority for our lawmakers. Given the poor state of health in our state, this mindset must change. A thriving, strong, and competitive North Carolina can only be achieved with a healthy population.

Luis A. Toledo is a Public Policy Analyst for the Budget & Tax Center, a project of the North Carolina Justice Center.

2018 Fiscal Year State Budget, NC Budget and Tax Center

Final budget a mixed bag of give, take, and disregard for courts and public safety

The final budget released by state leaders this week includes a mixed bag of give, take, and neglect in regards to public investments that promote safe and healthy communities. At the same time that public investments are made for particular initiatives of interest, lawmakers cut state funding and totally neglect boosting public investments in other areas of the Justice & Public Safety (JPS) budget.  For fiscal year 2018, the JPS section of the final budget is a modest 1.6 percent year-over-year increase in state spending when excluding additional state funding to provide pay raises to state employees.

Here are notable takeaways from the JPS section of the proposed final budget.

  1. Provides around $58 million in additional state funding for pay raises to state employees. The majority of the pay increase funding consists of a $1,000 salary increase for eligible state employees.
  2. Provides $250,000 for a limited pilot project with the City of Wilmington to address the needs of opioid and heroin overdose victims. This is the same level of funding included in the House and Senate respective proposed budgets. Whereas lawmakers acknowledge the seriousness of the opioid abuse issue in the state, a modest amount of state funding is included in the budget to prevent and combat this issue.
  3. Provides no additional state funding to enhance access to mental illness services for offenders. This missing investment in the final budget aligns with the House and Senate proposed budgets, which also excluded such funding. The Governor’s recommended budget provided $5.8 million for fiscal year 2018 to enhance services for mentally ill offenders.
  4. Includes $519,600 in one-time state funding for planning in regards to implementation of Juvenile Justice Reinvestment Act (JRA). The JRA was passed in 2011 and made major changes to sentencing and corrections in North Carolina in an effort to reduce state spending on corrections and to reinvest the savings in community programs that decrease crime and strengthen neighborhoods. The Governor’s budget included a total of $4 million in state funding for various support initiatives that continue the implementation of JRA.
  5. Provides $13.2 million in one-time state funding to support the “Raise the Age” initiative. The funding would be used to construct a new youth development center in Rockingham County in response to “Raise the Age” and is included in the Capital section of final budget. The respective House and Senate proposed budgets provided no state funding to support the “Raise the Age” initiative. Thus, the inclusion this funding is one positive outcome in the final budget.
  6. No additional state funding provided for indigent individuals to have access to private counsel representation. This missing investment in the final budget aligns with the House and Senate proposed budgets, which also excluded such funding. The Governor’s recommended budget included $2.9 million in state funding for fiscal year 2018 to increase compensation paid to private counsel representing indigent people who are unable to afford access to legal counsel.
  7. Includes a $10 million state funding cut to the Department of Justice budget and generates another $4.1 million in savings from eliminating 79 positions within the Department of Public Safety.

For more news and analysis during the budget debate, follow the Budget & Tax Center on Twitter @ncbudgetandtax.

Cedric Johnson is a Policy Analyst with the Budget & Tax Center, a project of the NC Justice Center.