2018 Fiscal Year State Budget, NC Budget and Tax Center

North Carolina’s leaders are abandoning the victims of Hurricane Matthew

Alamance Community Park, in Robeson County, near Lumberton, NC, remained inundated with flood waters on Oct. 16, 2016. Floodwater from Hurricane Matthew came to the bottom edge of the park signs when the storm first hit. USDA Photo by Lance Cheung.

Alamac Community Park, in Robeson County, near Lumberton, NC, remained inundated with flood waters on Oct. 16, 2016. Floodwater from Hurricane Matthew came to the bottom edge of the park signs when the storm first hit. USDA Photo by Lance Cheung.

If you have been following North Carolina’s response to the damage caused by Hurricane Matthew, then you know it has been a slow and, at times, disappointing process.

If not, here’s a refresher:

On Oct. 8, 2016, Hurricane Matthew made landfall on North Carolina. The resulting flooding impacted 50 counties in the Eastern part of the state, damaging more than 800,000 homes and over 300,000 businesses, displacing 3,744 residents, and causing closures in 34 school systems. In all, the storm caused $2.8 billion in damages and another $2 billion in lost economic activity.

In December 2016, three months after disaster struck, the General Assembly passed the Disaster Recovery Act of 2016 allocating $200.9 million in state dollars for initial relief efforts. The general understanding was that the state would wait for disaster funding from the federal government, re-evaluate the “unmet need,” and step in to fill any remaining gaps. Assuming the federal government would act as they have done in previous disasters and support the state with a significant relief package, Governor Cooper’s budget allocated only $115 million in state funding disaster relief.

On May 10, 2017, nearly six months later, North Carolina finally heard back from the federal government. The Trump administration announced they would provide only $6.1 million of the nearly $930 million in federal funds that the state needed and requested.

The message was crystal clear: North Carolina would have to take care of itself. Yet, despite being fully aware of the $930 million in unmet need in Eastern North Carolina, legislators in both the Senate and House responded by allocating only $150 million in each chamber’s budget.

Now that you’re caught up, you’re probably wondering, “Who will pick up the slack and fund relief in Eastern NC?”

The answer? Not your legislators. Read more

2017 Fiscal Year State Budget, 2018 Fiscal Year State Budget, Courts & the Law, News

Final budget delivers hits to legal services, emergency judges, Department of Justice

It’s only been a little over 24 hours since the North Carolina General Assembly introduced its final budget and its already well on its way to a House vote after passing the Senate on Tuesday.

There is plenty to read in the 438-page document and plenty to get confused about. Below are a few highlights from the Justice and Public Safety budget:

Raise the Age

Lawmakers have finally agreed to raise the juvenile age of prosecution from 16 and 17 years old to 18 years old. The final budget allocates $519,600 the first fiscal year toward “Juvenile Justice Reinvestment Act Planning” and $478,000 the second fiscal year.

The budget policy decision mandates that 16- and 17-year-olds who are accused of committing misdemeanors and two classes of felonies no longer be automatically prosecuted in the adult criminal system.

The policy decision also increases the information available on juveniles to law enforcement and establishes a juvenile jurisdiction advisory committee to help with implementation. You can read more about the decision beginning on page 309 of the budget.

Legal Aid

If you haven’t already read Rob Schofield’s piece about the budget provision entitled “Access to Civil Justice Funds,” do it now. And then come back to finish reading this article.

The provision will eliminate $1.7 million in legal services programs across the state, affecting those most in need and almost assuredly creating unequal access to justice.

The Access to Civil Justice Act funds all traditional legal services programs, including Legal Aid Legal Aid of North Carolina (LANC), Legal Services of Southern Piedmont and Pisgah Legal Services.

As written in the final budget, the provision means that $1.50 of every court fee imposed in District and Superior Courts would no longer be distributed to the North Carolina State Bar for legal services. It could also mean reducing LANC staff across the state by 50 to 60 or more positions.

Emergency judges

Instead of eliminating emergency judges altogether (ahem … Senate), budget negotiations resulted in lawmakers reducing funds for emergency judges, reducing the number of emergency judges who can be recalled and limiting situations for which an emergency judge may be recalled. Read more

2018 Fiscal Year State Budget, NC Budget and Tax Center

Final budget fails to strengthen the foundation of North Carolina’s public schools

The final budget that lawmakers have proposed fails to strengthen the foundation of North Carolina’s public schools. While the public schools area of the budget seems to have a lot going on – one could argue that a lot of special pet projects made it into the final budget – the reality is that little is achieved in ensuring that every student receives a high quality education, regardless of where they live in the state. Consequently, educators will embark upon the upcoming school year with the familiar challenge of doing more with fewer and inadequate resources.

Here are some highlights of the public schools budget that reflects the austerity budget approach state leaders continue to pursue despite an improving economy. Read more

2018 Fiscal Year State Budget, NC Budget and Tax Center

Lawmakers’ approach to paying for final budget means long-term fiscal challenges for North Carolina

The negotiated conference budget expects the state’s tax system to raise $22.3 billion in base General Fund revenue. This available base revenue is greatly constrained by previously approved tax cuts in recent years, and additional tax cuts in this final budget further reduce available revenue. In addition to base revenue, lawmakers rely on revenue collections coming in above what officials anticipated ($580.6 million); money they anticipate agencies will return to the state (known as reversions, estimated at $271 million); non-tax revenues ($849 million); and unappropriated dollars from the most recent fiscal year ($208.6 million). In total, $23.6 billion in revenue is available to lawmakers for public investments for fiscal year 2018 (FY18).

The second year of the budget uses $499.2 million of available revenue for FY18 to fund public investments for fiscal year 2019 (FY19). This reliance on prior year’s revenue raises concern, as the state’s tax system already falls short of raising adequate revenue to meet the growing needs in the state. This reality of an inadequately structured tax system and the use of prior fiscal year revenue, reflects the long-term challenges the state will face in ensuring that adequate revenue is available to meet the basic responsibilities of a growing state.

Year-over-year annual General Fund appropriations increase by $621 million in the final budget. However, around $1.1 billion in additional revenue will be needed in going from the first to the second year of the two-year budget to account for enrollment growth in public education, to pay for rising costs in the delivery of Medicaid services, to meet retirement and health plan obligations for public employees, and to fund the teacher pay plan. This suggests that existing obligations will either not be fully funded or cuts to public services are on the horizon, or a combination of both, in order to fund these ongoing obligations.

How do lawmakers pay for the final budget?

The final budget includes a required transfer of $100.9 million of General Fund dollars to the state’s Savings Reserve fund, per the special session disaster relief bill passed by state lawmakers in December 2016 to aid communities harmed by Hurricane Matthew. Furthermore, lawmakers stash an additional $263 million in available revenue into the Savings Reserve fund and another $125 million is set aside in the state’s Repair and Renovations fund.

More tax cuts in the final budget builds onto tax cuts in recent years that have reduced available General Fund revenue. Tax cuts in the final budget largely begin in the second year of the budget and will reduce annual revenue by $521 million for FY19. The full cost of the tax cuts – reflected by the loss of annual available revenue – is not reflected in the final budget because the tax cuts will only be in place for the second half of FY19. Accordingly, the cost of the tax cuts will be higher than the $521 million price tag included in the budget, meaning a further reduction in available revenue for public investments in the years beyond the two-year budget.

Cedric D. Johnson 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

Statement: This budget deal is not worthy of North Carolinians

Statement on the budget deal from Alexandra F. Sirota, Director of the Budget & Tax Center, a project of the NC Justice Center:

The final budget that state lawmakers will vote on in the coming days reflects missed opportunities for North Carolina.  By pursuing more tax cuts even as states like Kansas have reversed course and abandoned their own failed tax-cut experiment, leaders of the NC General Assembly have chosen to stay the course and continue to do less for more North Carolinians.

The final state budget includes many of the worst ideas and budget decisions from the House and Senate proposed budgets — including cutting legal assistance for low-income residents, failure to provide needed additional funding for K-12 classroom teachers, and using increasingly uncertain federal dollars to meet ongoing state priorities.

North Carolina’s leaders should put forward a budget that truly reflects the priorities of our growing state, including healthy and safe communities, quality educational opportunities and skills training, thriving communities, and broadly shared economic prosperity. They should make a sustained commitment to rebuilding Eastern North Carolina after Hurricane Matthew instead of offering just a fraction of what is needed. Instead, lawmakers have chosen to give even more benefits to the wealthy and profitable corporations. As state leaders continue to dig their heels in on their failed tax cut experiment, it is time for leaders across the state to emerge and demonstrate the harm of another budget that is not worthy of North Carolinians.