Falling Behind in NC

Governor McCrory signed a final budget into law for the current 2015 fiscal year, which runs from July 2014 through June 2015, this morning. The $21.1 billion budget includes new spending initiatives – largely pay raises for teachers and state employees – but fails to include additional revenue to sustain this spending in the long-term. Contrary to fueling North Carolina’s economic comeback, as Governor McCrory claims, the final budget continues to fund core public services at diminished levels, well below pre-recession levels, and compromises the ability of the state to get ahead and prepare for the future.  Moreover, it puts North Carolina on a fiscally irresponsible path that will continue to create budget challenges in the years ahead, largely as a result of the tax plan that was little debated and discussed in the final budget.

North Carolina faces a revenue challenge, and actions taken within the final budget make this reality clear. The final budget signed by the Governor spends every available dollar and uses dollars from last year’s budget as a result of the Governor requiring agencies to cut their respective budgets. No funding is available to build up the state’s Savings Reserve fund, which is meant to position the state to weather a future economic downturn. Furthermore, the budget relies on one-time funding sources that, once depleted, cannot be replenished with such low revenue and shifts funding for core public investments such as K-12 education to lottery receipts and early childhood programming to federal block grants.

Such budget decisions are driven largely by the tax plan the governor signed into law last year, which significantly reduces revenue available for public investments. Revised analysis by the General Assembly’s Fiscal Research Division estimates that the income tax rate cuts in the plan will cost at least $200 million more annually than initially expected – more than $1 billion less in annual revenue once the plan is fully implemented. The Governor and state policymakers failed to account for this reality in the final budget, which means that, absent new revenue, more budget cuts to core public services are likely to occur in future years as the tax plan continues to be implemented. Another round of tax cuts is set to occur in January 2015.

Under the final budget signed by the Governor, state spending remains 6.6 percent below pre-recession levels (see chart below). Read More

If you work hard and play by the rules, you deserve a chance to get ahead. This is why the Earned Income Tax Credit was invented: to help families with low-paying jobs make ends meet.

Unfortunately, North Carolina is the first state in 30 years to eliminate its Earned Income Tax Credit. This move abandoned a bunch of our neighbors, people with stories like Kara’s:

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There is no more stark illustration of why tax policy matters. With NC job growth coming primarily in low-wage industries, we’re going to need the Earned Income Tax Credit — and other measures that work for working people — more than ever.

 

This is the 4th 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 other posts here and here and here.

Chances are schools across North Carolina will continue to rely on outdated textbooks and limited resources for classroom supplies for the upcoming school year. The Senate budget approved last week fails to provide additional funding for these two classroom areas in the wake of dramatic state funding cuts to both textbooks and classroom instructional supplies in recent years.

Since the 2009-10 fiscal year, state funding for textbooks has been cut by 81 percent, down from $119 million when adjusted for inflation to around $23 million for the current school year. As for classroom materials and instructional supplies, state funding has been cut by nearly 47 percent since FY 2009-10, down from $90.7 million when adjusted for inflation to around $50 million for the current school year. Local schools systems have been challenged with replacing these state funding cuts with other funding sources or continuing the trend of doing more with fewer resources.

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Inadequate state funding for textbooks means the continued use of outdated textbooks, and in some cases schools have resorted to making photocopies from textbooks to ensure that students have learning materials. Diminished funding for classroom instructional materials has meant teachers having to reach into their pockets to buy supplies for classroom instruction.

The decision to not restore funding for textbooks and classroom material and supplies in the Senate budget comes on the heels of policymakers passing a tax plan last year that significantly reduces annual revenue for public investments now and in the years ahead. Policymakers now face huge revenue shortfalls for the current budget as well as for the upcoming 2014-15 fiscal year budget, which are driven by the tax plan passed last year. This foregone revenue could have help boost investments in our public schools.

As House budget writers work to put together their proposed budget, restoring funding for textbooks and classroom supplies would represent a positive step in promoting a quality education for all North Carolina students. Revenue options are available to responsibly demonstrate this commitment. Policymakers should stop the additional income tax cuts slated to go into effect January 2015. Doing so would allow for greater investments in the state’s future workforce, and in turn, the Tar Heel state as a whole.

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

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