2017 Fiscal Year State Budget, NC Budget and Tax Center

Follow the money: The Governor’s budget keeps phased-in income tax cuts on the books, proposes no further rate changes, and leaves nearly $5 million on the table

Today, Governor Pat McCrory unveiled a budget proposal for the 2017 fiscal year that provides modest funding increases to support early learning, education, mental health, and inconsistent pay bumps for teachers and state employees. His $22.3 billion budget proposal represents a 2.8 percent—or $600 million—increase over the current 2016 fiscal year budget.

The Governor’s budget proposal, in large part, is one that stays the course. That’s because his ability to replace the worst cuts from the economic downturn and address pressing needs is severely constrained by the recent tax cuts that he signed into law. His proposal allows these tax cuts—which primarily benefit profitable corporations and the wealthy—to continue to phase in as scheduled. All told, recent tax cuts are expected to cost more than $2 billion annually once all tax cuts go into effect.

That price tag is coming at the expense of providing pay raises and cost of living adjustments for all workers as well as strengthening education, public health and safety, and the other building blocks of a strong economy. His proposed modest levels of reinvestment are a small fraction of what is needed to realize his own stated principles of preparing for future growth and helping those who are struggling in today’s economy, as noted in the NC Budget & Tax Center’s public statement.

In fact, his budget would keep state support for services below pre-recession levels, when adjusted for inflation. That would be fine if public needs had shrunk. But they have grown. Read more

2017 Fiscal Year State Budget, NC Budget and Tax Center

Delivering efficient, effective, equitable public services

The operations of government and the targeted deployment of public services for public goals is the purpose of the General Government budget area.

In year’s past, the General Government area of the budget has supported important investments in affordable housing development and the supports to managing efficient and effective core functions of government.

Here are a few of the key items to highlight in the General Government budget:

• Creates a statewide network that develops and leverages existing NC entrepreneurial management talent and recruits investors, entrepreneurs and managers to NC ($2.5 million).

• Translates University research and development for commercialization through non-profits or housing entities ($2.5 million).
• Provides funding to conduct a School Facility Needs Assessment for low-wealth counties (despite an existing assessment indicating that $8 billion is needed for school construction). In 2013, lawmakers eliminated a dedicated school construction fund via the corporate income tax revenue in order to pay down the cost of the income tax rate cuts ($1 million).

• Funds to support access to permanent, community-based integrated housing for individuals with disabilities, directly supporting Olmstead Settlement ($5.5 million). Provides no additional funding for the Housing Trust Fund or the Workforce Housing Fund, despite pressing needs.

• Provides additional funding for the Human Relations Commission, which lawmakers placed on a continuation review last year ($788,076).

• Expands elections outreach to help ensure fair elections (but leaves in place recent election law changes such as Voter ID) and implements a new campaign e-filing process (more than $900,000).

2017 Fiscal Year State Budget, NC Budget and Tax Center

Preliminary review of Governor’s Health and Human Services Budget: Supporting the health, safety and well-being of North Carolina Families

Public investments in health and human services of the state budget provide protections for the health and well-being of North Carolina families, children and seniors.  By strengthening healthy outcomes and ensuring access to high quality health services, North Carolina policymakers can improve the quality of life of all North Carolinians and build healthy communities that support thriving economies.

The Governor’s budget is able to make investments in targeted programs and services within health and human services and other areas of the budget because of the reductions in Medicaid costs resulting from lower enrollment and utilization.  This $318 million reduction in Medicaid is being driven primarily by an improving national economy that means less folks are qualifying for Medicaid and by lower utilization that could be resulting from better preventive health care.  Recent policy decisions like cutting reimbursements, raising copays and eliminating optional services over the years have likely also contributed to this lower utilization.

Here are key highlights (and missing items) in the HHS budget:

  • Expand Support for Alzheimer’s Patients and their Families through Project CARE ($1 million)
  • Expand support for Alzheimer’s Patients and their Families through Community Alternatives ($3 million)
  • Serve more four year olds through NC Pre-K through lottery receipts although there still would remain a waiting list of at least 5,000 at-risk children ($4 million)
  • Improve quality of child care in NC by pushing adding 7 FTEs to conduct criminal records verification, fraud prevention and detection and 3 FTEs to invest in training of child care staff ($663,435)
  • No funding to expand access to child care subsidies to ensure quality early childhood experiences for children and support low-income working parents
  • Support Children’s Developmental Services Agencies that serve young children with developmental disabilities ($2.5 million)
  • Ease transition to new state funding model for local public health departments ($17 million)
  • Fund two new positions to support the Maternal and Child Health Block Grant work to reduce infant mortality ($97,597)
  • Enhance child safety through Federal Improvement Plan implementation which will address deficiencies identified in the Child and Family Review ($8.6 million)
  • Provide rental assistance benefit for vulnerable citizens including low-income, elderly and disabled individuals ($459,000)
  • Invest in Medicaid reform to support administrative efforts to transform the Medicaid and Health Choice programs to reach $6 million ($1 million)
  • Address backlog and expand services for individuals with developmental disabilities ($2.5 million)
  • No Medicaid expansion to serve nearly 500,000 North Carolinians without health insurance
  • Implement Governor’s Task Force for Mental Health and Substance Use Recommendations ($30 million)
  • Mental health investments to enhance the community health system ($20.2 million)
NC Budget and Tax Center

Statement on Governor’s released budget proposal from Alexandra Sirota, Director of the Budget and Tax Center

Now with the Governor’s budget proposal released, it is clear that unanticipated revenues available due to a recovering national economy and the lower than anticipated costs in Medicaid are allowing the  Governor to pursue small, targeted investments to promote child well-being and support improved educational outcomes.

These additional investments represent a small fraction of what is needed to realize Governor McCrory’s principles of preparing for future growth and helping those who are struggling in today’s economy.

It is certainly unclear how the Governor will sustain any new public investments with the already scheduled phase-in of additional cuts to the personal and corporate income tax and the heavy reliance on Medicaid “savings” as a primary source of dollars.

The Governor is limited by the costly income tax cuts implemented since 2013 that primarily benefit wealthy and profitable corporations, which result in at least $1 billion less in revenue each year than what would otherwise have been available to build the solid foundation that North Carolina needs to ensure the economy works for everyone.

This makes it impossible to build into the budget much-needed pay increases for all teachers and state employees and make the smart investments that will support a high quality of life and allow North Carolina to compete. Specifically, the tax cuts force bad choices like providing bonuses versus salary raises, selecting only certain public employees and not everyone to receive a pay raise that will also boost local economies, leaving certain waiting lists unaddressed and keeping in place many of the tuition increases and fee increases that have been implemented over the years.

It is, however, very important that the Governor has chosen to seek even this modest reinvestment over more tax cuts that would primarily benefit profitable corporations and the wealthy, shift the tax load  onto middle- and low-income taxpayers and only further distance North Carolina from achieving our potential.

The General Assembly should choose reinvestment over tax cuts for the wealthy or arbitrary spending targets as well and commit to building an economy that works for everyone.

NC Budget and Tax Center

State leaders need to know: Cash-strapped N.C. homeowners do exist

Simply saying something doesn’t exist doesn’t create a new reality. The Senate Finance Committee voted in favor of a bill yesterday that includes a provision that will continue to require cash-strapped homeowners to pay state income tax on mortgage debt forgiven by lenders, even though no cash is provided to the homeowner. State leaders pushed through this tax change last year and plan to keep it in place this year.

In rejecting a request by Sen. Ford, who represents Mecklenburg, to exclude the provision from the bill, committee co-chairman Sen. Rucho, who also represents Mecklenburg, stated that he had not heard of any North Carolinian benefiting from the tax provision. He made the same assertion last year when making his case for targeting cash-strapped homeowners.

Could it truly be the case that the massive and pervasive mortgage fraud committed by financial entities that ushered in the disastrous national economic downturn bypassed North Carolina? The simple answer is no. In the wake of the crisis, a number of financial institutions agreed to settlements that provide consumer relief to affected homeowners with unaffordable mortgages, which include reducing the amount of principal debt owed on mortgages to make them more affordable. SunTrust Mortgage, for example, agreed to provide as much as $21 million in relief to North Carolina homeowners in a national settlement. The General Assembly’s Fiscal Research Division estimates that requiring cash-strapped homeowners to pay state income tax on mortgage debt forgiven by lenders will generate $8 million in revenue for this fiscal year – an indication that North Carolina homeowners who may be eligible to receive such mortgage relief exist.

Yet state leaders continue to adopt this out of sight, out of mind thinking that was on display yesterday. To the contrary, they expend the necessary energy and effort to push through tax cuts that largely benefit the wealthy and profitable corporations at the expense of hardworking North Carolinians who struggle to make ends meet. This effort to once again target cash-strapped homeowners is yet another example of the disconnect between rhetoric and actual policy decisions by state leaders.