NC Budget and Tax Center

2015 Fiscal Year State Budget, NC Budget and Tax Center, Women and the Economy

One of the most pressing concerns for any working family with children in North Carolina is to figure out a child care arrangement for children that allows parents to work and provide for their family, and allows children to learn and grow in a safe and stimulating setting when not in parental care. This is especially challenging because of the high cost of child care, as noted in these recently released state fact sheets by Child Care Aware of America. There are a few options available for families who earn low to moderate wages including the child care subsidy program which provides financial assistance to working families who need help paying for child care. Unfortunately this critical building block that makes life work for working families has been crumbling due to recent policy decisions by North Carolina lawmakers.

In our newest edition of Prosperity Watch, we feature a report released this month by NC Child detailing the impact made by child care subsidy policy changes passed by North Carolina lawmakers last year. These changes amounted to the loss of financial assistance for thousands of North Carolina families, including reducing income eligibility levels to qualify for the program, elimination of prorated fees for part-time child care (meaning many families will no longer be able to afford care), as well as counting income of a non-parent relative caregiver like a grandparent against the child’s eligibility for subsidies.

The map below provides a county by county breakdown of the more than 6,000 children who have lost or will lose access to child care subsidies from the change to the income eligibility provision alone.

PW 50-4


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NC Budget and Tax Center

State legislators are expected to pass a stop-gap measure today to address the expiration of the current spending plan, which runs through June 30 or next Tuesday. The measure, known formally as a Continuing Resolution, would allow North Carolina to avoid a shutdown and keep state government operating. The measure would give the leadership in the state Senate and House additional time to iron out the stark differences between their respective spending plans and approve a final budget.

Absent the stop-gap spending measure, the governor would only be authorized to spend money on “essential” programs and services.

It is not uncommon for state lawmakers to pass a stop-gap spending measure, which can last as long as they choose. In the recent past, the measures have lasted between two weeks and thirty days. Lawmakers last approved a stop-gap spending measure in 2013. That resolution permitted state agencies to spend up to 95 percent of their authorized budgets from the current fiscal year. The Office of State Budget and Management determined how to trim the other 5 percent. Before that, lawmakers approved the measure three times in 2009.*

If lawmakers miss the deadline at the beginning of the second year of a two-year budget, that budget simply continues unless the governor provides further instructions. That’s what happened last year when Governor McCrory directed budget cuts. Read More

NC Budget and Tax Center

During the Senate budget debate last week, some lawmakers demonstrated a lack of understanding—or a willingness to ignore the economic reality—of how money loses its value overtime. By ignoring inflation, Senate leadership readily claimed that education spending in the state is the highest that it has ever been. This claim, however, when placed in proper context is not factually accurate, as pointed out in a new Fact Check from WRAL.

In fact, when accounting for inflation, the largest state education budget was in the 2008 fiscal year, the last budget enacted before the recession hit.

The “fairy tale” denial of how inflation works—a basic Economics 101 concept—signals that the Senate leadership is sensitive to public concerns over the erosion of the state’s funding commitment to services such as high-quality public schools, health care, and child care. North Carolinians have seen and felt too much to be fooled into thinking that today’s investment in these public services exceeds pre-recession levels. That just doesn’t bear out in the data or in our current lived experience.

Here is an excerpt from WRAL’s fact check: Read More

NC Budget and Tax Center

This is a guest blog post from Luc Schuster, Deputy Director with the Massachusetts Budget and Policy Center. This blog post synthesizes and updates information in a longer MassBudget’s factsheet on Education Reform in Massachusetts, available online HERE.

Motivated by growing concerns that our schools were not serving all students well, especially those in high-poverty districts, Massachusetts passed the landmark Education Reform Act of 1993 (or Ed Reform), which included a bunch of changes to the way schools are financed. While pressing challenges remain, these changes helped position a much greater share of all Massachusetts children to learn and to thrive over the past couple of decades.

Ed Reform overhauled the state’s Chapter 70 education funding formula, making the distribution of state aid more adequate and more equitable by:

  • Creating a minimum required funding level for all districts. A district’s minimum requirement is driven by its “foundation budget,” calculated by considering the characteristics of its student population (e.g. the total number of kids in each grade and the number of low-income students).
  • Requiring communities to contribute revenue based on a uniform calculation of their local tax-raising capacity.
  • Providing state aid to fill the gap between a district’s foundation budget and its required local contribution.

As part of a grand bargain to couple new policy reforms with greater state investment, Ed Reform included an ambitious commitment to increase education aid to local districts. The timing of this commitment coincided nicely with strong state economic growth, and education aid roughly doubled over the 1990’s. But the state’s fiscal situation deteriorated by the early 2000’s, due in large part to the annual loss of about $3 billion in revenue resulting from state-level income tax cuts phased-in between 1998 and 2002. With less revenue to support state programs, funding progress of the 1990’s has been partially reversed since 2002.

Part of the original motivation behind Ed Reform was a sense that the nation was rapidly moving towards a knowledge-based economy with a growing premium placed on the skills of a state’s workforce. This movement has continued over the past twenty years, underscoring the importance of investing in the education over the long term (see A Well-Educated Workforce is Key to State Prosperity).

Back in the late 1970’s states with more highly-educated workforces tended to have somewhat higher wages, but the relationship was pretty weak, with many outliers. States like Michigan and Ohio, for instance, were among the highest-wage states, even though they had lower levels of education, largely because these states had healthy manufacturing sectors with jobs that paid relatively well for people with only a high school degree.

Largely by 1993, and even more so today, there was a much stronger relationship between median wages and the education of a state’s workforce, with many fewer outliers. State leaders were right to identify the changing dynamic of education as the pathway to greater economic well-being back in the early 1990’s, and it appears that education will continue to play a central role in our state’s ability to build a strong, high wage, economy.

MA Scatterplot

NC Budget and Tax Center

The state Senate is set to take a third and final vote on its two-year spending plan today, nearly a month after the House approved its budget. Next, each chamber will select respective leaders to negotiate in “conference” to iron out differences between the two budget proposals. The final budget agreement will head back to each chamber for another vote and then to the Governor’s desk.

How the state budget is funded and what it ultimately supports matters for all North Carolinians’ daily lives. We know that high-quality public systems beget economic growth and prosperity. Research and the lived experience of North Carolinians prove it. That’s why we should all be concerned that both the House and Senate budget plans include sizeable tax cuts that hamper our ability to rebuild and replace the most damaging cuts enacted in the aftermath of the recession and 2013 tax plan. Read More