NC Budget and Tax Center

NC Budget and Tax Center

When putting together a budget, the debate typically entails where funding has expanded, what new initiatives have been introduced, and how much funding has been cut. However as North Carolinians are learning, when the baseline for comparison changes, spending that was once guaranteed may go away and new initiatives may only serve to undercut other important public investments that drive the state forward.

The base budget, or continuation budget, has traditionally been the starting point estimate of what North Carolina’s policymakers needed to invest to maintain current service levels. As we have written about before, recent changes to what is included in the base budget— removing enrollment growth, for example —has meant a shifting foundation upon which assessments are based. Rather than increasing transparency, this change masks just how little improvement there is in the Governor’s budget proposal.

Better information about what is in and what is now out of the base budget is needed so that the public can better understand whether so-called expansions are truly that or are just keeping up, and whether new initiatives are financed sustainably or through cuts to core programming. The Department of Public Instruction submitted a request that included a greater amount of investments than were ultimately funded as did the courts.  As an example, DPI requested $69.9 million in added investment to their base budget but got a cut of $56.3 million in their base budget. Specific details for all areas of the budget are needed to understand what is in and out of the base funding.BTC - Base Budget

In a preliminary look at the Governor’s budget, it is telling that the continuation budget (or base budget) for FY 15-16 falls $235 million below the current fiscal year budget spending. Moreover, as my colleague noted in a post yesterday, the proposed appropriation level by the Governor covers nearly exactly the enrollment growth costs forK-12 education, universities and Medicaid. In previous budgets, these enrollment growth costs would have been part of the base budget. Expansion items, such as further pay raises or increased foster care payments, are the result of shuffling the deck—moving dollars around without meaningfully reinvesting overall.

Pre-recession levels can also be used as a point of comparison in this budget debate to demonstrate the lack of reinvestment. Looking in this way, the Governors recommended appropriations remains $1.4 billion lower than the spending level at FY 07-08 despite a growing population and the state surpassing the fifth year of the economic recovery.

Changes to the base budget make clear that very little progress can be made by state policymakers as long as revenues come in under projections as a result of the costly tax plan since revenue growth is not keeping up with growth in enrollment and other program costs.

 

NC Budget and Tax Center

Students in high-poverty schools across North Carolina are showing up to class each day with food in their stomach and ready to learn thanks to an initiative known as Community Eligibility.  As part of the nationwide Community Eligibility Program (CEP), schools within 54 school systems across the state are providing breakfast and lunch to all students free of charge. Some districts have adopted CEP in all of their schools.

North Carolina is the fifth hungriest state in the country, so providing healthy school meals at no cost to students and families is especially important for children – particularly those in our most distressed communities. As North Carolina continue to face the challenges of persistent poverty and ensuring that all students are afforded a high-quality education, access to nutritious school meals serves as a positive step forward.

The initial rollout of CEP in North Carolina has been promising. Nearly half of all public schools eligible to participate in CEP adopted the initiative for the current school year, representing more than 310,000 students (Click here to see a list of CEP-eligible, participating schools). This is wonderful news! Only two states in the south – Tennessee and Georgia – have more students attending schools that are participating in CEP. Read More

NC Budget and Tax Center

Last week, Governor McCrory unveiled his two-year budget proposal for July 2015 through June 2017. He has since touted how his plan reinvests in the public services and programs that are essential for economic opportunity and quality of life. However, a close look at his 2016 fiscal year (FY2016) spending plan reveals that he fails to reinvest in a meaningful way in the critical public structures that benefit us all. Genuine progress will continue to be hampered until state lawmakers build a tax system that can adequately match the needs of a growing economy.

Governor McCrory’s proposed budget for FY2016 increases year-to-year spending by nearly $439.8 million, or 2 percent. This is in sharp contrast to past recoveries when state investments were far quicker to return to, and advance beyond, pre-recession levels. Enrollment growth in public schools, the UNC system, and the Medicaid/Health Choice programs is estimated to exceed the year-to-year increase in spending in the governor’s proposal, totaling nearly $442.6 million in FY2016. That means every new dollar increase, on net, is dedicated to funding enrollment growth (see chart below).

It also means that non-enrollment expansion items in the proposal are made possible by cutting or allowing spending to expire for other vital programs that are already stripped bare from previous underinvestment. That’s like rearranging the deck chairs on a sinking ship. Read More

NC Budget and Tax Center

This morning, Governor McCrory released his two-year plan to invest in education, health care, public safety and other priorities that are essential for economic opportunity and quality of life. He spoke of a “new paradigm” for state budgeting. A new paradigm indeed, one that abandons many of the practices that served North Carolina well in the past—like ensuring funding to maintain current service levels year-over-year or reinvesting in the recovery rather than locking in low levels of revenues by keeping the 2013 tax plan on the books.

A preliminary review of his budget plan shows that too many vital public services are at diminished levels, threatening their effectiveness, reach, and efficiency. No amount of “budget spin” will cover up how the budget baseline has been eroded from years of cuts or how the current tax system cannot sufficiently keep up with growing needs.

Below is a quick summary of how the Governor’s budget compares to pre-recession levels and also how the Governor chose to pay for his budget. Read More

NC Budget and Tax Center

The “tough choices” Governor McCrory says he made in his just-released budget proposal were self-inflicted. They come from tax cuts that primarily benefit the wealthy and profitable corporations, meaning there is too little left to invest in education and other building blocks of a strong economy.

Also troubling is the Governor’s use of changes to the budgeting process to mask the state’s inability to keep up with growing needs. It’s wrong to abandon longstanding practices that have served North Carolina well just to avoid debate over failed tax policies. Budget tricks won’t hide the fact that this will make it even harder in the future to promote broad prosperity.