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NC Budget and Tax Center

Revenues that fuel the state budget are growing so slowly that they are not even keeping pace with population-plus-inflation growth, according to Barry Boardman who is the chief economist for the state legislature’s non-partisan Fiscal Research Division. Weak economic growth and tax cuts are keeping state revenues low, Boardman explained during a presentation that he gave to lawmakers earlier this week.

More tax cuts are looming too—a move that will sustain the damaging trend of slow revenue growth that makes it harder to meet basic needs and build a stronger economy. The House and Senate leadership put forward budgets that included additional tax cuts totaling approximately $652 million and $950 million, respectively, over the next two years.

The presentation shows that during the immediate years before the Great Recession, state revenues were growing faster than the inflation-plus-population benchmark. At that time, the state tax code was better suited and comprised of a progressive income tax based on ability to pay. The trend reversed after the 2008 fiscal year, with the population-plus-inflation growth rate outpacing revenue growth. The economic downturn caused revenues to plummet. And before revenues were able to fully recover back to pre-recession levels, lawmakers cut taxes deeply as part of the 2013 tax plan.

Revenues are not expected to outpace population-plus-inflation growth in either of the next two years; they are expected to remain below the long-run historical average. Read More

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A memorandum from the state budget office issued earlier this month asks state agencies to let them know what’s essential and what’s not, in the event a budget stalemate leads to a government shutdown.

budget-pieThe July 14 memorandum (scroll down to read) asks agencies to go through their operations, and report back about public safety and essential services need to continue on in the event of a funding stoppage –things like keeping on the staff who feed animals at the N.C. State Zoo, emergency responders in the highway patrol and prison guards.

Agencies need to provide their responses by Monday, which need to include estimates about what would happen if funding is halted for a week, or longer.

Preparing for a budget stalemate is a lot different from how the state prepares for other emergencies, state budget director Lee Roberts wrote in the July 14 memorandum.

“For a budget contingency plan, we must instead identify the minimum functions and services that must be performed for immediate response to issues of public lives or safety, or to avoid catastrophic loss of state property, and the associated personnel required to carry out these tasks,” Roberts wrote in the memorandum. “This includes the number of personnel required to perform these functions at the critical level, as well as administrative staff that support those critical functions.”

He takes care to point out that the chance of government shutdown because of the current budget negotiations is unlikely, and his request is intended to make sure a contingency plan is available in case things fall apart on the federal or state level.

But it’s certainly not an unprecedented scenario, as North Carolinians found out in 2013 when the federal government stopped running.

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The Fayetteville Observer took a closer look this weekend at how things will play out at local elementary schools if Cumberland County and surrounding areas are forced to cut hundreds of teacher assistants from classrooms in exchange for reducing class sizes.

Many say sacrificing TAs for smaller classes isn’t a good tradeoff.

“The perceived benefit of hiring more teachers would be minimal,” said Todd Yardis, Baldwin Elementary’s principal.

For one thing, he said, whenever the budget is approved, it will be after Baldwin’s school year has started. If the school then has to add classes to reduce class sizes, it would be chaotic for students and teachers alike, he said.

Yardis said mid- to late summer isn’t an ideal time to hire good teachers, especially if hundreds of other elementary schools in the state are also looking to hire. Most of the good teachers will already have landed jobs, he said.

“We’re having trouble finding teachers as it is,” he said.

Yardis doesn’t think smaller class sizes would alleviate the problems created by the loss of teacher assistants.

“The research says, and I’ve seen it myself, if you reduce class size by a few kids, it doesn’t change what the teacher does,” Yardis said. “If you’re talking to 20 kids, or 17 kids, the teacher is saying the same thing.”

But a teacher assistant can work one-on-one or in small groups with struggling children, freeing the teacher to teach the rest of the class.

“They’re really instructional assistants,” Yardis said. “Their number one job is to work with children.”

Yardis also said years ago, each classroom had more teacher assistants, which was especially important because many young children need intensive one-on-one support to succeed.

Senate lawmakers have proposed a 2015-17 budget that would cut more than 8,500 teacher assistants’ jobs in exchange for reducing class size.

The June 30 end of the fiscal year has already come to pass, and lawmakers passed a continuing resolution to keep state government operations running but failed to clarify what local school districts should expect when it comes to funding for teacher assistants.

Winston-Salem/Forsyth schools have already laid off 30 teacher assistants, and school officials hope that more layoffs aren’t on the horizon.

“We still have our fingers crossed that the compromise (budget) will not cut deeper than 110 positions,” Crutchfield said.

Crutchfield said the district would have to lay people off after they were already planning to report to work in August.

At Wednesday’s rally, teacher assistants across the state said they don’t know whether or not they’ll have a job in a month.

Diane Pfundstein, a retired teacher assistant who came back part-time at Mineral Springs Elementary School last year, said officials at her school said they’re not sure if there will be a job for her when school starts in August.

“It’s very sad,” she said. “There are so many issues now. Teachers need an extra person (in the classroom).”

The Associated Press reports that it’s the third year in a row that Senate and House leaders can’t agree on how to fund teacher aides. In the last seven years, lawmakers have reduced funding for state-funded TAs by 32 percent.

Brady Johnson, the Iredell-Statesville Schools superintendent, said he doesn’t understand why what he called “draconian cuts” must continue given there was a $400 million budget surplus last year. Johnson said his district doesn’t have additional funds like larger systems to preserve his system’s 195 assistants should the Senate’s proposal prevail.

“Who’s going to monitor the children on the playground? Who’s going to walk them to the cafeteria?” said Johnson, the North Carolina Association of School Superintendents president.

Lawmakers return to Raleigh today to continue working on budget negotiations after a week long vacation.

NC Budget and Tax Center

A report released yesterday by ThinkNC First argues that decision makers in Raleigh have walked away from many of the programs that helped to build a middle-class in North Carolina. Authors William Lester and Nichola Lowe of the University of North Carolina review data showing that middle-income jobs have become much harder to find over the last decade. The report ties this disturbing trend to recent policy decisions to underfund state programs that foster industries that create livable wages and ensure that all North Carolinians can access those jobs. The report makes a strong case that state leaders should heed our history and remember how North Carolina became an economic powerhouse in the Southeast in the first place.

The central problem documented in the report is becoming increasingly difficult to ignore. For the second half of the 20th century, North Carolina’s economy generated strong employment growth up a down the wage scale. Since the start of the Great Recession however, most of the job growth has been in either very high or very low paying industries. The labor market hollowed out, as many industries, particularly in manufacturing, saw employment decline. We here are the Budget and Tax Center have been watching this same trend, and its not pretty.

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The Department of Public Instruction’s budget chief told members of the State Board of Education Thursday that the number one issue local superintendents are wrestling with as they figure out how to fund their schools for the upcoming year is how to handle their teacher assistants.

“It is a very big problem for school districts to make a decision on how to start the school year,” said DPI’s Chief of Financial Operations Philip Price, who explained that any reductions to teacher assistants that result from final budget negotiations completed by the House and Senate in the coming weeks will be retroactive to July 1 and will leave school districts in a very tricky situation.

Budget writers in the Senate have signaled their intention to cut funding for teacher assistants significantly, eliminating more than 8,500 TA jobs over the next two year biennial budget period. The House, on the other hand, wishes to keep funding in place for TAs, setting up a for a fight that may end up being very similar to the one that took place last year.

Teacher assistants have been a target for budget writers for several years now. More than 7,000 teacher assistant jobs have been cut by lawmakers since 2009.

The General Assembly appears to be on track to head into the fall with its budget negotiations, leaving local school districts without a clear plan for how to fund classrooms and hire — or fire — teacher assistants and other classroom personnel.

The dollar difference between the House and Senate’s plans for funding TAs amounts to $195.6 million, Price told State Board of Ed members Thursday.

“Local school districts like Wake County have already started school in their year round tracks and so they’ve had to make some decisions related to how to address the teacher assistants,” said Price.

Winston-Salem/Forsyth schools have already laid off 30 TAs and warn that more might be coming.

“We still have our fingers crossed that the compromise (budget) will not cut deeper than 110 positions,” Crutchfield said of the 500 TAs that Winston Salem/Forsyth schools employes. Crutchfield, the district’s budget director, said the district would have to lay people off after they were already planning to report to work in August, according to the Winston Salem Journal.

The overall difference in the House and Senate’s budget plan for public schools, said Price, amounts to $342.6 million.

“That’s a major difference in money,” said Price. “[The General Assembly] has a pretty challenging job to do.”

In addition to TAs, Price noted the House and Senate’s other disagreements, which include how to handle driver’s education (the House restores funding, the Senate does not and eliminates the requirement for it in order to get a driver’s license), teacher salaries (House gives 4 percent raises across the board while the Senate focuses pay bumps on early career teachers) and whether or not to reduce classroom sizes by including more money to hire additional teachers (a Senate proposal).

“It’s going to be a rather lengthy, I’m afraid, in my humble opinion, discussion between the chambers and it will kick off pretty rapidly, I would imagine, next week,” said Price.

Lawmakers return to Raleigh on Monday after deciding to take a week long vacation, despite having missed their June 30 budget deadline.