2017 Fiscal Year State Budget, NC Budget and Tax Center

Read fine print: How the state Senate spends federal the dollars in its budget

When state lawmakers put together a budget proposal, they decide how to spend state dollars on the public investments that help children, families, and communities thrive. These are things like public education, public health and safety, and transportation services and programs. Lawmakers also allocate federal aid that is passed to the state in the form of block grants, with the details appearing in the budget bill as “Special Provisions.”

These federal dollars are an important tool for helping communities thrive but on their own are insufficient to make sure that state goals that benefit everyone are met. Critical state investments are needed to build a more inclusive economy. Yet in some instances, lawmakers shifted away from using federal aid to meet long-standing priorities such as affordable housing while failing to make sure that the state makes catalytic investment. In other cases such as early childhood education, the state recently began to swap out a portion of state funding for federal aid. Supplanting—rather than supplementing—state dollars is troubling when waiting lists and unmet needs persist.

Block grants have been around since the late 1960s and are a specific amount of funding to assist state governments in addressing broad policy goals and purposes—such as improving economic mobility and quality of live through social services, public health, and community economic development investments. The federal government sets general guidelines on how states can allocate the money while giving give states a great deal of flexibility in the use of the funds. In North Carolina, most of the block grant dollars are passed to the state’s 100 counties to administer the services and programs.

The Senate budget governs the use of federal block grants across the board but it is worth highlighting specific changes that signal a change in the reliance and allocation of federal funds. Read more

2017 Fiscal Year State Budget, NC Budget and Tax Center

Read the fine print—Key policy choices in the Senate budget

The state budget includes more than just spending decisions on crucial public investments such as education, public health, safety, and transportation. It also includes policy decisions—known as special provisions—that in many cases “follow the money” to clarify how state agencies should use state funds and federal aid. In other cases, the budget includes policy decisions that are not related to fiscal matters and thus are not following the regular bill process.

It is not unheard of for massive programmatic changes to be included in the special provisions section of the state budget. And unless you are a full-time lobbyist working at the legislature, it is hard to find these special provisions and figure out their effects.

Here we detail a few of the significant special provisions in the Senate budget that contain major policy decisions that warrant a separate deliberation and debate process (with the exception of the first bullet). Read more

2017 Fiscal Year State Budget, NC Budget and Tax Center

Senate is raiding local coffers to pay for tax cuts

The North Carolina Senate plans to take $17.6 million currently destined for local governments to pay for part of its newest round of tax cuts.

A provision buried in the fine print of the Senate budget approved this week would eliminate a pool of funds that were slated for distribution to county and municipal governments. The House did not touch these funds, but the Senate needed the money to cover the costs of several expensive tax cuts.

Good intentions actually helped pave the road that got us to this juncture. Last year, the legislature revisited how sales tax revenues are distributed to local governments in an effort to make sure sales tax revenues reached rural communities. Without going into all of the gory details (see our post from last year for an overview), the legislature created a new pot of money to help out counties that lose out under the baseline arrangement. Some of the new money came from expanding the sales tax to services last year, but the legislature kicked in another $17.6 million so that no county would lose revenue when the rest of the sales tax revenue was divvied up. It was a practical way of partially addressing a real problem: help the more rural or suburban counties without hurting urban ones.

sales tax map final

But now the Senate has decided it wants that money back, and the only reason is to pay for more tax cuts.

It wasn’t a preordained necessity to stick it to local governments. The House found ways of increasing teacher pay and meeting its other modest aspirations without dipping into the pot of funds designated to bolster sales tax distributions. .But the Senate’s apparently insatiable drive to slash taxes is forcing them to go back on the compromise they struck last year, and to withdraw this little bit of help that had been slated for local governments.

Senate leaders claim that, because they plan to charge sales taxes on more services next year, they’re really not hurting county and city governments with this move, but that’s not really playing it straight with North Carolina. It’s not clear how much new revenue will actually be raised through the new sales taxes the Senate wants to impose, and regardless, counties would still have to go without the $17.6 million that the Senate wants to take back.

Last year the Senate took a few small steps to help local governments that serve struggling parts of the state; now they’re raiding those same coffers to fund the newest tax cut scheme.

2017 Fiscal Year State Budget, NC Budget and Tax Center

Senate’s higher education budgets continue disappointing status quo approach

Ensuring that North Carolina’s public colleges and universities remain top-notch national models of success doesn’t look to be a priority for Senate leaders. The Senate budgets for higher education – the UNC System and Community College System – fail to ensure that adequate resources are available to provide quality education services to the more than 400,000 students enrolled in public colleges and universities across the state.

Steady erosion of state support for higher education in recent years has played a direct role in the increasing cost of college in North Carolina, as colleges make up for those state funding cuts in part on the backs of college students and their families by increasing tuition and fees. Tuition at community has increased by 81 percent since 2009. At public four-year universities, state funding per student remains more than 15 percent below its 2008 pre-recession level when adjusted for inflation – equating to hundreds of millions of dollars in funding cuts. The Senate budget does nothing to make college access and completion an affordable reality for more North Carolinians.

Highlights from the Senate budgets for higher education: Read more

2017 Fiscal Year State Budget, NC Budget and Tax Center

Senate budget proposal fails to maintain service levels from Health & Human Services

The Senate’s proposal fails to maintain service levels overall and makes significant reductions to investments that are critical to children’s health and mental health in the Health and Human Services budget, which is supposed to provide core support to the well-being of North Carolinians and health of communities statewide.

Here is an overview of key areas:

  • Increases by less than $150,000 the state’s appropriation to improve Medicaid timeliness by supporting staff to analyze caseload data and develop performance standards.
  • Funds a Medicaid Analytics Pilot at $1.25 million.
  • Cuts various contract services on a department-wide basis by $3.2 million.
  • Commits just $300,000 to Project CARE support for Alzheimer’s Patients and their Families and $200,000 for a No Wrong Door Initiative in the Division of Aging and Adult Services.
  • Eliminates the state’s increased commitment to NC Pre-K ($6.4 million) and Child Care Subsidy ($3.6 million) and instead applies federal funds to these purposes so that current service levels are maintained.
  • Provides $8.4 million in funding for the Program Improvement Plan as a result of the recent review of child welfare.
  • Provides $600,000 in funds for a pilot effort to increase access to Food and Nutrition Services for individuals who are dually eligible for Medicare and Medicaid through outreach and assistance.
  • Increases funding for the Nurse Family Partnership Program by $400,000 in non-recurring funds.
  • Reduces Cherry Hospital Operating costs after delays in construction by $3 million and eliminates funding for the Wright School by $2.1 million to bring their appropriation to $0.
  • Provides $2 million in non-recurring funds to establish one or two child facility-based crisis centers.
  • Provides $1 million for support to Alzheimer’s patients and their families.
  • Reinstates adult optical eye exams with appropriation of $2.1 million.
  • Shifts the Health Choice rebase from recurring to non-recurring funds.

Examples of what is missing from the Senate’s budget in health and human services:

  • Fails to implement Governor’s Task Force for Mental Health and Substance Use recommendations or enhance the community health system’s delivery of mental services.
  • Fails to expand Medicaid to 500,000 North Carolinians.
  • Fails to make progress on child care subsidy rate.
  • Does not expand access to NC Pre-K and child care subsidies that provide quality early education opportunities for young children’s healthy development.