2017 Fiscal Year State Budget, NC Budget and Tax Center

An initial review of General Government in the Senate budget proposal

Like other areas of the Senate budget, the area of General Government makes little effort to significantly change the way in which the state is investing in the efficient and equitable delivery of public services and in strengthening local economies.

The biggest changes from last year’s budget are for salaries and retirement contributions in many administrative offices of state government funded through the General Government. Additional investments in various technological and analytic capacities are also funded through non-recurring allocations, such as tax fraud analysis through a vendor in the Department of Revenue.

Other notable changes in the Senate proposal

  • Restores funding for Human Relations Commission ($545,407) and adds an administrative assistant position.
  • Allocates funds for the administration for the Connect NC Bond by adding 9 staff people.
  • Renames the Youth Advocacy and Involvement Office to the Council for Women and Youth Involvement.
  • Authorizes the Housing Finance Agency to expend receipts to increase access to permanent, community-based integrated housing for individuals with disabilities ($25.6 million).
  • Provides $5 million in non-recurring funds to retrofit and purchase equipment for a regional career and technical education center in Onslow County.
  • Expands in-patient capacity for behavioral and mental health treatment ($12 million in non-recurring funds).
  • Provides $2 million in non-recurring funds to child facility-based crisis centers.

Examples of what is missing in the Senate proposal

  • Provides no additional funding for the Housing Trust Fund or the Workforce Housing Fund, despite rising housing costs and a decline in state investment since the recession.
  • Fails to include funding to expand elections outreach to help ensure fair elections, as was included in the Governor’s budget proposal.
2017 Fiscal Year State Budget, NC Budget and Tax Center

Senate’s public schools budget reflects diminished expectations and limited possibilities for NC

Public schools will continue to operate with constrained resources under the Senate’s proposed budget for the upcoming fiscal year. The budget leaves most needs across the K-12 education budget unaddressed, aside from providing additional funding for pay raises for teachers and school leaders and funding enrollment growth. The additional funding for teacher pay increases are made possible in part from cuts to General Fund appropriations for other core education investments that support children’s educational success. Furthermore, state leaders continue to rely more on lottery dollars, rather than General Fund appropriations, to fund core areas of the education budget.

As a result, state funding per student under this budget is 8 percent below 2008 pre-recession spending.* This education budget represents the diminished expectations and limited possibilities for North Carolina that are a result of state leaders’ preference for more and more tax cuts (included in the budget) and their misguided budget decisions based on an arbitrary spending target that fails to account for the actual needs of public schools. Read more

2017 Fiscal Year State Budget, NC Budget and Tax Center

No major positive changes for Natural and Economic Resources in Senate budget proposal

The Natural and Economic Resources section of the Senate Budget does not make any major positive changes to address the environmental or economic challenges facing the state. The level of support for struggling rural communities remains largely unchanged from last year, appropriations for small business services offered through The Support Center would be eliminated, and a number of vacant environmental oversight and enforcement positions would be cut. Despite some additional funds for specific areas of need, the overall budget will not level the economic playing field or ensure that North Carolinians are protected from environmental hazards.

Agriculture and Consumer Services

  • Increased funding for forest fire equipment purchases: $3 million in additional non-recurring appropriation to Forest Service to purchase airplane and heavy forest fighting equipment, bringing total FY 2016-17 appropriation to $39.1 million.
  • Increase export marketing of NC agricultural products: Transfers $180,000 from Swine Waste Fund, and appropriates $500,000 in non-recurring funds to Marketing Division to promote North Carolina agricultural products overseas.
  • Increases funding for military buffer land purchases: $1 million increase to Farmland Preservation Trust Fund to purchase lands surrounding military bases, bringing total FY 2016-17 appropriation to $3.6 million.

Department of Environmental Quality

  • Eliminates several vacant positions: Several positions that are currently vacant are eliminated.
  • Transfers funds from Mercury Pollution Prevention Account to Division of Waste Management: $2.5 million in existing balance in the Mercury Pollution Prevention Account is used to offset reduced General Fund appropriation to the Division of Waste Management.

Department of Environmental and Natural Resources

  • Restores various fee and tax transfers following continuation review: Funds transferred to the Division of Air Quality, Water and Air Quality Account, Commercial Leaking and Underground Storage Tank Fund, and Boating Safety Account are restored following a continuation review

Department of Commerce

  • Eliminates funding for the Support Center: Eliminates all $2.5 million in state funding for the Support Center, which provides loans and assistance to small business. House budget had continued state support for the Support Center.
  • Johnston County public infrastructure for economic development: Appropriates $6 million in non-recurring funds to support public infrastructure and wastewater treatment facilities. Funds limited to use in support of economic development projects in the pharmaceutical, biotechnology, and telecommunications industries located in the Johnston County Research and Training Zone. Generally, appropriations with this level of specificity about eligible uses are targeted for an already identified economic development project.
  • Increases funds to promote the High Point Market: Increases recurring state appropriations to the High Point Market Authority by $400,000, bringing total state appropriation for FY2016-17 to $1.6 million.

Department of Natural and Cultural Resources

  • Increases funding for Clean Water Management Trust Fund: Budgets $5 million in additional non-recurring funds, bringing the trust fund total FY 2016-17 appropriation to $18.8 million.
  • Zoo and Aquarium Funds: Establishes a $1.5 million transfer from the General Fund to the Zoo Fund, and $2.8 million to the Aquarium Fund.
2017 Fiscal Year State Budget, NC Budget and Tax Center

Making college affordable by possibly killing off public universities

One of the major issues that Senator Berger and Brown have heard from their constituents is that the rising cost of tuition at the state’s public universities is making it difficult for parents to send their kids to college or for kids to complete their degrees. The Senate’s answer in the form of Senate Bill 873 is unlikely to make sure that a four-year degree remains affordable and accessible. Instead, it will almost certainly limit access to public universities for students of color and those living in more rural parts of the state, as well as harm their communities’ economic development efforts.

Senate Bill 873, included in the Senate’s budget proposal, targets students at five specified colleges and universities, which have a rich history as HBCUs, the state’s university serving American Indians, and a rural institution. These five institutions would see their tuition capped at $1,000 for the year for in-state students and $2,500 for out of state students. Capping tuition at these institutions would mean a significant loss of revenue for each respective institution – ranging from an estimated nearly $3.9 million to more than $29 million among the five institutions.

Copy of Senate Bill 873 (HBCUs)_tuition cap analysis

And if the tuition cap is not a big enough hurdle to overcome, the mandatory reduction in fees (combined with the tuition reduction and cap) will certainly heighten the financial challenges faced by these institutions. These fee reductions would mean additional estimated annual revenue loss that ranges from around $6 million to $15 million.

For the majority of these institutions, which have faced the challenges of building endowments,sustaining their institutions through segregation and Jim Crow, and serving a disproportionately low-income student body, the tuition cap is a blunt instrument that will only serve to erode the institutions’ fiscal stability and ability to support every student’s completion of a four-year degree.  It fails to ensure that those who can afford to pay do so, and instead delivers a benefit to all students regardless of income. A better strategy to keep college affordable would be to increase the state’s need-based grant program to close the gap for students struggling to afford an education and only able to access federal grants.

Of course, it is hard to believe that keeping college affordable is the true intent.  After all, why then are just these five institutions targeted with a tuition cap? If the tuition cap is the policy choice of the Senate to achieve affordability, it should be applied to UNC Chapel Hill and NC State, too.

All UNC institutions will face a limit on fee increases. Students at all UNC institutions will be able to freeze tuition to what it was when they entered until four years later under this proposal. Such an approach fails to anticipate needs that may arise or the possibility that tax cuts will phase-in and further erode the state’s aspiration to be a first-rate public university system.

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 state funding cuts on the backs of college students and their families. State funding per student at public four-year universities remains more than 15 percent below its 2008 pre-recession level –– equating to hundreds of millions of dollars in funding cuts. In response, public universities have increased tuition and fees in part to offset the funding cuts.

And while the bill allows for up to $70 million in state funding to be requested from lawmakers to replace the revenue loss from the tuition cap, it is unlikely that these funds will be sustained because of the priority given to poorly targeted tax cuts. It is also unlikely that they will be sufficient. The tuition cap means that any enrollment growth in the years ahead will result in greater revenue loss that otherwise could be generated from in-state and out-of-state students. A growing student body amid limited and constrained financial resources compromises the ability of these institutions to ensure quality education services that promote student success.

Ensuring an affordable college education for North Carolina students and families is important to North Carolina remaining an attractive place to live and do business, as well as in retaining the talented young people who will lead our state in the future. This short-sighted and limited budget proposal is not the road map to make college access and completion a reality for more North Carolinians despite the economic imperative to do so.

2017 Fiscal Year State Budget, NC Budget and Tax Center

Senate budget proposal fails to meet state needs: Statement from Alexandra Sirota, Director, Budget and Tax Center

RALEIGH (May 31, 2016) — The Senate seems to have taken the most extreme approach to the state budget yet, putting forward a proposal that fails to meet community and family needs and holds our state back from a brighter future.

While we have yet to see the full details, it is very likely that the Senate has once again cut core public services in order to facilitate a new round of income tax cuts that cost $200 million—nearly half the cost of their teacher pay plan. These cuts are just one more blow in the year after year onslaught on public institutions as the Senate continues their commitment to flawed economic theories that aren’t helping our communities or our economy.

The Senate is irresponsible at best in pledging commitments to North Carolinians’ priorities today without ensuring that the state can continue to prioritize them in future years. They believe that North Carolinians won’t figure out that they have sacrificed our state’s future at the altar of tax cuts.

The reality is that North Carolinians know that the path to a better future is built on the middle ground through shared commitment to good schools, protection of air and water quality, support for main street development and other building blocks of a strong economy and healthy community. The House must reject the Senate’s flawed approach and get much closer to meeting the needs and priorities of North Carolinians across the state.