North Carolina state budget

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North Carolina operates on a biennium budget schedule, budgeting for two fiscal years at a time. While the General Assembly draws up a budget every two years, it then adjusts the budget just prior to the state of the the second fiscal year of the budget.^[1]

North Carolina will receive approximately $634 million from the federal government under H.R. 1586, a $26 billion plan to give states money for Medicaid and education that the President signed into law on August 10, 2010.^[2]

See also: The North Carolina State Budget on State Budget Solutions

[edit] Fiscal Year 2011 State Budget

The Office of State Management and Budget estimates that the state could face a budget shortfall of $3.3 billion.^[3]

Governor Bev Perdue instructed agencies in September 2010 to determine how to cut spending by up to 15% in FY2012, which begins July 1, 2011.^[3] The budget cuts may be necessary because Perdue said that she does not intend to extend a temporary 1-cent sales tax increase approved a year ago to help close a deep fiscal hole.^[3] The state sales tax would revert to 6.75%.^[3]

[edit] Fiscal Year 2011 State Budget

North Carolina Assembly passed the FY2011 budget and Gov. Bev Perdue signed it into law on June 30, 2011. With the budget in place the day before the start of the new fiscal year, the state budget was done on time. The last time that happened in North Carolina was 2003.^[4]

On June 27, 2010, Democrats in the House and the Senate reached a deal on the $18.9 billion plan that reduces state spending by 3.3 percent less than the legislature expected to spend when it approved a two-year budget last summer.^[1] The House approved the spending plan by a vote of 66-50 and the Senate voted 28-15 in favor.^[4]

The state faced a deficit between $800 million and $1.2 billion on April 20, 2010, when Governor Bev Perdue introduced a $19 billion budget for FY2011. Perdue's budget included reductions of $410 million for the second year of a biennial budget she signed into law last summer.^[5][6] The state legislature began consider the budget when it reconvened on May 12, 2010.^[5][7] Other aspects of her proposed budget include:

• replacing the in-home personal care services, which serves elderly people who have trouble caring for themselves, with a new program for adults with the most intense needs, saving $59.8 million
• standardizing the rates prison inmate health care providers can charge, saving $20.5 million

No tax increases were a part of the Governor's proposed budget, although car and truck owners would see their annual state vehicle registrations rise to $35, an increase of $7, to pay for the new North Carolina Mobility Fund, which Perdue’s office hopes will one day reach $300 million.^[6] Leaders in the House and Senate say there is little chance the General Assembly would vote to raise sales or income taxes this year.^[7]

[edit] Federal Funds

Lawmakers wrote the budget on the assumption that North Carolina would receive $512 million in federal Medicaid money, but in August, Congress voted to send the state only $343 million of the expected Medicaid money.^[8]

The governor and legislatures agreed in June 2010 to a supplemental budget should the state note receive the full $512 million in Medicaid funds, including cuts to Medicaid provider rates.^[1][9] In August, when the governor moved to enact those cuts and reduce Medicaid reimbursement by $26.6 million or 1.35%, doctors argued that Medicaid rates are already low and that reducing them further will force doctors to accept fewer Medicaid patients.^[8]

The state also received $300 million in education funds from the federal government that the state had not expected.^[8] Doctors suggested that the state tap those funds to avoid Medicaid cuts.^[8]

[edit] Jobs

To create or maintain 20,000 jobs over the next several years, the FY2011 budget provides more than $200 million for assistance to small businesses and infrastructure, including: • $58 million to establish the North Carolina Mobility Fund that will relieve traffic congestion, improve logistic capabilities and create jobs around the state. • $34 million in tax relief by establishing a 25 percent refundable tax credit against unemployment insurance contributions. • Investments in the Main Street Solutions program and other small business assistance programs to grow home-grown businesses that create the bulk of new jobs.

[edit] Education

Education saw the fewest cuts in the budget plan, even before Congress approved $298.5 million for teaching positions.^[10]

The budget fully funds community colleges for enrollment growth. Higher education will need to make about $170 million in discretionary cuts.^[11] The budget uses money from the state lottery to save hundreds of teacher jobs.^[1] It also allots $10 million recurring funds for diagnostic assessment tools that will give teachers the ability to track individual students so they can keep students from falling behind.^[4]

[edit] College Sports Issue

Contentious budget negotiations in the legislature occurred over a controversial subsidy permitting the state's public universities and their booster clubs to pay the in-state tuition rate on scholarships for out-of-state athletes.^[1] The legislative budget deal ended those subsidies but protected a similar subsidy for academic scholarships to out-of-state students.^[1]

[edit] Other Spending

The budget also includes the following provisions^[4]:

• Reduces spending by $20.5 million by linking inmate medical costs to the Medicaid fee schedule.
• Supplies increased funds for the State Ethics Commission and the State Board of Elections.
• $8.8 million for the Criminal Justice Law Enforcement Automated Data Services (CJLEADS) project that will merge all criminal data records into one interactive and comprehensive system.
• $4.7 million to expand the VIPER system which ensures that first responders on the ground are adequately equipped to communicate with one another during emergency situations.
• Funding to begin to establish statewide capacity for law enforcement to collect DNA at the time of the arrest.
• Restoration of the $40 million community mental health reduction which occurred in 2009.

[edit] Future Deficit

The FY2011 avoided many of the deepest cuts under consideration but The Charlotte Observer reported on June 30, 2010 that the deficit for FY2012 could top $3 billion.^[12]

Republicans said the budget spends too much in the midst of a deep recession and fails to avoid prepare a potential $3 billion shortfall at the start of FY2012 when temporary tax increases expire and federal stimulus money dries up.^[4] State Treasurer Janet Cowell, a Democrat, said the state was "starting down a dangerous path" because off how little additional money was set aside to sustain the state employee pension fund - the legislature provided only half of what she said was needed. She said this year's deficit could mean lawmakers would need to set aside a whopping $1.2 billion for the public employee pension fund in 2011^[4]

[edit] Fiscal Year 2010 State Budget

North Carolina faced a $1.7 billion budget deficit for FY 2010,^[13] July 1 2009-June 30, 2010. The state saw an historic 10.9 percent decline in tax revenue.^[6] The original recommended appropriations for FY 2009 from the North Carolina Office of Management and Budget was $21.4 billion before multiple revisions and amendments as revenues declined.^[14] The North Carolina General Assembly met for over six months (January 28-August 11)^[15] and well past the start of the fiscal year to finally pass a balanced budget on August 5, 2009 and signed by Gov. Bev Perdue on August 7, 2009.^[16]

Gov. Perdue issued an executive order on July 24, 2009 to severely restrict state appropriations for the interim until a budget was passed, which was replaced by another executive order on August 14, 2009 that "reduce monthly allotments by five percent of each state agency’s certified budget."^[17] The final $19 billion FY 2010 budget ($20.7 billion with $1.69 billion in federal funds used to supplement state spending, especially in education and Medicaid included)^[18]:^[19]

• Nearly $2 billion in cuts
• $1 billion in federal stimulus money
• Almost $1 billion in higher taxes and fees including: ^[20]
  • 1-cent Statewide Sales Tax Increase; cost to Taxpayers: $803.5 million
  • Sales tax on online purchases, digital downloads of items like songs and movies may be subject to sales tax effective Jan. 1, 2010
  • Online sales made by referrals from N.C. website owners
  • Personal income surcharge; cost to Taxpayers: $172.8 million
  • 3 Percent Surcharge on Corporate Income; cost to Taxpayers: $23.1 million
  • Tobacco products excise tax increase to 45 cents a pack
  • Alcohol excise tax increases
• 700 state job positions eliminated

The FY 2010 budget appropriations include:^[21]

• 7.456 billion for the Department of Instruction
• $999 million for the community college system
• $2.7 billion University of North Carolina
• $3.9 billion Health and Human Services

The state made $500 million in cuts after the budget was passed, with cuts of $37.3 million to K-12 education, $202.5 million to higher education, $3.3 million to public assistance and $52.6 million to corrections.^[22]

[edit] Budget Background

North Carolina ’s constitution requires that the budget enacted by the general assembly be balanced. In the second year of the biennium, the Office of State Budget and Management develops the governor’s recommended adjustments to the biennial budget. The governor releases a recommended budget every other year in February but still makes an annual update, usually in May. Once both the House and the Senate review and approve the document, then the bill is submitted to the governor for final approval.^[23]

In 2007, the legislature created the Program Evaluation Division, a watchdog group to examine state programs and their efficiency. It was one of the last state legislatures to create such a group. The Legislature or the division's 18-member bipartisan oversight committee determines what the division's 10 member staff, which is separate from the legislature's regular staff, will review.^[24] The Program Evaluation Division's recent report can be found here.

[edit] Budget figures

Fiscal Year	General Funds Expenditures	% Change from Previous Year
2000	$13,853,708,453[25]	6.9%[25]
2001	$13,445,510,386[25]	-2.9%[25]
2002	$13,741,135,020[25]	2.2%[25]
2003	$13,855,522,493[25]	0.8%[25]
2004	$14,704,184,520[25]	6.1%[25]
2005	$15,798,359,545[25]	7.4%[25]
2006	$17,065,090,604[25]	8.0%[25]

• See North Carolina state budget (2008-2009) for more details.

[edit] Accounting Principles

Main article: North Carolina government accounting principles

North Carolina Office of the State Auditor prepares and publishes audit reports as independent evaluations of the state's financial records and public program performance. Beth A. Wood was elected State Auditor in 2008.^[26]

The Institute for Truth in Accounting (IFTA) rates North Carolina “Timely” in filing the state’s Comprehensive Annual Financial Report (CAFR) – The annual report of state and local governmental entities. IFTA rated 22 states timely, 22 states tardy, and 6 states as worst. IFTA does not consider North Carolina's CAFRs, and those of the other states, to be accurate representations of the state’s financial condition because the Generally Accepted Accounting Principles (GAAP) basis does not include significant liabilities for the pension plans and for other post employment benefits, such as health care.^[27] North Carolina's CAFRs are prepared and published online by the North Carolina Office of State Controller.^[28]

Credit Rating	Fitch	Moody's	S&P
North Carolina[29]	AAA	Aaa	AAA

[edit] Economic Stimulus Package

North Carolina is expected to receive $7.8 billion from the $787 billion dollar economic stimulus.^[30] All told, the federal stimulus plan would create or save 105,000 jobs in North Carolina, based on White House estimates.^[31]

Nine North Carolina projects were noted in Senator Coburn and Senator McCain's "Summertime Blues, 100 stimulus projects that give taxpayers the blues" report. One project gave North Carolina State University researchers $770,856 to research how video games can help improve mental health for the elderly.^[32] Wake Forest University is using $266,505 in stimulus funds to continue its annual science education workshops for reporters.^[32] The University of North Carolina at Charlotte received more than $750,000 in stimulus funds to help develop a computerized choreography program that its creators believe could lead to a YouTube-like “Dance Tube” online application^[32]

For more information on how the federal stimulus funds are being used in the state of North Carolina, visit the state recovery website.

According to preliminary reports, North Carolina is expected to receive:^[30]

• $132 million for weatherization
• $917 million for Medicaid 2009
• $1.3 billion for Medicaid 2010/11
• $736 million for highways and bridges
• $14 million for Head Start
• $77 million for Title 1 (school improvement)
• $16 million for technical assistance
• $44 million for dislocated workers
• $11 million for employment service
• $83 million towards public housing

[edit] Budget transparency

North Carolina became more transparent in 2009 after the launch of NC Open Book spending transparency.

Prior to the launch of NC Open Book, the Office of the State Auditor established a searchable database that reports on private organizations receiving state funds. The database is available here.

[edit] Website evaluation

C-
Budget Usability Elected Officials Administrative Officials Ethics Audits Contracts Lobbying Public records Taxes

NC.gov is the website for the state of North Carolina.

• Main article: Evaluation of state websites

[edit] The good

• State tax information is provided.^[33]
• Elected and administrative officials are listed with contact information.^[34]
• Audit reports are available.^[35]
• Budget is published.^[36]

[edit] The bad

• Site has a search function but is somewhat difficult to navigate.
• Current state contracts are not provided.
• Does not provide information on ethics, lobbying, and how to request public records under the North Carolina Public Records Law.

[edit] Government tools

The following table is helpful in evaluating the level of transparency provided by a state spending and transparency database:

Criteria for evaluating spending databases

State Database	Searchability	Grants	Contracts	Line Item Expenditures	Dept/Agency Budgets	Public Employee Salary
NC Open Book
Private Companies Receiving State Funds Site

[edit] Limitations and Suggestions

NC Open Book does not list state employee salaries, nor does it provide line-item expenditures.

A user name and password are required to view the Private Companies Receiving State Funds site.

[edit] Economic Stimulus Transparency

*North Carolina received an estimated $4,019,461,548 from the American Recovery and Reinvestment Plan of 2009 [37]

• The economic recovery website to show how legislators and government officials in North Carolina are spending Federal funds is available here.

[edit] Error in ARRP

On November 16 and 17, 2009, many errors were found in the $747 billion plan that showed the plan set aside money for districts that do not exist. According to Recovery.gov, the plan shows its funds will go to 884 Congressional Districts, though there are only 435.^[38][39]

North Carolina has distributed more than $5.7 million in federal stimulus money to six congressional districts that do not exist, according to ARRP's website.

The labels for the districts include 00 and 91.^[40]

[edit] Public employee salary information

Information about North Carolina's state employee salaries is available at this link. The Charlotte Observer obtained this information from the North Carolina Office of State Personnel.

[edit] See Also

North Carolina taxpayer-funded lobbying

North Carolina state budget (2008-2009)

[edit] External links

[edit] Additional reading

[edit] References

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