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North Carolina state budget

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 second fiscal year of the budget.^[1] The Assembly passed the $19.7 billion FY2012 on June 5, 2011 budget.^[2] Gov. Bev Perdue vetoed the bill on June 12, 2011, the first time in state history that the governor has vetoed a budget. Lawmakers voted to override the veto on June 15, 2011, and the budget took effect.^[3]

North Carolina has a total state debt of approximately $97,376,318,000 when calculated by adding the total of outstanding official debt, pension and other post-employment benefits (OPEB) liabilities, Unemployment Trust Fund loans, and the budget gap. ^[4]

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

[edit] Fiscal Year 2013 State Budget

Gov. Perdue said her spending proposal for FY2013 would include a temporary sales tax increase of three-quarters of a penny, the revenues from which would be dedicated to public education. That would raise the sales tax consumer in most counties pay from 6.75 percent to 7.5 percent.^[7]

The administration told several House subcommittees to find reductions equal to 1.5 percent of what the two-year budget directs them to spend in FY2013.^[8]

The legislature convenes on May 16, 2012 to take up the Medicaid issue and adjust the second year of the two-year state government budget that was approved in 2011.^[8]

Governor's Proposed Budget

Gov. Perdue unveiled her proposed adjustments to the $20.9 billion spending plan for FY2013 on May 10, 2012,^[9] and the budget can be found here.

[edit] Fiscal Year 2012 State Budget

• See past state budgets

As of the end of April, lawmakers learned that the state would have a revenue surplus of about $233 million for FY2012, but they expected a $150 million shortfall for the state's Medicaid program to take up a large portion of that surplus.^[8]

The House passed a $19.7 billion budget by a vote of 73-45 on June 11, 2011, matching a similar Senate plan. Gov. Perdue vetoed the bill on June 12, 2011.^[10] Lawmakers voted to override the veto on June 15, 2011, and the budget took effect.^[3] Gov. Perdue said she vetoed the budget in pat because it cuts education spending. The budget ends the expiring three quarters of a cent sales tax, eliminating $800 million in revenue Governor Perdue has relied upon to fund teachers' jobs and protect education.^[11] Democrats said that the budget cuts roughly 13,000 education jobs statewide, including nearly 9,300 in public schools.^[2] Republicans have said those numbers are exaggerated and don't take into account usual employment attrition and more than $250 million in unused federal money. Republicans also say that the budget spends almost $7.5 billion on the public schools next year, or nearly as much as Perdue's proposal in February.^[12] The budget also cuts funding to higher education, directing the University of North Carolina system to find $414 million in cuts.^[12]

The legislature considered a bill that made mover than 35 changes to the budget the week after it was passed, and the legislature typically passes a technical corrections bill after every budget that serves as a kind of clean-up bill. This bill would do a variety of things, from allowing the Lieutenant Governor to keep to his cell phone to specifying that certain prisons could not be among those closed as part of the closures called for in the budget. ^[13]

Gov. Perdue said she did not intend to raise taxes^[14] and 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.^[15] The state sales tax would revert to 6.75%.^[15] Responding from a request from Gov. Perdue regarding the FY2012 budget, administrators from the public schools and university system told a General Assembly oversight committee how they would be affected by spending cuts of 5% or 10% to a General Assembly oversight committee.^[14]

The 342 page budget can be found here.

State government reorganization

North Carolina state government is undergoing the biggest reorganization in 40 years to streamline it and make it more efficient, and the centerpiece is the creation of a 25,000-employee criminal justice super agency. The state did not know just how much money would be saved by the reorganization.^[16]

Medicaid

As of December 2011, the state has a projected shortfall of $139 million in Medicaid funding and the governor and legislature have not reached an agreement on how to close the funding gap.^[17]

Education

Legislators spent about $258 million less on public education than Perdue proposed, or about 2.3 percent less. The budget does provide additional funds to hire more than 1,100 teachers in early grades and the framework to create a merit pay plan for teachers starting in the 2012-13 school year. ^[3]

State education officials said the budget would lead to the elimination to 13,000 public education jobs, of which 3,200 comes from the University of North Carolina system. Republicans did not agree with those numbers, saying that they fail to account for more than $250 million in federal funds for preserving education positions that the local districts have not spent. ^[3]

The budget limited enrollment in the NC Pre-Kindergarten program. Superior Court Judge Howard Manning ruled on July 18, 2011, that changes that limit enrollment in the service violate a landmark state Supreme Court ruling, the so-called Leandro II ruling, that every child has a constitutional right to an equal education.^[18]

Expiration of Taxes

The FY2012 budget permits temporary taxes expire, meaning the base sales tax consumers pay will decrease from 7.75 percent to 6.75 percent. Other taxes for the highest wage earners and corporations, approved in 2009 by Democrats, also won't be renewed.^[3]

Cuts

The budget makes many other cuts, including educe spending in the Department of Environment and Natural Resources by more than 12 percent, reducing the number of agency employees by about 160. It also gives The Clean Water Management True Fund $11.3 million, although the fund is supposed to receive $100 million annually.^[19]

Funding for more than 1,250 full-time positions would be eliminated in the courts, local prosecutor offices and prisons.^[3]

[edit] Negotiations

Legislative Budget

On May 5, 2011, the House approved a $19.3 billion budget bill by a vote of 72-47, with some Democrats supporting the Republican proposal. The bill will go to the Senate, which will create its own budget version, and then the House and Senate also will take votes on a final compromise budget before it goes to Gov. Perdue.^[20]

The budget approved by the House cuts more than $360 million for teacher assistants, janitors, clerical workers, assistant principals, and programs. IT also includes a provision that makes the State Board of Education, not local boards, responsible for setting policy on how impending school layoffs will be handled.^[21] The plan spends $650 million less than Perdue proposed for the coming year in the public schools, the University of North Carolina system and community college system and 11 percent less than what was required to keep services running at current levels.^[20]

The House budget includes the expiration of a pair of temporary tax increases -- an extra penny on the sales tax and higher income tax bills for top wage earners. Republicans ran on doing away with the taxes during the fall campaign and allowing them to expire means the state will have $1.3 billion in lost revenues.^[20]

The House plan also increases many fees, including:^[22]

• High school students would pay up to $75 for driver education classes that were previously free.

• Criminal defendants will pay up to $70 more in court fees, and pay $10 for each night they spend instead of the prior $5/night fee.

• Community college classes will cost more, and so will a variety of state licenses and inspection fees.

• Commuters who travel to work on two busy coastal river ferries, now free, will have to pay tolls or buy passes that could cost up to $100 a month.

• Drivers with speeding tickets and other defendants would pay $24 more in costs for District Court, and $52 more for Superior Court.

• parties in civil suits would be charged $20 to file motions, and $150 to $200 to file counter-claims, which could lead to the courts' collecting an additional $57 million in new or increased fees for the state, and $35 million more for counties.

Unemployment Insurance

The U.S. Labor Department notified state officials at the beginning of August that it would stop paying from the extended benefits program by April 16 because the state's recent three-month average unemployment rate had improved statistically from the depressed rates of prior years.^[23]

On April 16, 2011, the legislature passed a bill linking the state budget and state unemployment benefits, extending the benefits but forcing the Democratic governor to accept a 13 percent cut in the $19.9 billion state budget she presented in February.^[24] Gov. Perdue vetoed the bill, meaning that 37,000 state residents would lose unemployment benefits.^[25][23] On June 3, 2011, the governor issued an executive order to restore the benefit payments.^[26]

[edit] Budget transparency

• See Evaluation of North Carolina state website or find sample transparency legislation at the Sunshine Standard

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] 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	Y	Y	Y	N	Y	N

[edit] Limitations and Suggestions

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

[edit] Fiscal Year 2011 State Budget

Find the state’s FY2011 Comprehensive Annual Financial Report (CAFR) compiled by the state government here.

A Dec. 17, 2010 memo directed agencies to find additional 2.5% savings by keeping vacant positions open, halting salary increases and limiting purchases, travel and training. It could save the state $200 million this fiscal year.^[27]

North Carolina Assembly passed the FY2011 budget and Gov. Bev Perdue signed it into law on June 30, 2010. 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.^[28]

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.^[28]

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.^[29][30] The state legislature began consider the budget when it reconvened on May 12, 2010.^[29][31] 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.^[30] Leaders in the House and Senate say there is little chance the General Assembly would vote to raise sales or income taxes this year.^[31]

[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.^[32]

The governor and legislatures agreed in June 2010 to a supplemental budget should the state not receive the full $512 million in Medicaid funds, including cuts to Medicaid provider rates.^[1][33] 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.^[32]

The state also received $300 million in education funds from the federal government that the state had not expected.^[32] Doctors suggested that the state tap those funds to avoid Medicaid cuts.^[32]

[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.^[34]

The three branches of North Carolina education - K-12 education, community colleges and the university system - accounted for 57% of the $19 billion state spending plan, and that figure did not include stimulus money.^[14]

The budget fully funds community colleges for enrollment growth. Higher education will need to make about $170 million in discretionary cuts.^[35] 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.^[28]

[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^[28]:

• 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] 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.^[36]

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.^[37] The Program Evaluation Division's recent report can be found here.

[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.^[38]

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.^[39] North Carolina's CAFRs are prepared and published online by the North Carolina Office of State Controller.^[40]

[edit] Stimulus

North Carolina has received $3.92 billion in federal funding from the American Recovery and Reinvestment Act of 2009.^[42]

[edit] Public Employees

Main article: North Carolina public employee salaries

Main article: North Carolina public pensions

According to 2008 Census data, the state of North Carolina and local governments in the state employed a total of 655,598 people.^[43] Of those employees, 510,183 were full-time employees receiving a net pay of $1,839,723,835 per month and 145,415 were part-time employees paid $150,416,252 per month.^[43] More than 57% of those employees, or 377,690 employees, were in education or higher education.^[43] The state employee work force has grown less than 1 percent since July 2008, when there were 92,627 workers at state agencies and universities.^[44] As of April 2010, North Carolina employed 93,217 state workers.^[44]

[edit] External links

[edit] Additional reading

[edit] References

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