North Carolina state budget (2008-2009)
From Sunshine Review
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North Carolina is facing a $3.2 billion budget gap for fiscal year 2009.[1] However, in light of a lower than expected tax collections in April 2009 tax collections, the budget gap for fiscal year 2010 grew by $1.5 billion to a total of $4.6 billion. The budget gap is estimated to equal 21 percent of 2008's budget.[2] In order to try and ease the state's budget woes, Gov. Bev Purdue transferred $139.6 million from rainy day funds in April 2009 and a state Senate bill transferred another $250 million to keep the State Health Plan afloat.[3] In her State of the State Address, the governor emphasized that not only is it time to cut excess spending but it's also time to "transform the way we invest the people's money."[4] Gov. Purdue added:
“I will do what I must in order to ensure that North Carolina can pay our bills and provide the essential services required by our citizens.”[5]
[edit] Impact of budget woes
- In April 2009 the unemployment rate remained at 10.8 percent for the third consecutive month. The statewide jobless rate a year earlier was 5.7 percent. In February 2009 the unemployment rate rose 5 points to 10.7 percent. The national unemployment rate in April was 8.9 percent.[6]
- According to the state Employment Security Commission, the unemployment rate fell in 83 counties across North Carolina. For example, Alleghany County’s rate fell 2%, Ashe's 0.6 % and Burke’s fell 0.8%.[7]
- North Carolina Senate Bill 200 is a bill that would make the current fuel tax limit of 29.9 cents per gallon the minimum rate for the next two years. According to state officials the bill, if passed, is expected to generate $67.5 million for roads and bridges through mid-2011. The bill already passed the Senate and waits to be voted on in the House, as of June 4,2009, before going before the governor for final approval.[8]
- On April 28,2009, the governor announced a "flexible furlough program for all state employees." The furlough amounts to $65 million for 2009. Teachers’ and state employees’ compensation is expected to be reduced by an annualized amount equivalent to 0.5 percent for the remainder of FY 2009.[5]
[edit] Budget background
North Carolina operates on a biennium,covering two fiscal years at a time. For example, the 2009-2011 biennium consists of year 1, July 1, 2009 to June 30, 2010, and year 2, July 1, 2010 to June 30, 2011. 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.[9]
[edit] Budget figures
| Fiscal Year | General Funds Expenditures | % Change from Previous Year |
|---|---|---|
| 2000 | $13,853,708,453[10] | 6.9%[10] |
| 2001 | $13,445,510,386[10] | -2.9%[10] |
| 2002 | $13,741,135,020[10] | 2.2%[10] |
| 2003 | $13,855,522,493[10] | 0.8%[10] |
| 2004 | $14,704,184,520[10] | 6.1%[10] |
| 2005 | $15,798,359,545[10] | 7.4%[10] |
| 2006 | $17,065,090,604[10] | 8.0%[10] |
[edit] Ideas about why the crisis exists
- In April 2009, state officials reported that state tax revenues dropped 21 percent compared to a year ago. Tax revenues declined a total of $623.7 million pushing the year to date decline to $1.7 billion. According to officials, the decline is caused by a sluggish economy and high unemployment.[3]
- In January 2009, state revenues declined by $286 million or 14.3 percent, compared to 2008. Personal income tax collections dropped $284 million, or 21.4 percent, compared to a year ago. However, sales and use, beverage and tobacco taxes combined grew $42 million, or 8.5 percent, during January.[11]
[edit] Proposed actions
[edit] Governor Bev Purdue
North Carolina State of the State Address 2009 |
Gov. Bev Purdue's budget recommendation closes a $6.4 billion cumulative gap and reduces spending by $2.6 billion over the next two years with the use of $2.9 billion of federal recovery funds and recommends a $1.3 billion revenue tax change for tobacco products and alcohol. "Despite our nation's tough economic situation, I stand ready to strengthen our middle class, improve public education and public safety, and ensure that government works smart for our citizens," said Purdue.[12]
In April 2009, the Governor announced a "flexible furlough" and the discovery of additional funds to close the current FY 2009 budget gap. A total of $1 billion in special funds, the state’s Savings Reserve Account, and federal recovery dollars will be used to help close the state's gap. “North Carolina continues to experience the effects of a national economic crisis, which force me to make difficult decisions in order to maintain a balanced budget through June (2009),” said Gov. Perdue.[5]
[edit] Republicans
State Democrats said that they plan to attack the state's budget deficit with budget cuts that would eliminate a total of $3.9 billion in spending, but state Republicans said that they won't support tax increases to balance the cuts.[13] Rep. Pearl Burris-Floyd and other GOP members said she won't vote for tax increases to narrow the deepest cuts.[14] In May 2009, Senate Republican Leader Phil Berger asked for an independent prosecutor to investigate former Gov. Mike Easley’s campaign finances. The request comes in light of reports of missing expense records detailing travels[15]
[edit] Democrats
North Carolina Democrat lawmakers propose to close the budget gap almost entirely through spending cuts. Cuts currently include 12 percent from education spending and cuts to university centers, programs and initiatives. Lawmakers said that despite the cuts, they do not plan to propose tax increases. In comparison to the current 2009 budget, drafts of the Democrats' proposal reveal a budget of $17.5 billion, a reduction of $3.9 billion. Rep. Mickey Michaux said tax increases wouldn't bring in enough revenue to avoid painful cuts.[16] However, not all Democrat legislators are happy with the proposal. "I do have some serious problems with the budget. I'm concerned about not having a revenue package," said Rep. Jean Farmer-Butterfield.[13]
[edit] Revise state tax plan
In March 2009, the North Carolina Budget & Tax Center released a revenue plan that to help close the state's looming budget gap and provide "long-term stability,adequacy and fairness of the state tax system."[17]
The plan proposes:[17]
- Close corporate tax loopholes and end ineffective business tax incentives
- Broaden the base of the personal income tax and make it more progressive
- Broaden the sales tax base to include digital downloads and services commonly taxed in other states
- Substantially increase the state Earned Income Tax Credit for working families.
[edit] Raise taxes
In early June 2009, approximately 80 groups, including the North Carolina Budget & Tax Center, organized "Together NC." The groups have called for legislators to raise taxes in 2010 and reduce the number of spending cuts because it's effects could leave thousands out of work.[18]
[edit] Economic Stimulus Package
North Carolina is expected to receive $7.8 billion from the $787 billion dollar economic stimulus.[19] All told, the federal stimulus plan would create or save 105,000 jobs in North Carolina, based on White House estimates.[20]
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:[19]
- $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] Legislation
- North Carolina Executive Order No. 4 (2009), signed by Bev Perdue on January 12, 2009, mandated the creation of a website to make available information about state grants and contracts. The site is managed by the Office of State Budget and Management and the Office of Information Technology Services.[21]
Office of the State Auditor: North Carolina’s Office of the State Auditor provides residents with in-depth grant information. Thanks to an increase in reporting requirements that became effective in 2005, all nongovernmental entities receiving state or federal “pass-through” grants must complete reports on how the funds were used (previously, organizations receiving less than $15,000 do not have reporting requirements).
Upon receipt of those reports, the State Auditor issues a yearly grant report with summaries by fund source, agency, county, and service type. In fiscal year 2006, North Carolina gave private organizations $606 million in grants, yet over a quarter of all grants had none of the reports required of beneficiaries on how the grant money was used. In order to spur compliance, the Auditor’s office publishes a monthly reporting noncompliance list.
While the information currently focuses on private-sector grants, the Auditor’s office works with the Local Government Commission to establish a similar report for grant funds going from the state to local governments.
[edit] Government tools
The following table is helpful in evaluating the level of transparency provided by a state spending and transparency database:
| 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.
[edit] Economic Stimulus Transparency
- The Economic Recovery and Reinvestment Act of 2009 designated $787 billion to be spent throughout the U.S. Of that $787 billion stimulus package, it is estimated that 69%, or over $541 billion, will be administered by state governments.[22]
- North Carolina will receive an estimated $4,019,461,548 [23]
- The economic recovery website to show how legislators and government officials in North Carolina are spending Federal funds is available here.
[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
[edit] External links
- Model transparency legislation from the American Legislative Exchange Council is available at this link.
- John Locke Foundation
- John William Pope Civitas Institute
- Jesse Helms Center
- North Carolina Office of State Budget and Management
- North Carolina General Assembly site
- North Carolina Americans for Prosperity
- Charlotte Observer, North Carolina Government Salaries Database
[edit] Additional reading
[edit] References
- ↑ Center on Budget and Policy Priorities,"State budget troubles worsen," May 18,2009
- ↑ Associated Press,"Group says cuts alone to NC budget would devastate," June 2,2009
- ↑ 3.0 3.1 The News Observer,"Report: Tax revenue down 21% in April," May 13,2009
- ↑ Gov. Purdue,"State of the State 2009," March 9,2009
- ↑ 5.0 5.1 5.2 WNCT,"Purdue Announces Pay Cut For All State Employees," April 28,2009
- ↑ Charlotte Business Journal,"North Carolina unemployment holds steady at 10.8%," May 26,2009
- ↑ Go Blueridge,"Unemployment Rate Decreases in Most of NC Counties," June 1,2009
- ↑ Land Line Magazine,"North Carolina bill would authorize temporary fuel tax increase," June 4,2009
- ↑ North Carolina Office of State Budget and Management,"About the Budget," retrieved June 5,2009
- ↑ 10.00 10.01 10.02 10.03 10.04 10.05 10.06 10.07 10.08 10.09 10.10 10.11 10.12 10.13 State of North Carolina,"Historical budget data," March 2009
- ↑ The Business Journal of the Greater Triad Area,"North Carolina revenue drops 14%," February 24,2009
- ↑ Gov. Purdue,"2009-11 Governor's Recommended Budget," retrieved June 5,2009
- ↑ 13.0 13.1 Associated Press,"NC budget plan inches along with subcommittee OKs," June 5,2009
- ↑ The Associated Press,"Thursday at the North Carolina General Assembly," June 5,2009
- ↑ The News Observer,"GOP wants probe of 'lost' records," May 19,2009
- ↑ The News Observer,"N.C. House eyes stark spending cuts," June 4,2009
- ↑ 17.0 17.1 North Carolina Budget and Tax Center,"http://www.ncjustice.org/sites/default/files/BTC%20Revenue%20Plan_March%202009.pdf," March 2009
- ↑ Associated Pres,"Group says cuts alone to NC budget would devastate," June 2,2009
- ↑ 19.0 19.1 North Carolina Recovery,"Impact on North Carolina," retrieved June 3,2009
- ↑ American Recovery and Reinvestment Act,"Impact," retrieved June 3,2009
- ↑ About NC Open Book
- ↑ National Taxpayers Union, "A Letter to the Nation's Governors: Ensure Transparency and Accountability by Posting Stimulus Expenditures Online," March 10, 2009
- ↑ Wall Street Journal,"Stimulus Spending by State," April 23,2009
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