Gov. Perdue released her budget proposal earlier this week. Because of the daunting $2.4 billion deficit, Perdue’s recommendations were highly anticipated. Following is an overview the Governor’s proposed budget plan:
TOTAL SPENDING STILL UP NEARLY 90% IN 15 YEARS
- Perdue’s budget proposal would spend $19.9 billion for fiscal year 2011-12
- Total spending in the current year budget, including federal stimulus dollars, comes in at $20.6 billion.
- The budget of $19.9 billion, however, represents an increase over 2008-09 actual spending of a quarter-billion dollars.
- Moreover, a budget of $19.9 billion would mark a 37% increase in state spending over ten years ago, and 88% growth in the last 15 years.
PERDUE BREAKS PROMISE ON “TEMPORARY TAXES” WITH $826 MILLION TAX HIKE, RECOMMENDS CUTTING CORPORATE TAX RATE
- Perdue’s plan would lower the state corporate tax rate from 6.9% to 4.9%. The change would drop North Carolina’s corporate tax rate from highest to lowest in the Southeast and third lowest in country among the 44 state with a corporate income tax. This move is projected to reduce corporate tax revenue by $115 million for the 2012 budget year.
- Extends ¾ of the 1 cent “temporary” sales tax set to expire this year. This is estimated to cost taxpayers $826 million.
- Allows the temporary income tax and corporate tax surcharges to expire.
- Includes a temporary, one-year tax credit for small businesses with gross receipts less than $2.5 million. The credit would be equal to 50% of the unemployment insurance tax paid by eligible businesses. The credit is estimated to total $65 million for the coming budget year.
- State employees again receive no pay raise in Perdue’s budget.
- An estimated 10,000 positions are eliminated in the proposal. Most of those, however, are vacant positions. About 3,000 actual workers would lose their job in Perdue’s plan. It appears 1,900 of those are school bus drivers. Another 1,000 state workers would be reduced due to an early retirement initiative. The “Employee Retirement Incentive Program” is projected to save $208 million by offering a buyout for employees to retire early. This may save money now, but will put additional financial pressure on the state’s pension system.
- State Health Plan: Perdue’s budget includes a $117 million increase expenditure to the State Health Plan to cover expected rising premiums. Her proposal also includes $89 million in savings realized from requiring some state workers and retirees to pay for a small share of their Health Plan premiums themselves (those opting in to the 80/20 PPO plan)
REORGANIZATION AND CONSOLIDATION
- $142 million saved by eliminating funding for 68 “nonessential programs” and eliminating 235 positions
- $442 million saved by reducing 71 other programs while eliminating another 4,500 positions
- $78 million through “37 reorganizations and consolidations that eliminate 488 administrative and middle management positions”
- Additional savings from outsourcing IT and healthcare services
- Consolidates 14 executive branch agencies into 8.
CORPORATE WELFARE AND OTHER NOTABLES
- Perdue seeks to add $10 million to the One North Carolina, her discretionary corporate welfare fund
- $75 million dedicated to funding repairs to state government buildings
- $25 million to upgrade equipment and technology in the community college system
- Perdue proposes her “Career and College Promise” of providing a fully-state funded two years of career training or a two-year community college degree for high school students maintaining a B grade point average.
- Adds $75 million to the Mental Health Trust Fund
- $150 M to rainy day fund
- 4,410 non-teaching school positions are slated to be eliminated, for a savings of $160 million. A breakdown of the positions:
- 1,900 school transportation
- 1,700 clerical and custodial
- 380 school building administrators
- 290 instructional support
- 140 school central office positions
- $40 million reduction in funding for textbooks, lowering the allotment to $75 million
- $31 million in savings realized by the Retirement Incentive Program
- Millions in savings by eliminating and reducing pass-through funding to non-profits. Most notable among these is $13 million from dropout prevention grants. Other nonprofits include Kids Voting, Science Olympiad, North Carolina Science, Math, and Technology Education Center, Communities in Schools and Teach for America.
- A $38 million expansion of the budget for projected enrollment growth
- Pushes $39 million in spending on workers’ compensation and tort claims onto local entities
- Forces another $57 million in spending onto local entities to fund school bus replacement
- Ends the portion of the corporate tax revenue traditionally directed to the school building fund, increasing instead available revenue to general operations by $72 million
- $253 million “management flexibility reduction.” Perdue specifically recommends UNC consider reducing senior and middle management positions and the elimination of low-performing or redundant programs
- $12.2 million in savings realized from the Retirement Incentive Program
- $11 million reduction to UNC Hospital from a 25% reduction in their subsidy for charity care
- $7.1 million in savings from agricultural research station consolidation – based on recommendations in a 2008 Program Evaluation report
- Increase of $34.9 million for needs-based financial aid
- $3.8 million in savings by eliminating specialized centers and programs, such as the Textile Technology Center and Gaston College and the Marine Technology Program and Cape Fear Community College
- A tuition increase of $5.50 per credit hour – reducing the state subsidy by $25.3 million
- $32.3 million in savings from a “management flexibility reduction”
- Increase of $17.9 million to accommodate enrollment growth
- $25 million in savings realized from consolidating and adjusting the formula used for categorizing program curriculum
- $25 million is dedicated from the current budget’s unexpended funds for equipment and technology upgrades
Justice and Public Safety
- $9 million in savings by reducing administrative service expenses by 16%
- $4.8 million reduction to the Department of Justice – DOJ had discretion how to make the cuts
- $500,000 increase for SBI training standards and improvements
- $5.5 million in savings through reducing funding for the Eckerd Wilderness Camp and closing one juvenile multi-purpose home
- $23.7 million in savings from a “management flexibility reduction” to the Department of Corrections
- $3 million in savings by shifting eligible inmate medical costs to Medicaid
- $10 million increase for funding of four new correctional facilities
- Most of the savings contained in the General Government come from the Retirement Incentive Program and the elimination of vacant positions
- Nonrecurring increase in spending of $1 million in 2011-12 and $1.5 million in 2012-13 to purchase land buffers for military expansions throughout North Carolina
- $7 million increase for operation and staffing of new buildings being completed in 2011 and 2012 – specifically in DENR, DOA and DHHS
- Doubles the company license free from $2,500 to $5,000 for life, health, fire and casualty insurance companies. This increase is estimated to raise $3.3 million in revenue
- $2.3 million in savings from a 10% reduction in Department of Cultural Resources grants to the NC Arts Council, grassroots programs, state aid to libraries, and the NC Symphony
- $1.2 million in savings realized by converting the NC Transportation Museum to receipt-supported.
Department of Natural and Economic Resources
- A one-time $10 million expansion to the One North Carolina Fund – the governor’s discretionary corporate welfare fund
- $600,000 in savings realized by closing welcome centers on Tuesdays and Wednesdays. Perdue further pledges to work with the Department of Transportation to privatize the state’s welcome and visitor centers.
- $7.3 million in savings from reducing the state appropriation to 13 non-state entities by 10%. Included in the list are the NC Biotechnology Center, the NC Rural Economic Development Center and Wake Forest Institute of Regenerative Medicine
- $10.2 million in savings from consolidating the state’s research station farms based on the recommendations in a 2008 Program Evaluation Committee report
- $218,000 in savings by closing two state forests due to low attendance (Rendezvous Educational State Forest and Turnbull Creed Educational State Forest)
- $1.4 million in savings from eliminating the oyster sanctuary program
- $3.1 million savings from a 10% reduction in state funding to Parks and Recreation division. To avoid an permanent employee layoffs, this will require many state parks to close two days a week
- $50 million reduction in the scheduled appropriation to the Clean Water Management Trust Fund, from $100 million to $50 million; which maintains the funding level for the 2009-10 biennium
- A one-time reduction of $7 million for the JDIG (Job Development and Investment Grant) fund
Health and Human Services
- $2.3 million in savings by reducing funding to private nonprofits
- $2.1 million in savings realized by the Retirement Incentive program for department personnel
- $9.4 million in savings from a 5% reduction to Smart Start
- $5.5 million reduction to local departments of social services
- $16 million net savings from enhanced measures to root out fraud, abuse and over utilization in Medicaid
- $16.4 million savings from eliminating some optional services and otherwise modifying delivery of services in Medicaid
- $75 million of the projected year-end balance from the end of the current budget year is earmarked for the Mental Health Trust Fund