In 2011 North Carolina lawmakers passed a two-year state budget which legislators are reviewing this year. The current budget has built in increases of roughly a quarter billion dollars for the second year, and decisions were made based on revenue forecasts at that time. The House budget proposal, however, includes another $436 million in additional spending on top of that.
As of now, the state is on track to run a slight surplus in the current fiscal year, but the House’s recommended additional spending increases could translate into a deficit for FY 2012-13.
Following is our summary of the House budget plan:
The five major North Carolina House appropriation committees that make up the majority of the state’s General Fund budget have settled on their proposals tweaking the second year of the biennial budget passed last year. Rather than holding the line on spending, or even finding some more sensible reductions, the plan would increase spending for fiscal year 2012-13 by $436 million over what was passed last summer. Items such as debt service and reserves for state employee retirement benefits still need to be added separately.
The increases are even more curious given the fact that the most recent revenue projections for 2012-13 show virtually no additional revenue becoming available in the coming fiscal year. This issue, of course, leads to the question: where do House budget writers think they are going to come up with an additional $436 million?
The most likely guess is they will seek to raid various trust funds established for specific purposes. For instance, there was some talk of lawmakers looking to transfer money from one of the transportation trust funds. Moreover, the Natural and Economic Resources budget includes a transfer of $30 million from the One North Carolina Fund (the governor’s corporate welfare money) to the General Fund to finance general operations. In addition, public education increases are budgeted with the partial aid of $42 million in anticipated surplus state lottery receipts. But that still leaves well over $300 million in unfunded increases.
Amidst all the recent talk coming from Raleigh about fiscal restraint, tough economic times and belt-tightening, it is striking that the House would craft a budget proposal hiking spending by another $436 million.
Seems like old times…
Below is a summary of the five major agencies and the House’s budget proposal for each.
The House Appropriations Subcommittee on Education approved a budget recommendation for public education (K-12, community colleges and UNC System) which — if approved — will add about $268.6 million in additional spending over funding levels approved in last year’s budget. About $248 million of the expected increase is for K-12 education. Under the House’s proposed plan, budgets for the Community Colleges and the UNC System will increase by $10 million and $10.5 million respectively.
Education Spending By Budgets
|2012-13 Ed Budget (Approved. Last Year)||2012-13 Ed. Budget (Approved by House Appropriations Ed. Subcommittee)||Net Gain or Loss|
- $333 million in additional spending to offset reduced allotment to local education agencies (LEAs). $227 million of this is one-time, non-recurring funds to help replace federal Edujobs funds. Some of the funding is to be appropriated from $42 million in projected surplus lottery receipts.
- $6.4 million in savings because of fewer students
- Budget also restores pass-through funding to programs whose budgets were reduced last year including: $3.2 million to restore Teaching Fellows Fund; $900,000 Teach for America and $200,000 Governor’s School
Community Colleges Highlights
- $12.1 million savings because of expected reduction in enrollment
- $10 million NC Back to Work Initiative
- $11.7 million to lessen management flexibility reduction
- $3 million for faculty recruiting and retention fund
- $9 million for UNC Television
There are several reasons why conservatives should be concerned about the proposed House Education budget.
The Use of Non-Recurring Funds. Lawmakers used $227 million in one-time funds to offset the loss of federal Edujobs funding. The one-time fix shows lawmakers aren’t willing to make tough budget decisions to get state spending under control. Haven’t we seen this before?
Flip Flops. By restoring funding to programs Republicans had reduced last year (i.e. Teaching Fellows, Teach for America, Governor’s School), lawmakers showed little commitment to the principles on which they justified last year’s funding reductions. These actions also indicate lawmakers have no aversion to funding private non-profit organizations with public money. If these programs are doing good work, private support will help to replace the loss of public funds.
Fail to Reflect Winning Themes. Republicans swept to majorities in the House and Senate on themes of reform, less spending and smaller government. Approving a budget which adds $268 million in spending is certainly not consistent with those themes. Patching together a budget that uses one-time funding, additional funding transfers and delays hard decisions on programs only perpetuates our current problems. It is worrisome the House Education budget fails to reflect these themes, and hopefully is not a sign of things to come.
Health and Human Services (HHS)
Amount Approved in 2011 Session: $4,455,162,933
House Appropriation Revised Budget Proposal: $4,617,833,246
The House Appropriations Subcommittee on Health and Human Services (HHS) has rolled out its Fiscal Year 2012-13 Budget Proposal. The original approved budget during the 2011 session was almost $4.5 billion but after the interest groups were done with it, it now stands a little over $4.6 billion – just a cool $162 million increase over last year’s biennial budget. While that may be pocket change to some legislators, it’s still quite a bit of money to the average taxpayer.
The highlights include:
- Replace state Smart Start Funds with federal Block Grant funds: This will save the state an estimated $4 million.
- Increase in NC Pre-K Program: These additional funds in the amount of $15 million, along with the lottery funds, provide a total of $143 million for the Pre-K program.
- Medicaid adjustments: Based upon an expected growth in Medicaid eligibility, $168 million in additional funds is now available. Another $55 million will go to fund repayment of a FY 2009 federal overdraw and to repay a drug rebate policy change. There is also expected a $59 million reduction due to projected savings by the Community Care North Carolina network and a $630,000 savings through the 1915 b/c waiver in behavioral medicine. Through fraud prevention programs, another $3.8 million is expected to be saved.
- Eliminate administrative waste and vacant positions: An attempt to minimize waste and redundant positions fell rather short. Only $1 million was reduced due to administrative waste and only 50 vacant positions were eliminated while 650 vacant positions remain open.
Natural and Economic Resources
Amount Approved in 2011 Session: $360,985,691
House Appropriation Revised Budget Proposal: $384,014,831
The House Appropriation Committee for Natural and Economic Resources plan reveals a proposal to increase spending by $23 million, or 6.4%, over the spending amount approved in last year’s biennial budget. A significant share of the increases involve corporate welfare and economic central planning activities.
Funding increases include:
- More than half a million increase for Agriculture Centers in southeastern NC
- $12.6 million in funding for regional offices within the Department of Environment and Natural Resources. The appropriation restores funding for the offices, which had been eliminated in last year’s biennial budget.
- $100,000 in nonrecurring funding for the “Oyster Sanctuary Program”
- Nearly half a million dollars are restored to fund a “Conservation Education Program” in the Wildlife Resources Commission. The education program had been slated for elimination in last year’s biennial budget.
- $9 million for the One North Carolina Fund – a corporate welfare scheme. The Fund currently has a cash balance of $60 million. However, $30 million of that would be transferred to the General Fund under the House proposal, with $30 million remaining. For some reason, House budget writers felt the need to pad the Fund with another $9 million.
- $2.6 million in additional taxpayer money to fund Regional Economic Development Commissions, which would bring the total FY 2012-13 allocation to close to $5 million. These commissions are essentially local economic central planning boards.
Justice and Public Safety
Amount Approved in 2011 Session: $2,323,469,854
House Appropriation Revised Budget Proposal: $2,302,980,918
Interestingly, the only major segment of the state budget taking a reduction in the House budget plan is Justice and Public Safety (JPS). In all, the JPS budget would be reduced by roughly $20 million relative to the original spending plan passed in last year’s biennial budget. The total revised budget for JPS was $2.3 billion.
The highlights include:
- The funding for the Voice Interoperability Plan for Emergency Responders (VIPER) was increased by $2.29 million.
- The Justice Department budget was reduced by $6 million.
- $543,942 will be appropriated for the creation of a DNA section at the Triad Regional Lab.
- For the Judiciary, $2.8 million in recurring funds were restored to the Family Court Program.
Amount Approved in 2011 Session: $401,274,973
House Appropriation Revised Budget Proposal: $403,868,491
Non-essential items like museums, tourist attractions and the symphony receive more than $5 million in additional funding in the House’s General Government budget plan, which would grow on net by about $2.6 million over the original spending plan passed last year.
The highlights include:
- $323,298 in recurring funds and almost $2 million in non-recurring funds were added to operate the Nature Research Center and Green Square Office Building
- $210,074 will be restored to the Museum of Art, $300,000 to the state Transportation Museum, and $200,000 in recurring and $225,000 in non-recurring funds for Tryon Palace.
- $1.8 million will be given to the Voluntary Safety Workers’ Compensation Fund on a non-recurring basis. The Department is also directed to review the status of the fund.
- A $2 million appropriation was made for a Challenge Grant for the NC Symphony.