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North Carolina state budget (2008-2009)

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State Information


North Carolina faced a $3.2 billion budget gap for fiscal year 2009.[1] However, in light of lower than expected tax collections in April 2009, the budget gap for fiscal year 2010 grew by $1.5 billion to a total of $4.6 billion. The budget gap was estimated to equal 21 percent of 2008's budget.[2] In order to try and ease the state's budget woes, Gov. Bev Perdue 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 was it time to cut excess spending, but it was also time to "transform the way we invest the people's money."[4] Gov. Perdue 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]

Impact of budget woes

See also: State budget issues, 2009-2010
  • 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 was a bill that would make the 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, was expected to generate $67.5 million for roads and bridges through mid-2011. The bill already passed the Senate and was awaiting a vote 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 amounted to $65 million for 2009. Teachers’ and state employees’ compensation was expected to be reduced by an annualized amount equivalent to 0.5 percent for the remainder of FY 2009.[5]

Budget background

See also: North Carolina state budget

North Carolina operates on a biennium, covering two fiscal years at a time. For example, the 2009-2011 biennium consisted of year one, July 1, 2009 to June 30, 2010, and year two, 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]

Budget figures

2009 General Fund[10]

Category Amount in millions
Beginning balance $599
Revenues $19,146
Adjustments $0
Total resources $19,745
Expenditures $19,653
Ending balance $92
Budget stabilization fund $150


Fiscal year General Funds expenditures  % Change from previous year
2000 $13,853,708,453[11] 6.9%[11]
2001 $13,445,510,386[11] -2.9%[11]
2002 $13,741,135,020[11] 2.2%[11]
2003 $13,855,522,493[11] 0.8%[11]
2004 $14,704,184,520[11] 6.1%[11]
2005 $15,798,359,545[11] 7.4%[11]
2006 $17,065,090,604[11] 8.0%[11]

Ideas about why the crisis occurred

  • In April 2009, state officials reported that state tax revenues dropped 21 percent compared to a year prior. Tax revenues declined a total of $623.7 million, pushing the year-to-date decline to $1.7 billion. According to officials, the decline was 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 prior. However, sales and use, beverage and tobacco taxes combined grew $42 million, or 8.5 percent, during January.[12]

Proposed actions

Governor Bev Perdue


North Carolina State of the State Address 2009

Gov. Bev Perdue's budget recommendation closed a $6.4 billion cumulative gap and reduced spending by $2.6 billion over the next two years with the use of $2.9 billion of federal recovery funds and recommended 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 Perdue.[13]

In April 2009, the governor announced a "flexible furlough" and the discovery of additional funds to close the FY 2009 budget gap. A total of $1 billion in special funds, the state’s Savings Reserve Account, and federal recovery dollars would 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]

Republicans

State Democrats said that they planned 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 would not support tax increases to balance the cuts.[14] Rep. Pearl Burris-Floyd and other GOP members said they would not vote for tax increases to narrow the deepest cuts.[15] In May 2009, Senate Republican Leader Phil Berger asked for an independent prosecutor to investigate former Gov. Mike Easley’s campaign finances. The request came in light of reports of missing expense records detailing travels.[16]

Democrats

North Carolina Democratic lawmakers proposed to close the budget gap almost entirely through spending cuts. Cuts included 12 percent from education spending and cuts to university centers, programs and initiatives. Lawmakers said that despite the cuts, they did not plan to propose tax increases. In comparison to the 2009 budget, drafts of the Democrats' proposal revealed 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.[17] However, not all Democrat legislators were 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.[14]

Revise state tax plan

In March 2009, the North Carolina Budget & Tax Center released a revenue plan to help close the state's looming budget gap and provide "long-term stability, adequacy and fairness of the state tax system."[18]

The plan proposed to:[18]

  • 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

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 its effects could leave thousands out of work.[19]

Economic stimulus package

North Carolina was expected to receive $7.8 billion from the $787 billion dollar economic stimulus.[20] All told, the federal stimulus plan would create or save 105,000 jobs in North Carolina, based on White House estimates.[21]

According to preliminary reports, North Carolina was expected to receive:[20]

  • $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

Budget transparency

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

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

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 was managed by the Office of State Budget and Management and the Office of Information Technology Services.[22]

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 did 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.

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
600px-Yes check.png
Y
600px-Yes check.png
Y
600px-Yes check.png
N
600px-Red x.png
N
600px-Red x.png
N
600px-Red x.png
Private Companies Receiving State Funds Site Y
600px-Yes check.png
Y
600px-Yes check.png
N
600px-Red x.png
N
600px-Red x.png
N
600px-Red x.png
N
600px-Red x.png

Economic stimulus transparency

  • The Economic Recovery and Reinvestment Act of 2009 designated $787 billion to be spent throughout the nation. Of that $787 billion stimulus package, it was estimated that 69%, or over $541 billion, would be administered by state governments.[23]
  • North Carolina was expected to receive an estimated $4,019,461,548.[24]

Public employee salary information

See also: North Carolina state government salary

See also

External links

Additional reading

References

  1. Center on Budget and Policy Priorities,"State budget troubles worsen," May 18,2009
  2. Associated Press,"Group says cuts alone to NC budget would devastate," June 2,2009
  3. 3.0 3.1 The News Observer,"Report: Tax revenue down 21% in April," May 13,2009
  4. Gov. Perdue,"State of the State 2009," March 9,2009
  5. 5.0 5.1 5.2 WNCT,"Perdue Announces Pay Cut For All State Employees," April 28,2009
  6. Charlotte Business Journal,"North Carolina unemployment holds steady at 10.8%," May 26,2009
  7. Go Blueridge,"Unemployment Rate Decreases in Most of NC Counties," June 1,2009
  8. Land Line Magazine,"North Carolina bill would authorize temporary fuel tax increase," June 4,2009
  9. North Carolina Office of State Budget and Management,"About the Budget," accessed June 5,2009
  10. National Governors Association and National Association of State Budget Officers Fiscal Survey of States June 2010
  11. 11.00 11.01 11.02 11.03 11.04 11.05 11.06 11.07 11.08 11.09 11.10 11.11 11.12 11.13 State of North Carolina,"Historical budget data," March 2009
  12. The Business Journal of the Greater Triad Area,"North Carolina revenue drops 14%," February 24,2009
  13. Gov. Perdue,"2009-11 Governor's Recommended Budget," accessed June 5,2009
  14. 14.0 14.1 Associated Press,"NC budget plan inches along with subcommittee OKs," June 5,2009
  15. The Associated Press,"Thursday at the North Carolina General Assembly," June 5,2009
  16. The News Observer,"GOP wants probe of 'lost' records," May 19,2009
  17. The News Observer,"N.C. House eyes stark spending cuts," June 4,2009
  18. 18.0 18.1 North Carolina Budget and Tax Center,"http://www.ncjustice.org/sites/default/files/BTC%20Revenue%20Plan_March%202009.pdf," March 2009
  19. Associated Pres,"Group says cuts alone to NC budget would devastate," June 2,2009
  20. 20.0 20.1 North Carolina Recovery,"Impact on North Carolina," accessed June 3,2009
  21. American Recovery and Reinvestment Act,"Impact," accessed June 3,2009
  22. About NC Open Book
  23. National Taxpayers Union, "A Letter to the Nation's Governors: Ensure Transparency and Accountability by Posting Stimulus Expenditures Online," March 10, 2009
  24. Wall Street Journal,"Stimulus Spending by State," April 23,2009