NC budget discussions beginning at Legislature
RALEIGH, N.C.—The annual North Carolina state budget dance is about to begin in earnest now that legislators know how much money they'll have to spend. Republican legislators still have yet to hear formally from their partner -- Democratic Gov. Beverly Perdue -- about what she'd like.
Lawmakers learned this week they should have a revenue surplus of about $233 million for the fiscal year ending June 30, largely the result of more income taxes being withheld from workers' paychecks, according to a legislative staff memo. House budget subcommittees also have started meeting and have received preliminary orders to locate cost savings in several areas of government. No cuts have yet been directed for public education by the House, a key lawmaker said.
GOP legislators warn most of this year's surplus will probably be needed to close an immediate $150 million shortfall for the state's Medicaid program this year and to close an additional projected gap between revenues and Medicaid expenses for the next fiscal year. That means spending money on any new or expanded programs likely will occur when cost-cutting frees up additional funds.
The General Assembly reconvenes May 16 to take up the Medicaid issue and adjust the second year of the two-year state government budget that was approved in 2011.
Medicaid is "going to take up most of the overage in the current year, meaning there won't be much surplus going forward to the next year," said Sen. Richard Stevens, R-Wake, co-chairman of the Senate Appropriations Committee.
There wasn't much of a surplus to begin with -- the $233 million is only 1.2 percent of the $19.7 billion expected for this year's spending plan. A downgraded economic outlook has prompted staff at the Legislature and Perdue's state budget office to agree to expect only an additional $21 million in government coffers for the budget that starts July 1.
Perdue will have her own budget proposal but has yet to say exactly when she'll unveil it. The last time Perdue offered her proposed adjustments to the second year of the budget in 2010, she released her recommendations to the Democratic-controlled Legislature a month before the session began. This time, it may not happen before the Legislature reconvenes.
"We will release the budget within the next few weeks," spokesman Mark Johnson said Wednesday.
The delay has frustrated lawmakers such as Rep. Harold Brubaker, R-Randolph, senior co-chairman of the House Appropriations Committee. He said he'd like to see whether Perdue has cost-saving ideas with which the Legislature might agree.
He said there's one area where no agreement will occur. Perdue, who is leaving office in January, has vowed for months she would propose raising the sales tax by three-quarters of a cent to help restore public education cuts made in last year's final budget that she vetoed. The Legislature, with the help of a handful of House Democrats, overrode the veto.
"In a tough economy when families are hurting and we're trying to create jobs, we're not increasing taxes," Brubaker said.
Perdue has dribbled out bits and pieces of her budget over the past week, saying she would propose spending more money for need-based financial aid for students on UNC campuses, expanding a reading diagnostic program for schoolchildren in early grades and helping pay victims of the state's sterilization program in the 20th century.
The House is expected to approve a budget plan first, as early as May 23, and then sent it to the Senate, which will approve its own plan. The two chambers aim to reach a compromise before July 1 to present to Perdue.
Several House subcommittees have been told to find reductions equal to 1.5 percent of what the two-year budget directs them to spend in the new fiscal year, according to Brubaker. For example, the health and human services subcommittee was told Wednesday to find $66 million in savings off a budget of $4.4 billion. In public education, no cost savings are yet required, Brubaker said.
Rob Thompson, a spokesman for Together NC, a coalition of nonprofits and service providers, said lawmakers must remember citizens already have felt the sting of spending reductions for needed health and education programs since the height of the Great Recession in 2009.
"Any cut at this point is too much," he said.
Stevens said he didn't know yet if legislators would be able to reduce the $502 million that local school districts are expected to have to return to the state as a cost-saving measure. It's also unclear if the state can make up any difference for federal stimulus money that is going away and districts have used to hire staff.
Republicans will be very careful with how they adjust the spending plans for the public schools and University of North Carolina and community college systems. Perdue and other Democrats denounced the GOP for cutting too deeply in those areas they say forced thousands of positions to be eliminated. In an election year, Republicans would like to reduce the perception that they are anti-education, and have some of their own reform ideas.
Senate leader Phil Berger, R-Rockingham, rolled out a package of education initiatives last week that also would expand reading improvement in early grades but also provide merit pay for teachers and pay for five additional instructional days. The package would cost $45 million.
Perdue and Berger held out olive branches Tuesday after both said in statements they would like to work together on the reading diagnostic initiative. But most Democrats probably won't be satisfied unless some way is found to make up for the cuts from last year.
"If the extreme education budget cuts continue in this budget and are made worse or not improved, then Democrats won't be supporting the Republican budget," said House Minority Leader Joe Hackney, D-Orange.