BTC REPORTS: The FY2012-13 House Budget: An inadequate and temporary fix for North Carolina's growing budget pressures
By Brenna Burch, Public Policy Analyst, with Tazra Mitchell, Public Policy Fellow
Budget & Tax Center
- The North Carolina House’s $20.3 billion budget proposal for fiscal year 2012-2013 (FY2012-13) would increase total state spending by $338.7 million, or 1.7 percent, over the $19.9 billion continuation budget, but it would do so by relying heavily on one-time money rather than by raising recurring revenue.
- The House budget would increase General Fund availability by a net total of $338.7 million over base tax and non-tax revenues of $19.9 billion in order to pay for its budget. Gross total availability is significantly reduced by several major expenditures made within the availability statement, including payment of roughly 75 percent ($154 million) of North Carolina’s significant current-year Medicaid shortfall, estimated at $205.5 million at the time of this publication.
- In order to meet both one-time and recurring state obligations—including paying off the current-year Medicaid shortfall and paying down next year’s shortfall, funding an extension of the existing Work Opportunity Tax Credit, funding a proposed new corporate tax credit for private-school scholarship contributions, depositing funds into the state’s reserve account for upkeep of state properties, and temporarily offsetting the loss of federal recovery dollars for education—the House would raise $815.6 million in General Fund availability, which includes the credit balance, non-tax revenues, and fund transfers.
- Net of paying down part of both current and projected Medicaid shortfalls and funding other items, the House budget increases total General Fund availability by $571.6 million in one-time money to pay for both recurring and nonrecurring state obligations. This amount is further adjusted to reflect an accounting maneuver in last year’s budget that shifted approximately $188 million for the State Highway Patrol from the Highway Fund within the Transportation budget to the General Fund. While this shift has no net economic impact, it makes total General Fund availability and spending appear significantly higher than FY2010-11 levels. Net of this accounting maneuver, total state spending would increase by $338.7 million from the continuation budget under this proposal.
- The House budget’s reliance on one-time money means its most sizeable spending increases and restorations are temporary. The House budget takes no significant actions to address the state’s growing structural budget deficit, and it does not provide any long-term relief from recurring budget pressures in key areas of state investment, particularly education and human services, which will face sizeable budget gaps going into the FY2013-15 biennium.