The Senate’s Proposed Budget: Overall Spending Target Mirrors Governor’s But Spending Priorities Differ

By Elaine Mejia and Meg Gray Wiehe with Steve Jackson and John Quinterno
April 2009

Executive Summary

The North Carolina Senate has adopted its proposed state budget for fiscal years 2009-10 (FY09-10) and 2010-11. The Senate proposes a general fund budget of $20 billion in year one and $21.2 billion year two. The FY09-10 budget is a decrease of $1.3 billion, or 6.1%, compared to the originally adopted budget for FY 08-09 (before mid-year budget cuts).

The total general fund spending of the Senate’s proposal is nearly identical to Governor Perdue’s budget. However, the Senate’s budget looks smaller because it accounts for increased federal Medicaid funds differently than the governor’s. The Senate uses the money to offset state spending but rather than counting it as a revenue source, which the governor’s budget does. When this discrepancy is taken into account, the Senate’s FY09- 10 budget spends $20.9 billion, only $12 million less than the governor’s.
The Senate budget recommends reductions in every major budget category. Compared to the governor’s proposal, the Senate is considerably more generous to the University System and considerably less generous to public schools and Health and Human Services. In addition, the Senate’s budget does not include the governor’s proposal to suspend longevity payments to eligible state employees.

Perhaps the most sweeping proposed policy change is the potential elimination of the More at Four preschool program for at-risk four-year olds. The Senate plan would convert More at Four to a child-care subsidy program, reduce funding overall and replace a substantial portion of the current state funding with nonrecurring federal dollars.

The Senate’s plan relies on an additional $500 million in tax adjustments that will be made through a separate piece of legislation. Senate leadership has not disclosed the details of those tax proposals.

The Senate’s plan would issue an additional $306.6 million in new state debt over the next four fiscal years — which, according to the state treasurer, would leave no room for additional debt for the next five years without jeopardizing the state’s good credit rating.