AUGUST 13, 2009 ISSUE
North Carolina Budget—Brother, Can You Spare a Dime?
Worst Decline in Tax Receipts in Decades
The newly passed austere North Carolina budget has local governments, school boards, mental health providers and state funded programs scrambling to ascertain its financial impact.
“The budget has not been slashed so deeply since the Great Depression of the 1930s. Hundreds of state employees and teachers will lose their jobs. Programs for the most vulnerable in society, such as the mentally ill, will be deeply cut. More kids will be jammed into public school classrooms. Prisons will be closed. And nearly $1 billion in new taxes will be raised,” The Raleigh News and Observer reported this week.
“Having had time for just a preliminary review of the budget, I’m concerned,” Watauga County Manager Rocky Nelson said. “I don’t know the final numbers on how much the state budget cuts funding to our county school system yet, but I do know that the state’s $15 per diem for prisoners in the county jail—sentenced to 60 days or less—will be eliminated. That will cost the county approximately $60,000 per year.
“I am pleased that the legislators did honor their 2007 Medicaid commitments to the counties. It’s still too early to tell the amount of revenue Watauga County may save,” Nelson said. In taking the financial burden of Medicaid off the counties’ shoulders, the General Assembly previously estimated that each county should realize a savings, on average, of $500,000.
“The town will lose $39,600 per year for the next two years in beer and wine tax revenue,” said Boone Town Manager Greg Young. He was not aware as of press time how else the newly passed State budget may negatively affect the town’s finances.
Expressing deep concern over the $40 million cut to mental health services that includes eliminating group homes and residential centers for children and adolescents, Gail Hawkinson, director of administrative clinical services at New River Behavioral Healthcare—which serves an 11 county western North Carolina region including Watauga—said, “Obviously, some major programs have been eliminated and our fear is that we don’t know what can replace them. The lack of resources greatly affects our ability to keep and employ highly trained staff. When people with mental problems, addictions and disabilities or children who have behavioral problems can’t receive help, the spin-off effect to the community can be severe and much more costly. We understand that within 60 days, the state will provide the final numbers we anxiously await.”
“Given that we had a $4.6 billion deficit, I think we did the best we could do in protecting education and programs for the elderly and children,” said Rep. Cullie Tarleton (D-93). The budget provides for full enrollment for public schools, community colleges and universities across the state.
“This session’s primary focus was on the budget and to balance in this recession-driven economy, we cut the budget 40 percent, increased revenue 22 percent, used Federal stimulus money for 30 percent and increased fees eight percent,” added Tarleton.
According to the Center on Budget and Policy Priorities in Washington, D.C., “The total shortfall for fiscal year 2010—including gaps that have been addressed through budget cuts and other measures, and newly emergent gaps—now totals $166 billion across 48 states. Total gaps through 2011 will exceed $350 billion.
“At least 39 states have made cuts that harm vulnerable residents to help close budget gaps. The federal economic recovery act is providing needed relief, reducing the size and extent of cuts and closing roughly 40 percent of state budget shortfalls. Twenty-five states have raised taxes this year and another 12 are considering doing so, as states increasingly realize that the budget holes are too big to be filled by cuts alone,” according to the Center.
“State policymakers face an increasingly challenging battle against an economy that is still getting weaker,” said Nicholas Johnson, director of the Center’s State Fiscal Project. “There is no letup in sight when it comes to making hard choices.”
“This was months of difficult work,” Tarleton continued. “We went through the budget line by line, and frankly, some of the cuts needed to be made. The sales tax increase of one percent and the income tax surcharges have sunset provisions and will end mid-2011.”
The surcharges amount to approximately two percent for people earning $60,000 and three percent for couples earning between $100,000 and $250,000.
“The income tax surcharge affects only the top 13 percent of earners in the state,” Tarleton said. “Eighty-seven percent of state residents will be exempt from this temporary tax.”
In the interview, Tarleton raised a good question, “Can a tax system based on textiles, furniture and tobacco—industries that were kings in North Carolina—deliver in the future?
Sen. Steve Goss (D-45) agreed with Tarleton. “The passage of a final state budget ends a very difficult time for our state. Even with its passage, the economic environment which shaped it is still with us, and the challenge of how to best meet the needs of our people is just beginning. I voted for this budget with many misgivings. I finally decided to support it because it could be a temporary solution with the Senate and House Finance committees convening in the fall to pursue the first major tax reform in the state since 1933. I have been an advocate of tax reform for a number of years. If it comes to fruition, we will actually see our personal income taxes cut significantly, and the system made fairer for all.”
Budget Breakdown
Rep. Cullie Tarleton (D-93) provided the following overview of the budget reductions on his website, which can be accessed by clicking to http://cullietarleton.com/wr81009.html. Link to the site for a more comprehensive review of the budget, especially the Preservation and Expansion of Programs section.
The budget eliminates 2,191 state employee positions, 726 of which are currently filled. There are no salary cuts or furloughs in the budget, and longevity pay is also preserved.
Education—Funding has been reduced for about 100 programs; 23 programs have been eliminated.
Health & Human Services—Funding has been reduced for about 125 programs; 13 programs have been eliminated.
Natural and Economic Resources—Funding has been reduced for about 75 programs; five programs have been eliminated.
Justice and Public Safety—Funding has been reduced for about 80 programs; 10 programs have been eliminated.
General Government—Funding has been reduced for about 80 programs; two programs have been eliminated.
Transportation—Funding has been reduced for about 30 programs; one program has been eliminated.
Community Interest
News & Notes
Events
Arts & Entertainment
