Wednesday’s numbers

Wednesday’s numbers

- in Fitzsimon File

The numbers Wednesday morning brought good news and bad news to the pundits, politicos and policy advocates poring over them, trying to understand what happened and looking for information to help them predict what will happen next.

No, it's not county by county election results causing the stir, it's the May state budget update and revenue projections from the economists at the General Assembly.  The 11-page report reads like a dry, detached analysis of economic trends and tax collections, but it has dramatic implications for the General Assembly this summer and more importantly, for millions of people in North Carolina

Every legislative session is defined by the budget lawmakers adopt and short sessions, like the one beginning Tuesday, were created to make adjustments to the two-year spending plan passed in long sessions held in odd-numbered years.  This year is likely to involve more frustrations than adjustments.

The Wednesday report is a reminder that North Carolina's budget picture is far better than in most places. The Center for Budget and Policy Priorities says that more than half the states are struggling, facing combined budget shortfalls of more than $40 billion.

The latest North Carolina numbers predict that state revenues will wind up $150 million ahead of projections at the end of the year. That is a fraction of the billion dollar surpluses in recent years, but still a testament to the overall strength of the state's economy in light of the national downturn, and another indication of the wisdom of the conservative revenue forecasts by state economists.

That's the good news, that the budget will have a surplus at the end of the year. The not-so-good news is that economists are now lowering their revenue estimates for the next fiscal year that begins July 1.

The bottom line for budget writers is that they will have roughly $600 million to spend when they convene this summer, which may not sound like a tight budget year but it is. The law requires that one fourth of the end of the year surplus go in the state's savings account and then there is the normal allocation to repair and renovate state buildings.

Maybe most importantly, the majority of the money available is non-recurring, meaning it shouldn't be used to pay for ongoing expenses like salary increases or services that continue year to year.

The recurring money could be half of the $600 million total or even less. Each one percent salary increase for teachers and state workers costs $100 million, so a three percent cost of living raise would use all the money available to invest this summer. 

So would the budget request from UNC President Erskine Bowles, who wants lawmakers to increase the university system's annual budget by $343 million, not  including another $700 million in capital requests. Community College officials say they need a $150 million increase.

Almost every lawmaker has pledged to invest more money in the state's troubled mental health system. A legislative oversight committee is recommending a $60 increase. Governor Easley will release his budget proposals Monday and may ask for even more for mental health.

Twenty-seven thousand children languish on the state's waiting list for a child care subsidy that it would cost more than $100 million to eliminate. It is hard to imagine lawmakers leaving town without increasing funding for the probation and parole system that has come under fire recently.

Then there is the strong argument that $50 million a year in the Housing Trust Fund may be the best way to use limited funds to help struggling families and create jobs. There are plenty of other needs, funding for poor schools most prominent among them.

The pressure won't just be on the spending side. The state stands to lose as much as $200 million in business tax revenue as a result of the federal stimulus package unless lawmakers intervene.

It adds up to a challenging session for lawmakers, who will be meeting with one eye focused on their own re-election campaigns and in the shadow of a gubernatorial race that is almost certain to include misleading and simplistic rhetoric about budgets and taxes.  

That's the lesson from a look at Wednesday's important numbers.

About the author

Chris Fitzsimon, Founder and Executive Director of N.C. Policy Watch, writes the Fitzsimon File, delivers a radio commentary broadcast on WRAL-FM and hosts "News and Views," a weekly radio news magazine that airs on multiple stations across North Carolina.
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