NC House’s Budget Makes Tough Decisions but Preserves Vital Services

NC House’s Budget Makes Tough Decisions but Preserves Vital Services

NC Budget & Tax Center analysis shows that for every one dollar in additional taxes in the House budget, there are three dollars in spending reductions

Members of the NC House of Representatives have proposed some painful cuts in their budget to help the state deal with its $4.6 billion budget deficit. A new report from the NC Budget & Tax Center, the leading non-profit organization doing fiscal analysis in North Carolina, shows that the House budget includes modest and sensible measures to increase revenue and strives to avoid the most painful budget cuts.

"The House budget process ought to serve as a reality check for North Carolina," said Elaine Mejia, director of the NC Budget & Tax Center. "The current recession is a deep one, and the state's outdated revenue system is ill-equipped to handle it."

North Carolina now faces one of the largest current-year budget gaps of any state and is one of only 13 states with budget gaps for the coming fiscal year that represent more than 20% of their general fund budgets.

Both the House and Senate budgets increased revenue as one way to address the budget gap and included important revenue reforms that, if implemented, would give North Carolina a stronger and more stable revenue system.

"The House's proposal to create two new upper-income tax brackets, expand the sales tax base, and close corporate tax loopholes generates needed revenue now and better positions North Carolina to weather future economic downturns," explained Meg Gray Wiehe, policy analyst for the NC Budget & Tax Center.

Although the House tried to avoid some of the most damaging cuts to the Health and Human Services budget, its proposal would make severe cuts to Medicaid, which provides health coverage for the many elderly people, disabled children and adults, and children in the state's poorest families. The House budget includes $82 million in reductions for payments to healthcare providers and $507 million in unspecified cuts.

"The cuts in provider payments will force some providers to stop accepting Medicaid, and others will have to cut staff, which means more unemployed workers in this brutal job market," said Louisa Warren, policy advocate for the NC Justice Center. "And let's not forget the federal government covers 75% of Medicaid costs, so for every dollar the state cuts, North Carolina's economy loses three dollars. That makes cutting Medicaid penny-foolish and pound-foolish."

The report is available online at: http://www.ncjustice.org/?q=node/328