Legislative Watch

Spending Showdown

No one really knows what July 1, the first day of the new fiscal year in North Carolina, will be like if state leaders fail to pass a budget all sides can live with.

That’s partly because the state has never faced a budget stalemate quite like what this year has the potential to bring, and state law offers little guidance about what would happen.

“There is no fail-safe arrangement,” said John Sanders, a retired UNC-Chapel Hill professor who headed the university’s School of Government for a quarter-century. “It’s a very good question about whether state workers will be paid and whether services will be continued.

“It’s a puzzlement,” he said.

The possibility of a state government shutdown has always been that – a possibility and generally a remote one at that, Sanders said.

The budget season can often be rocky, and it’s not unusual for legislative leaders to inch up or past the June 30 deadline. But stalemates are almost always headed off before the drop-dead date of July 1, with the General Assembly passing either a budget or a continuing resolution that temporarily keeps things running until a formalized budget can be agreed upon.

“That assumes a certain amount of goodwill between the governor and the General Assembly,” Sanders said.

And that goodwill isn’t in great abundance this year, to put it mildly. The GOP-controlled legislature remains intent on slashing what the state spends while Democrat Gov. Bev Perdue has made clear her power to veto what she feels goes too far and would cause too much harm to the state.

That means that unless a budget comes out that both sides can agree on, a very real possibility exists that North Carolina could find itself without a budget and whether thousands of state workers will have to stay home unpaid, or if things will function as normal remains to be seen.

Law books not saying much

State law offers only limited insight for what an emergency plan would be like, if neither a budget nor a continuing resolution is passed in time.

The state Constitution doesn’t allow funds to be taken out of the state treasury unless a budget is in place and approved by both the General Assembly and governor, said Gerry Cohen, the chief bill drafter for the legislature.

That means state workers, all 322,000 of them, may not get paid if a budget or continuing resolution isn’t in place. The governor also doesn’t have the authority to declare an emergency to pay workers, he said.

But nothing prevents teachers, correctional officers, DMV workers and others from reporting to work as usual, and getting an I.O.U. to be paid later or going without pay, Cohen added.

The state Constitution requires that the governor “prepare and recommend to the General Assembly a comprehensive budget of the anticipated revenue and proposed expenditures of the State for the ensuing fiscal period.”

Perdue did that on Feb. 17, with her $19.9 billion proposed budget that cut 10,000 state jobs and kept most of a temporary one-cent sales tax increase adopted in 2009 to usher the state through the Great Recession.

Then, a budget must be “enacted by the General Assembly (and) shall be administered by the Governor,” according to the state Constitution.

The House is preparing to vote next week on its version of its budget, a $19.3 billion document that cuts far deeper than what Perdue proposed and doesn’t extend that one-cent temporary sales tax.

Seeing state government function is what residents expect, and why the state Constitution never tackled the scenario of a budget not being in place, Sanders said.

“The Constitution and state laws are written on the assumption that people want their government to work,” Sanders said. “At the end of the day, they want to see roads built and maintained, and police to be paid.”

Contingency plans

Even with the near-shutdown of the federal government still fresh in people’s mind, state leaders on both the Republican and Democratic sides aren’t publicly talking about what could happen if the state does find itself without a budget.

Republican members tried pushing out their version of a remedy to a potential shutdown by slipping in a requirement to cut the budget further on a bill passing federal funds on to unemployed workers who have been out of work for more than a year.

In exchange for giving 37,000 people affected access to the federally-funded unemployment assistance, Perdue would have had to agree to make a 13 percent cut on top of her earlier budget proposal if a budget wasn’t in place by June 30.

She vetoed the bill, saying it “irresponsibly took the financial lifelines for 37,000 North Carolina citizens and families and hitched them to a budget ploy that would wreck the lives of millions more.”

Several of those unemployed workers spoke out at a hearing Wednesday and talked about being caught in the midst of political games while dealing with their personal dilemmas of figuring out how to feed their children, make rent payments and keep the lights in their homes on.

Greg Smith, a single dad of two from Castalia in Nash County, spoke about how he was trying to stay out of foreclosure and has been sending out five to a dozen resumes a day.

“These benefits are necessary for a family to survive,” he said. “We’re not here being lazy, we’re doing what we’re supposed to be doing.”

After the hearing, House Speaker Thom Tillis told reporters that he too had concerns for long-term unemployed workers like Smith but was waiting for a signal from the governor about what to do next before moving to restore their unemployment benefits.

In her April 16 veto message, Perdue said she would sign a clean bill and Democrats, as well as some Republicans, have said they’ll push forward a clean bill. But neither Tillis nor Senate President Pro-Tem Phil Berger have made any indication they’d let a clean bill through.

Tillis went on to say that the rider was added out of concern for the thousands of state workers and others in the state, who would be dealing with uncertainty of their own if there was no budget in place by July 1.

“What we’re trying to do is avoid all that uncertainty,” Tillis said.

Berger doesn’t have a set plan of what to do if the budget isn’t approved in time, according to his spokeswoman Amy Auth.

When asked about a contingency plan around a government shutdown, Auth indicated that the only plan in place was to find enough votes in the House to override Perdue’s veto on the unemployed workers bill.

“We passed a Continuing Resolution that keeps North Carolina’s government running if a budget is not signed by June 30 – but the governor vetoed that bill,” Auth wrote. “We hope that four Democrats in the House will vote to override that veto.”

As for Perdue, her office would not comment on whether the governor is drawing up contingency plans of what to do if there’s no budget in place by June 30, or what that will mean to the state.

She’s hoping that things work themselves out, according to a written statement released by Mark Johnson, Perdue’s deputy communications director.

“There is plenty of time for the General Assembly to deliver a budget that helps create jobs and strengthen education,” Johnson wrote. “Gov. Perdue is confident that the members of the legislature can do their jobs and keep our state moving forward.”

Questions? Comments? Reporter Sarah Ovaska can be reached at (919) 861-1463 or sarah@ncpolicywatch.com.

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