BTC Report:Final budget will underfund vital public investments

BTC Report:Final budget will underfund vital public investments

- in Must Reads

The final budget passed over a veto from Governor Perdue, will continue underfunding vital investments in education, health, safety and infrastructure, a new report finds.

The $20.2 billion state budget proposed by the legislature for 2012-13 fails to address North Carolina’s structural budget deficit, according to a report released today from the Budget and Tax Center, a project of the NC Justice Center, providing neither short-term nor long-term relief from growing budget pressures in key areas of state investment that would help direct the state toward a full economic recovery. The budget will increase total state spending by $242.4 million, or 1.2 percent, over the $19.9 billion continuation budget, the report finds, which still reflects a tremendously diminished budget when compared to state spending before the Great Recession.

“From a fiscal standpoint, the final budget continues in the same direction as the one set in the 2011 legislative session,” said Brenna Burch, public policy analyst with the Budget & Tax Center. “As such, it will continue to significantly underfund the education, well-being, and safety of all North Carolinians.”

The budget reduces the $503 million in recurring cuts to school districts by $143 million. However, the net increase to the state’s K-12 Public school budget is only $62 million, the report said. When accounting for the loss of $259 million in federal funding for next year, public schools across the state will have to operate with $190 million less than they had in the fiscal year 2011-12. The budget restores $194.2 million in funding to Medicaid, the report added, which would significantly reduce – but not eliminate – the program’s projected $243 million shortfall in fiscal year 2012-13.

Perhaps most egregiously, the report said, the budget keeps in place a $336 million business tax exemption passed in the 2011 budget that is available to firms of any size, whether or not those firms are employers. The final budget, as in both the House and Senate budgets, will not amend this costly and ineffective tax expenditure – exempting the first $50,000 in non-passive business income for a business of any kind – or restrict it to certain types of firms, such as small businesses or employers.

“This budget, which falls far short of investing adequately in North Carolina’s public structures, did so while preserving a costly and ineffective $336 million tax giveaway to wealthy North Carolinians and large profitable businesses set in place by the 2011 legislative budget,” said Burch. “Policymakers could have made much better choices and, by raising revenue and investing adequately in education, health, and infrastructure, set North Carolina on a much stronger path to recovery.”

To read the full BTC report, click here.