Budget Woes in an Election Year


The North Carolina General Assembly begins its 2014 Short Session on May 14th.  The main purpose of the short session is to adjust the budget.  However, eligible bills from last session plus study committee recommendations will also be in play.
The Budget for the Current Year:  The budget for the fiscal year ending June 2014 has been dealt some bad news in two forms.  
  • First, tax collections are $414 million below budgeted projections which reduces the expected tax revenues to $19.2 billion; this shortfall will also impact the 2014-15 budget since it is based on the tax structure.  
  • Second, there is a Medicaid shortfall of $140 million.  
This year’s budget left $250.5 million unappropriated (just sitting in the checking account) which will help alleviate the total expected shortfall of $554 million.  That leaves about $303 million for the State Budget Director to squeeze from state agencies and other budget line items to close out the year on June 30th.
The Budget the General Assembly will  be working on this session:  The 2014-2015 spending plan was including in the biennial budget passed last year, so the purpose of this legislative session is to adjust it.  Next year’s budget spends $20.9 billion and leaves $355 million unappropriated (just sitting in the checking account).  If tax collections continue at the same rate as this year, the unappropriated $355 million will have to be applied to the $414 million tax collections shortfall expected next year, leaving $59 million needed to true up the budget before budget writers can start spending new money. 
However, the Governor, Lt. Governor, and Legislative Leaders have publicly announced raising the starting salary for teachers to $33,000 which will be a new cost in the range of $60  to $75 million.  And, this election year budget writers hope to give state employees their first pay raise in 8 years.  (Food for thought: a 1% across-the-board increase for state employees costs $131.4 million OR a $1,000 *bonus* to each state employee costs $313.2 million).


DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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