LEGISLATIVE BULLETIN: Piling On: House budget proposals would add to working families’ challenges

EXECUTIVE SUMMARY

Drastic Budget Cuts Will Devastate Families Affected By the Recession: Cuts to children’s health insurance, laying off educators and other measures will harm low-income working families who are already struggling to stay afloat – and take millions out of the economy at exactly the wrong time.

A Cuts-Only Approach is Not in North Carolina’s Best Interests: Public investment is valuable. Withdrawing a commitment to public investment would seriously erode North Carolina’s progress toward becoming a healthier, more educated and more compassionate state

A Balanced Approach is Necessary: In the past two recessions and resulting fiscal crises, North Carolina elected to fill in a portion of the budget gaps with revenue from tax increases. Lawmakers must have the vision and courage to raise funds the state needs.

By Elaine Mejia
Director, NC Budget & Tax Center

May 28, 2009

North Carolina’s poor and low-income working families are struggling to weather this deep recession. As of the end of April, 10.8% of North Carolina’s workers could not find jobs, forcing families to cut spending, deplete savings and turn to public programs to help bridge the gap until the economy turns around.

Funding for those programs – and the jobs of tens of thousands of state and private-sector employees – are now in jeopardy. House leaders face a budget shortfall of $4.6 billion for the upcoming fiscal year, or roughly 20% of the current year’s budget. They will be able to apply approximately $1.4 billion in federal recovery dollars toward this gap, leaving a $3.2 billion hole that must be filled either with spending cuts or tax increases, or a combination of the two.

House considering drastic measures
According to a new report from the Center on Budget and Policy Priorities, North Carolina has the third largest budget shortfall (as measured as a percent of the current budget) of any state in the nation. House budget-writers are currently working to find more than $3 billion in spending cuts to balance next year’s budget. That’s approximately 15% of the current year’s budget. To meet this steep spending reduction target, the House is considering deep cuts to programs and services that working families depend on.

Spending reductions under consideration include the following:

Freezing access to health insurance for children: Enrollment would be closed for the State Children’s Health Insurance Program, which provides affordable health insurance for children in families whose incomes fall below 200% of the federal poverty level, or $44,100 for a family of four. That would mean the additional 8,000 children expected to become eligible for this program in the next fiscal year would likely go without health insurance. In addition to hurting families, this cut would take millions of dollars out of the state’s economy. That’s because the federal government pays for 75% of this program’s costs, so for every dollar lawmakers cut, the state loses three dollars. In addition to closing enrollment, the House is considering eliminating vision and hearing benefits from this program.

Eliminating support for individuals suffering from Mental Retardation and Developmental Disabilities and for Medically Fragile Children: The services provided through this program allow these individuals to live in their communities instead of in institutions or group-home settings. Just last year the General Assembly appropriated additional funds to allow 1,738 more people to enroll in this program. Cutting this program would not only devastate the families who depend on it, it would jeopardize the jobs of the thousands of therapists and care workers who work for private companies and provide the services covered by this program.

Laying off educators: The House education appropriations subcommittee is considering reducing the public education workforce by some 11,000 positions, including 6,005 teachers and 4,663 third-grade teaching assistants. Keep in mind that these reductions would be in addition to the two-children-per-class increase proposed by the state Senate. Not only do these spending cuts threaten to undermine the quality of public school instruction by back-tracking on previous investments, but they also would put thousands of low- and middle-income people out of work at a time when they are extremely unlikely to find decent private-sector employment.

Barring the doors of community colleges to new students: Laid-off workers and recent high school graduates facing poor job prospects often turn to the community colleges for additional training and certifications. The House budget, however, does not provide the $10.4 million that the state’s 58 community colleges need to allow these additional students to enroll in courses. Instead, the House is considering a net reduction to the basic funding for community college enrollment of $9.6 million (in addition to $120 million in other more targeted reductions to the budget for the community colleges).

Bottom line: Cuts-Only Approach is Not in the State’s Best Interest
In the past two recessions and resulting fiscal crises, North Carolina elected to fill in a portion of the budget gaps with revenue from tax increases. In 2001, North Carolina raised taxes equivalent to 3.3% of the budget. The equivalent today would be approximately $700 million.

The level and types of spending cuts currently being considered by the House of Representatives would strike another blow to low-income working families who are already struggling to stay afloat due to the deep recession. Tens of thousands of people would join the rolls of the unemployed, and the programs so many families depend on to get them through difficult times would be gutted.

In addition, these cuts would seriously erode North Carolina’s progress toward becoming a healthier, more educated and more compassionate state. It would be sad and foolish to throw away all the investments North Carolina has made in recent decades, just because lawmakers didn’t have the vision and courage to raise the money the state needs.
 

Authors: 
Research & Publications: 
Issues: