BTC REPORTS: The 2011-2013 Final Budget - Neglecting a Balanced Approach, Budget Costs Jobs and Delays Economic Recovery

By Brenna Burch & Edwin McLenaghan
Public Policy Analysts, BTC
June 2011

Executive Summary:

  • The North Carolina General Assembly has proposed a $19.7 billion General Fund budget for fiscal year 2011-2012 and a $19.9 billion budget for fiscal year 2012-2013. When adjusted to reflect approximately $220 million per year in accounting maneuvers, the final budget spends $600 million less than the governor’s budget proposal.
  • The final budget increased the FY11-12 budget gap to $2.5 billion by adding $188 million in tax cuts for businesses and the wealthiest North Carolinians.
  • The final budget is fundamentally unbalanced, using more than $700 million in one-time money to pay for recurring expenses in the first year. The legislature closes the FY11-12 budget gap with $1.7 billion in spending cuts; $244.9 million in transfers from and diversions to non-General Fund accounts; $63.9 million in fee increases; and an anticipated $520 million General Fund net credit balance from current-year savings and reversions.
  • In addition to allowing the temporary tax package to expire, at an annual cost in revenue of more than $1.3 billion, the final budget includes tax cuts totaling $189 million in the first year of the biennium and $407 million in the second year. Part of the lost revenue from tax cuts is offset by diverting $147 million in corporate tax revenue from the Public School Building Capital Fund to the General Fund over the biennium.
  • Of its $1.7 billion FY11-12 spending cuts, the legislature made 28 percent in the public education budget ($459 million); 26 percent in health and human services ($432 million); 20 percent in the UNC system ($347 million); and 10 percent in justice and public safety ($165 million).
  • Economic impact analysis by the NC Budget and Tax Center shows that by FY12-13, the cumulative impact of the tax cuts and spending cuts in this budget will cost the state a net 29,782 jobs, $1.2 billion in lower wages, and $2.3 billion in lost industry output.

 

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