Budget features highs, lows

Published 9:16 pm Saturday, June 5, 2010

Staff Writer

The $18.9 billion spending plan given final approval by the state House early Friday morning includes benefits and liabilities, depending on one’s political perspective.
The budget adjustments prescribe some money for loans and tax credits to small businesses, but they also rely on $500 million in Medicaid funds that might not be forthcoming from the federal government.
“It’s very upsetting, but it has not been funded,” Rep. Arthur Williams, D-Beaufort, said Friday, speaking of the Medicaid allotment.
Williams added, “It’s my understanding we’re going to let it go for two or three weeks to see if the federal government funds it.”
If the funds don’t come through, the Legislature will have to reconvene to decide how to make up the shortfall, he noted.
“That’s pretty serious,” Williams stated.
On the plus side, the House budget contains a one-time provision that would let counties use N.C. Education Lottery money that would have been used for debt service to avoid laying off teachers.
“No teachers are to be laid off in this state,” Williams said. “That’s why we did that.”
County commissioners would retain the option of using the money for debt service, but the funds couldn’t be used to cover raises or administration costs in school systems, Williams related.
“That’s just for one year,” he pointed out, speaking of the provision.
The House road map for spending would fully fund a requested, $85 million increase to cover enrollment growth at community colleges, Williams shared.
The state’s community colleges have taken on 31,000 new students because of the recession, and the added money is necessary to handle that growth, David McLawhorn, president of Beaufort County Community College, told the Daily News late last month.
Some would argue that, in light of the possible Medicaid shortfall, the budget isn’t balanced as it stands.
“I guess it would be hard to really classify it at this point as a balanced budget, given that $500 million in the budget are federal dollars that are not guaranteed,” said Brian Balfour, a policy analyst with the John W. Pope Civitas Institute, a conservative think tank in Raleigh.
The budget depends heavily on temporary revenues that won’t be in place next year, including a 1-cent sales tax increase that will go off the books and federal stimulus dollars, Balfour said.
“The state is setting itself up for a much deeper hole when it comes to crafting the 2011-2012 budget,” he commented.
It has been widely reported that the Great Recession brought on slow tax collections and other problems, leading to state funding shortfalls and leaving lawmakers in the difficult position of making substantial budget cuts in an election year.
The news isn’t all bad, though.
Despite these obstacles, the House and Senate could be on track to reconcile their spending plans before the fiscal year ends June 30. The plan that emerges will have to be signed into law by Gov. Beverly Perdue.
Also, the House and Senate have put forward different proposals for helping small businesses.
In a news release, Rep. Tim Spear, D-Washington, cites small-business tax credits in the adjusted budget, including:
• $250-per-employee benefits for small businesses that provide health insurance for their workers;
• $1,000-per-employee credits for businesses with 25 employees or less as part of the Putting People Back to Work program;
• and tax benefits for investments in small businesses.