Senate budget moves in right direction, has room for improvement

May 19, 2013

RALEIGH — Spending slightly less than Gov. Pat McCrory’s General Fund budget plan, the N.C. Senate’s $20.56 billion proposal would move state government spending in the right direction. The John Locke Foundation’s chief budget analyst offers that assessment. She says senators could save even more money by avoiding several new programs they plan to create within state government.

“One of the best attributes of the governor’s budget plan was that he avoided the temptation to create lots of new government programs,” said Sarah Curry, JLF Director of Fiscal Policy Studies. “The Senate would spend about $17 million less in its General Fund budget than Gov. Pat McCrory, but senators also shift money into new programs and activities that could be avoided.”

For instance, Curry focuses on funding that targets rural economic development. “Senators make a good choice by deleting $16 million in funding from the existing N.C. Rural Economic Development Center, ” she said. “But the Senate plan would spend about $17.3 million for a new rural economic development unit within the N.C. Department of Commerce. That’s just one example of a case in which senators could have reduced the bottom line for taxpayers by simply sticking with the initial cut.”

Speaking of cuts, Curry praises Senate budget writers’ decision to give state agency officials some discretion for making cuts. That approach mirrors recommendations in Curry’s own $20.2 billion “Budget for Growth,” which JLF released in April. Curry’s plan would save nearly $500 million from McCrory’s 2013-14 General Fund budget proposal, and more than $1 billion over two years.

“Senators followed a similar process outlined in the Budget for Growth by asking state agencies to identify their own ways of cutting a fixed percentage from their budgets, leaving managers with flexibility to set priorities that allow them to maintain funding for critical services,” Curry said.

The state’s public schools, community colleges, and University of North Carolina system all would get more inflation-adjusted dollars in 2013-14 than in the current budget year, Curry said. The same is true for Health and Human Services and the state agriculture department. “Those who focus on education spending should notice that there’s no major cutback in that area — from K-12 public schools to higher education.”

Senators could stand to add one piece of funding to the education budget, said Dr. Terry Stoops, JLF Director of Research and Education Studies. “It would be good to see lawmakers consider additional funding for an opportunity scholarship program that would improve access to parental school choice,” Stoops said. “Otherwise, it’s good to see senators take a ‘what you see is what you get’ approach to the education budget.”

Much of the increase in the Senate’s General Fund spending is linked to prior cost overruns tied to North Carolina’s Medicaid program. “Senators could help address unexpected hikes in Medicaid costs by looking at reforms that would move North Carolina toward consumer-driven Medicaid,” said Katherine Restrepo, JLF Health and Human Services Policy Analyst.

There’s no good reason for senators to budget another $100,000 to study the effectiveness of Community Care of North Carolina, the state’s primary Medicaid provider, Restrepo said. “We already know the problems associated with CCNC, so that $100,000 could be spent more effectively elsewhere.”

With room for improvement, the first two stages of the state budget process still have turned out better than other budget debates in recent memory, Curry said. “Think back to the last two years, and you’ll remember that the first legislative budget proposal set the stage for a fight between the Republican-led General Assembly and the Democratic governor over raising taxes,” she said. “This time around, no one is calling for major tax increases to enable big increases in government spending.”

For more information, please contact Sarah Curry at (919) 828-3876 or [email protected]. To arrange an interview, contact Mitch Kokai at (919) 306-8736 or [email protected].