Next North Carolina state budget will be tight, authors say

lbonner@newsobserver.comJanuary 26, 2013 

Where the state spends its money

N&O GRAPHIC

  • More information The budget process In each odd-numbered year, the legislature writes a two-year budget. Lawmakers this session will be putting together a spending plan that covers July 1, 2013 through June 30, 2015. The second year of the two-year budget is a blueprint for spending that legislators will revise in spring 2014.

It’s usually a slow, predictable walk from the beginning of the budget-writing season to the release of state budget proposals in late winter and early spring. But budget surprises got off to an early start this year with Gov. Pat McCrory picking Art Pope, former legislator, multimillionaire and conservative foundation financier to be his budget director and with Senate leader Phil Berger’s pronouncement that he wants the state budget, now at $20.2 billion, to be smaller next year.

McCrory will present his budget in March, and the state Senate has the first crack at writing the legislature’s version.

Pope said it’s too soon to talk specifics, but there’s going to be little money to pay for expanded government services.

The state budget is on firmer footing than in recent years, but there’s not much cushion. Rather than the $3 billion-plus shortfall the state stared down two years ago, budget writers could begin the next budget with a tiny surplus, projected to be about $100 million.

Next month, Pope and the legislature’s fiscal research staff will make public their expectations for revenue growth. At 3.3 percent – which former Gov. Bev Perdue’s office predicted – the state would bring in an additional $800 million. But most of that would be claimed by increases in public school and university enrollment, Medicaid increases, and the cost to continue state agency work at its current level, Pope said.

“There’s going to be a very tight budget,” Pope said.

He also said the state hasn’t spent enough on building repairs. Sen. Pete Brunstetter, a Winston-Salem Republican and a chief budget writer, said that an adequate repair and renovations fund is essential to creating a solid, post-recession budget.

Other than boosting the Rainy Day reserve account and building funds, no one is talking about budget priorities.

But when it comes to writing the budget, the state’s biggest expenses, education and Medicaid, are also the biggest targets for cuts.

After failing to contain Medicaid costs as they expected, legislators have kept a close eye on spending on the government health insurance program for the poor and disabled.

Medicaid spending will get more scrutiny, and optional services, those the federal government does not require states to offer, may be cut. Most of what the federal government considers optional are what many think of as a basic part of a health insurance plan, such as prescription drugs and hospice care, but the state already has begun to trim some medical services.

The Senate proposed deeper reductions in optional services in its budget two years ago, and may consider it again, Brunstetter said.

The state offers a “broader array” of optional services compared with other states, he said, and Medicaid spending takes money away from other priorities.

“Every part of the state budget, whether it’s education or corrections, is subsidizing the Medicaid budget,” he said. “We have to solve that problem if you want to invest appropriately in other areas.”

Bonner: 919-829-4821

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