State House budget writers will have almost $1.1 billion more available as they craft the state’s next spending plan – a better-than-expected number that will provide more flexibility than in recent budget years.
A new projection from the state budget office and the legislature’s fiscal research staff comes as the House appropriations chairmen held lengthy closed-door meetings this week preparing to write a spending plan for the state that’s expected to total about $22 billion.
They say their budget proposal’s details will be released by Thursday, when appropriations subcommittees begin to debate various subject areas. Even with the positive news on revenue – including Wednesday’s announcement of a $400 million budget surplus for the current year – legislators are calling for a cautious approach.
“The easiest thing to do would be to make a lot of people happy and rush out there and spend that money, but that is not the fiscally prudent thing to do,” said Rep. Donny Lambeth, one of the appropriations co-chairmen and a Winston-Salem Republican. “There will be tough days ahead of us, and I think it would not be very wise to try to just run with all that money and spend it.”
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Lambeth points out that this year’s surplus isn’t free money. State law requires legislators to use surplus funds for one-time expenses or to beef up the state’s savings. “We’re looking at ways that we can take advantage of it but also be fiscally responsible,” he said.
Both Gov. Pat McCrory and Senate leader Phil Berger called this week for doubling the state’s rainy day fund. The House leadership agrees.
“There are some statutory requirements for reserves we haven’t been meeting, and we’re going to make sure we meet those in this budget, at least in the House version,” Lambeth said. “When the money wasn’t there, we weren’t able to do that in the past couple sessions.”
The extra revenue, however, has dozens of lobbyists optimistic that their spending wish lists will be granted this year. Among them is Tom Murry, a former legislator who now lobbies for the state court system.
“I felt confident before I saw those numbers, and I feel even more confident after I saw the numbers,” Murry said.
Murry’s job is to make sure budget writers remember N.C. Supreme Court Chief Justice Mark Martin’s request for more courts funding. Martin spoke to legislators in March and said the state is “confronting a situation where the justice system is unable to promptly serve those who turn to us for help.”
Murry says he’s requesting an increase of $25 million to $50 million. That would be an appropriate request to the General Assembly, he said. “We have a menu of options that includes salary increases, operational funds … as well as technology needs.”
Murry and the court system will have plenty of competition. Legislative leaders have pledged to increase starting teacher pay to $35,000 – a $41.8 million budget item. McCrory has asked for $82 million for targeted pay raises across state government to keep employees in some hard-to-fill positions. And he wants $155 million in tax breaks designed to stimulate film, aviation, renewable energy and other sectors.
Each request is getting close scrutiny, said Rep. Nelson Dollar, the senior appropriations chairman.
“We have to make sure our funds are going to the highest and best use, and frankly, going to those programs that we know are getting the biggest bang for the buck,” he said. “What’s really important is for those programs to prove themselves in terms of impact.”
But Lambeth said the House is backing many aspects of McCrory’s $21.5 billion spending proposal, which was released in March. “I don’t think we’re going to be that different from many of his priorities,” Lambeth said.
McCrory included a $3 billion bond referendum for transportation and infrastructure projects in his budget. But Lambeth says the House won’t discuss the bond proposal until the budget is finished and sent to the Senate.
“We’re going to separate the bond package from the budget,” he said. “We’ve got to spend a little bit more time on the bond package.”
The governor could have better initial luck with his request to restore a tax deduction for senior citizens’ medical expenses. That change has drawn outcry, and bringing it back would cost about $38 million per year, officials say.
“It was our goal – even before the governor said it – that we were going to do everything we could to get that back in the budget,” Lambeth said. “I have no idea how the Senate will react. They’ve held pretty firm to not chipping away and adding new deductions, so we’ll have to deal with that.”
Not all of the $1.096 billion in additional revenue can go to new programs and tax credits, however. A large chunk of that money is spoken for – it will go to cover growth in Medicaid expenses, school and university enrollments and employee health care costs that are no longer included in the “base budget” that lawmakers use to the start their talks.
Budget climate changed
Even with those constraints, Murry says, the budget climate has changed dramatically since he first entered the legislature as a freshman House member in 2011 – when the recession demanded sharp spending cuts.
“It’s a much more relaxed environment, and I think members of the General Assembly are excited to be able to invest in priorities,” he said.
Lambeth says he and other House budget writers aren’t seeing much relaxation this week. Their meetings have been running from 8:30 a.m. to nearly 9 p.m.
“I’d hate to know how much time we’ve put in so far, but it’s a lot,” he said.
By the numbers
$1.096 billion projected revenue increase in fiscal year 2015-2016
$21.97 billion projected total revenue in fiscal year 2015-2016
$180 million estimated cost of growth in Medicaid expenses, school and university enrollment and employee health care costs
$41.8 million cost of raising starting teacher pay to $35,000
$15 million governor’s request for a fund to help startup businesses
House budget schedule
Here’s the budget timeline state House leaders announced this week:
May 14: Appropriations subcommittees review their sections of the budget.
May 19: Full budget proposal on House floor.
May 21: Final House vote on budget.
May 25: Senate begins budget deliberations.
June 30: Deadline to pass a new budget, although legislators sometimes extend it.