The Devil’s in the Details: FY 2012-13 Continuation Budget Cuts

The General Assembly will soon put together their FY2012-13 continuation budget, in which lawmakers make changes to the second year of the biennial state budget that was passed in the spring of 2011. Any changes to the state budget are based on the availability of revenue (whether there is more or less than expected) and other policy considerations. Since the current-law state budget functions as the starting point for legislators, the N.C. Budget and Tax Center compiled the following facts about budget decisions made last spring that lawmakers could choose to reconsider.

The NCGA chose to make these budget cuts in FY2012-13 …	… but instead of making cuts, they could:
Public Education
$503.1 million Continue to require school districts to “give back” this amount of state appropriations for education every year (“LEA Adjustment”)	$500 million Expand state sales tax to include over 150 categories of currently untaxed services and cut the sales tax rate from 4.75% to 3.75%
$102.9 million Cut funding for instructional and non-instructional support personnel, eliminate support for teacher mentoring, and cut school transportation funding	$100 million Stop allowing multi-state corporations to shelter profits from the state corporate income tax
$4.8 million Eliminate Teacher Academy, a program that provided professional development and student loan repayment for teachers	$5.6 million Repeal 2% discount for tobacco distributors for filing and paying their taxes on time
Tuition and Financial Aid
$60.4 million Raise tuition for community college students for the second year in a row	$56 million Eliminate sales tax breaks on expensive boats and private aircraft; vending machine items; and prepared food sold in university dining rooms
$12 million Eliminate all state funding for UNC-TV, North Carolina’s public television network	$13.1 million Eliminate tax credit for companies exporting cigarettes from a North Carolina port ($9.1 million) and repeal the sales tax exemption for artisanal bakery products ($4 million)
Health & Human Services
$53.6 million Cut nationally-recognized prekindergarten program NC Pre-K and early childhood program Smart Start	$43 million Keep 2% personal income tax surcharge on households with joint taxable income between $100,000 and $250,000 ($60,000 to $150,000 single)
$382.5 million Cut Medicaid budget to the point where DHHS estimates the state will fall $243 million short of what is needed to pay claims in FY2012-13	$335.6 million Eliminate the $50,000 business tax exemption that was included in the FY2011-13 budget
Justice & Public Safety
$7.9 million Cut state funding to pay private attorneys for representing indigent clients in court	$9.1 million Eliminate tax credit for companies that export cigarettes to a foreign country through the N.C. State Ports
Total Cuts: $1.13 billion	Total Revenue: $1.06 billion

—Text and chart: Brenna Burch, Public Policy Analyst, NC Budget and Tax Center

Sources:

Spending cuts are based on NC Budget & Tax Center calculations and data in the FY2011-2013 Final Budget (http://www.ncleg.net/fiscalresearch/). Revenue options are based on NC Budget & Tax Center calculations, data provided by the Institute on Taxation and Economic Policy (ITEP), and the NC Department of Revenue’s Biennial Tax Expenditure Report, 2009 (http://www.dornc.com/publications/nc_tax_expenditure_report_09.pdf).

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