The continued deadlock over the state budget is beginning to affect important state services, nonprofit groups, local governments and others who depend on state money.
North Carolina’s new budget year began on July 1, but Democratic leaders in the General Assembly were unable to agree on a final budget by then.
They kept government operating through a temporary spending bill. That bill was supposed to expire on July 15, but when they couldn’t meet that deadline, legislators extended it again until the end of the month.
Under the temporary spending bill, each area of state government is allowed to spend money at a level equivalent to 84 percent of what was authorized in the previous budget year.
To meet that requirement, agencies are taking all sorts of cost-cutting measures. Big things include neglecting to fill open positions. Small things include encouraging employees to use e-mail instead of printed paper to reduce the cost of office supplies.
And the uncertainty over what the final budget will look like is causing further problems.
Local school systems, for instance, don’t know how much money they will have to pay teachers in the rapidly approaching new school year. School officials also don’t know if the state budget will include an increase to average class sizes – a cost-saving measure that was included in budget proposals put forward by the N.C. Senate and N.C. House.
“Superintendants and principals are trying to hire teachers and fill positions, but they don’t know how many positions they’re going to have,” said Bill Harrison, the chairman of the state board of education. “Everyone is doing their planning on a worst-case scenario until we get something definitive.”
In the court system, officials have suspended the rotation of Superior Court judges, who normally rotate among various counties every six months. To cut down on travel expenses, all judges have been ordered to remain in their home districts.
In a budget memo to judicial employees, the director of the N.C. Administrative Office of the Courts warned that, if there is no permanent state budget in place by the end of the month, the department may not have enough money to pay out full salaries and other critical expenses.
Payments for witness fees, expert testimony and other expenses are already being delayed.
Similar delays affected the payment of some money in the N.C. Department of Health and Human Services, which held up some checks that pay for indigent patients in rest homes.
Lanier Cansler, the state’s secretary of health and human services, said that the checks were delayed four or five days because of “cash-flow issues,” but he said the problem is now fixed.
The state budget deadlock is especially hard on nonprofit groups that have contracts with the state to provide services and depend on state money, Cansler said.
“We’re having to hold those funds back,” he said. “That obviously creates a good bit of turmoil for those organizations.”
As everyone waits for a final budget, the legislators in charge of passing it appear to have made little progress on the key stumbling block: how to raise about $1 billion in new taxes.
Democrats, who control the budget-writing process, agree in principal that the new taxes are needed to offset plummeting state revenues caused by the economic recession. But
House Democrats and Senate Democrats disagree on how taxes should be raised.
For instance, the House has proposed an increase to the sales tax rate and an increase to the income tax for top earners. The Senate does not want to raise the income tax on top earners, and the Senate would also prefer to lower the sales tax rate while expanding it to include many more goods and services.
Without any tax increases, Democrats say the state is facing a budget shortfall of more than $4 billion – a gap that they say would necessitate devastating cuts to services.
Republicans accuse the Democrats of overstating the size of the shortfall. Republicans say the Democrats are not properly accounting for spending cuts that have already been enacted by Gov. Bev Perdue or for federal stimulus money being used to help balance the budget.
Republicans say tax increases are not necessary and will only further hurt the economy.
Chief Democratic budget-writers said this week the House and Senate negotiators have reached broad agreement on a spending plan of about $18.9 billion. Now they are working out the details of where money should be allocated within each spending area, said Sen. Linda Garrou, D-Forsyth.
And of course, for the spending plan to be viable, the two sides will have to come to agreement on taxes so that the state has enough revenue to cover the spending.
Asked how much the budget negotiations have progressed since July 1, Garrou answered with a single word.
“Somewhat,” she said.
Budget-writers have tried to downplay the effects of the delay. On Wednesday, just before the House voted to extend the budget deadline from July 15 to July 31, a Republican posed a question about the state’s current cash situation to Rep. Mickey Michaux, D-Durham and the House’s senior budget writer.
“The only other thing I can tell you is that we have not given out any IOUs yet,” Michaux said.
