(Some) Takeaways From The 636-Page Budget Deal

Sep 15, 2015

Tax changes are among the hefty budget document released late Monday that is being dissected this week.
Credit www.irs.com

Politicos across the state are sifting through the 429-page budget bill - as well as the generally easier-to-follow 207-page money report - after its release late Monday night. The spending plan for the two fiscal years beginning July 1 is complicated, dense, and spotted with policy changes - including money for Medicaid reform and changes to the tax code, among other provisions.

The North Carolina constitution requires a balanced budget. So, the amount of money the General Assembly appropriates has to be less than (or, in theory, equal to) the amount of projected revenue.
Here are just some of the components, tidbits, and reactions, to the massive budget:

This and That

The $21.735 billion budget for the 2015-16 fiscal year represents an increase in state spending by about 3.1 percent. That figure is actually about $495 million less than what state budget staffers from the General Assembly and from Governor Pat McCrory's administration predict will be available. In other words, lawmakers could have spent up to $22.229 billion. Instead, some $600 million will be added to reserves.
This budget ends the annual $216 million transfer from the highway trust fund. So, instead of nearly a quarter of a billion dollars going into the general fund, policymakers who back the idea say that money can be used for infrastructure needs.

Compromise might have well been the word of the day on Jones St., as legislators from both chambers used it to discuss a deal that was months in the making. This budget agreement was unveiled 76 days after it was due. And initially the proposals each side laid out were separated by more than $1.2 billion.

Tax Changes

Several tax changes are included in the budget. The personal income tax rate will drop a quarter of a percent to 5.4 percent beginning in 2017. Additionally, the amount of money that will not be taxed is increasing in 2016, from the first $15,000 an individual or jointly-filing couple makes, to $15,500.
Some new sales taxes are also coming to the deal. These will be applied to car repairs and appliance installations, among other services to be taxed for the first time. The revenues from these new taxes will be distributed in an effort to help rural counties. Here is a chart of the projected changes, compliments of Representative Chuck McGrady (R-Henderson)

This change, while a shift in policy, is not nearly as sweeping as a redistribution proposal that rural and urban Republicans had been at odds over for months. The way current sales taxes are distributed will not be changed under this budget proposal.

Planned Parenthood Losing Funding For Two Programs

Deep in the budget is a provision to discontinue funding for the Adolescent Parenting Program in Wilmington ($60,000) and the Teen Pregnancy Prevention Program in Fayetteville ($75,000).

"Without the (Wilmington) program, the community as a whole will lose a vital community resource for their most at-risk youth," said Melissa Reed with Planned Parenthood. She was roaming the halls of the Legislative Building Tuesday.

Reed said the programs have been funded by state grants for 16 years and are proven to be effective.

Film Incentives Returning

Lawmakers are allocating $30 million in grant money for the state's film industry. This provision is designed to recruit productions to the state. A tax incentive for the state's film industry expired at the end of 2014. Industry officials in Wilmington say recruiting films, TV shows and other productions has become difficult and hurt the local economy.

"We are gratified the North Carolina legislature, led by Sen. Lee and Rep. Davis, has chosen to extend and increase its investment in the television and film industry in our state," said Wilmington Regional Film Director Johnny Griffin.

"We will work hard to put this grant funding to use in recruiting more TV and film projects to North Carolina to justify the General Assembly's faith in our industry and its contribution to the economy of our state. Our goal is that 2 years from now, if not sooner, that the people of North Carolina will have realized a substantial return on the investment they have made in the TV and film industry in our state."

Welcome Back, Medical Deduction

Restored in the fiscal blueprint is a state medical expense tax deduction that had been eliminated for the 2014 tax year. The AARP was among the outside groups that support the reinstated measure, calling it a move to "provide necessary relief to North Carolina families and seniors who face significant medical expenses." The change restored deduction was sought by many fixed-income elderly individuals who had been affected. It will benefit everyone who spends over a certain amount on medical expenses. The tax break will go into effect for 2015.

Now, More Policy!

As the fiscal blueprint moves forward so too will three pieces of legislation - dealing with Medicaid reform, economic development (grant money) and a $2 billion bond proposal. The Senate loaded its budget proposal with policy. At the urging of the House it pulled those components out. Still, as part of the budget negotiations each side has agreed to help move bills from the other chamber. If you're wondering about what happens if one chamber reneges on a promise, well say hello to a poison pill. What's a poison pill?

"Basically the funding for something important to the other chamber changes if that chamber doesn't take action as promised, on the bill that it has promised," explained Rep. McGrady.

"We've promised to take action on Medicaid. If we don't, and we leave a piece of the budget changes for something the House wanted. There is a similar provision tied to the incentives and bond package, where if the Senate were to leave without taking action on those bills as promised - a portion of something that was very important to the Senate in the budget gets changed."

So, the Senate gets a bill laying out the framework for the future of Medicaid. The House gets economic development and a transportation bond referendum - the latter of which will go to the voters, potentially as early as March and could ultimately become a significant piece of Governor McCrory's re-election campaign.

The budget moved through the first of two required votes in the Senate on Tuesday. The House is expected to advance the budget bill Thursday and (early) Friday. Those policy measures will follow in the next two weeks and lawmakers could be heading home by the end of the month…