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June
29, 2002
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Volume
2, Issue 5
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The
Living Income Initiative is a special project of the NC Justice and
Community Development Center. It is
supported completely through contributions and foundation support. You
can contribute directly by mail at
Living Income Initiative, P.O. Box 28068, Raleigh, NC 27611. Email us
at sorien@ncjustice.org
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HOUSE
HOPES TO BRING BUDGET TO A VOTE BY JULY 4
June 28, 2002
IN
THIS ISSUE:
• HOUSE
HOPES TO BRING OUT BUDGET BY JULY 4
Governor Pressures
House To Make Cuts
Where's the Beef?
- House Has Yet to Discuss Any Revenue Options
It's Time
for House Leadership
• SENATE BUDGET
HITS LOW AND MIDDLE INCOME WORKERS HARD Part 2: More Details
Senator Kinnaird
Bravely Votes No
Big Cuts in Health
and Human Services
Temporary Assistance
for Needy Families Block Grant Plan Includes More Cuts
• FEATURED
CUTS OF THE WEEK: MENTAL HEALTH AND DEVELOPMENTAL DISABILITY SERVICES
• NEW REPORTS
FROM NC BUDGET AND TAX CENTER - Links to Reports Included
Look
For BUDGET ALERT!
Coming in a Separate Email
You can get more information about the legislature, your representatives
and the state budget at the General Assembly Web Site http://www.ncleg.net.
Go to Bill Information to obtain bills discussed in this update.
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HOUSE HOPES TO BRING BUDGET TO A VOTE BY JULY 4
Speaker of the House Jim Black (D-Mecklenburg) let House Appropriations
Subcommittee Chairs know they should be prepared to work all weekend
on the House's version of the budget for 2003. He also warned that Finance
Committee chairs should be available for the weekend and that all members
should be prepared to meet on the budget starting Monday, July 1. The
Speaker indicated they would like to complete the budget as soon as
possible and rumors were that they hope to bring it for a vote on July
4. I remain skeptical that the almost evenly divided House can move
so quickly. If they do, it means there will be almost no opportunity
for public review and debate of the bill. Legislators not in Appropriations
leadership would also get only limited input.
Meanwhile, the current state budget ends June 30, 2002 - yes, that is
Sunday. (Current budget is Senate Bill 1005) The House and Senate passed
a "continuing resolution" which gives state government permission
to keep operating under a bare outline of the 2002 budget until July
31. (Senate Bill 1111) The House debated at length about how to deal
with a lost month when the deficit is so great. The problem is that
continuing government as set out in the 2002 budget means that spending
will exceed revenues and that new cuts and new revenues that are being
contemplated for 2003 are delayed. The House says it has not had long
enough to look over the Senate budget, which was passed on June 19,
to know to which cuts they will ultimately agree so they did not agree
to any cutting in this continuing resolution. Ultimately, this will
mean that they have to fill the budget deficit with eleven months (instead
of twelve) of new revenues or lessened spending due to cuts. Every month
they don't have a budget and they keep spending at 2002 levels and not
raising new revenue, the deficit gets bigger and therefore, the budget
and staff cuts must be deeper and the amount of new revenue needed grows.
Governor Pressures House
To Make Cuts
On Thursday, the Governor expressed his concern about this problem by
issuing an Executive Order declaring a new fiscal emergency. This allows
the Governor to begin making cuts and/or laying off staff in order to
keep the budget in balance. The state constitution prohibits the state
from deficit spending and requires that the Governor insure that the
budget is balanced. The near-final fiscal data for the year indicates
that the 2003 budget deficit will be between $1.5 and $1.6 billion.
The Governor said in his press conference that he would wait two weeks
before making further cuts or laying off staff. Already, lay-off notices
have been issued to many staff and their job status is now unclear.
This Executive Order puts enormous pressure on the House to act quickly
regarding the budget. While all appropriations members have been meeting
since early April, the House has only had the Senate budget, from which
they must work, since June 20. As a result, Speaker Black said the House
is not yet prepared to agree to cuts in staff and programs. Yet, if
they don't come to the table with a list of their preferred cuts, the
Governor has now told them he will begin making cuts based on his and
the Senate's budget proposals and the House will be left out of the
decision-making. Presumably, this weekend House Appropriations Co-chairs
are trying to determine which positions they can agree to cut, as well
as if there are other program cuts they can agree to take in advance
of completing their full budget.
Where's the Beef? - House
Has Yet to Discuss Any Real Revenue Options
With a $1.5 billion budget deficit, one would think that the House would
want to consider raising some revenue. The Senate raised or found $845
million in additional money for the 2003 state budget by passing a revenue
package that implements another half-cent sales tax, delays some new
tax breaks from going into effect and transfers money one time from
the Tobacco and Highway Trust Funds to other uses in the budget. Many
fine revenue bills have been entered in the House but there has been
no public discussion of any proposal to raise new revenue or to transfer
funds from existing trust funds. There are House bills to raise corporate
taxes, increase individual's income taxes, close corporate tax loopholes
and transfer funds from the Highway Trust fund and the Tobacco Trust
fund. The only item being publicly discussed at all is the lottery,
which Speaker Black says will come to a vote the week after July 4.
The lottery is so regressive its like taxing food stamps, which is prohibited
by federal law. The House intends to run a bill calling for a non-binding
referendum on the lottery before it would be implemented. This means
a lottery could not be in place in time to raise any money for the 2003
fiscal year and therefore, is not relevant to this year's budget debate.
Before the House can agree to changes in the budget, it would seem they
need to know how much money they can raise to fill the deficit. But,
as Representative Jennifer Weiss (D-Wake) told the Raleigh News &
Observer, "The challenge is finding 61 votes to support any one
of those ideas."
It's Time for House
Leadership
While the 120 member House is somewhat unwieldy, it also provides ample
opportunity for individual members to stand up and make a difference.
House leaders are correct in saying the Senate budget relies on too
many questionable budget gimmicks that will only leave the state in
a worse budget problem next year. Now more than ever, the House requires
some strong, articulate leaders to come forward and voice why a sensible
revenue package is necessary and to put one on the table. A package
of revenue bills entered by Representative Mickey Michaux (D-Durham)
and another package by Representatives Jennifer Weiss (D-Wake), Paul
Luebke (D-Durham) and Verla Insko (D-Orange) are an excellent starting
point. There are other revenue bills entered by Representative Paul
Miller (D-Durham) and others worth consideration also. While closed-door
meetings to discuss all of these issues are important to move the process
forward, the House must immediately begin having public meetings. It
is only then that these issues can be completely vetted in the media
and with the public. It is only then that leaders can explain to the
public why they must do, what they must do.
And raising revenue they must do. If House members do not raise any
new revenue other than transferring funds from a few trust funds, they
will have to cut state programs and state government so severely North
Carolina's progress will be set back by decades. Already we are struggling
to keep up with the nation as national child poverty rates drop while
ours increase. Fifteen percent more children were living in at-risk
households in 2000, at the end of the economic boom, than in 1990. Last
year the House stepped up and did the right thing. They made very hard
cuts, but they also raised revenues without resorting to the most regressive
and least reliable tax, a lottery. This year, North Carolina needs more
of the same leadership.
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SENATE BUDGET HITS LOW AND MIDDLE INCOME WORKERS
HARD Part 2: More Details
Contributions
to this report from Elaine Mejia, Policy Analyst, NC Budget and Tax
Center
On June 19, the NC Senate passed its proposed budget 34 to 16. Their
budget bill cuts about $1 billion in state funded programs and staff,
$109 million more in cuts than the Governor proposed. The largest dollar
cuts are in Health and Human Services and Education (public education,
universities and community colleges combined). The largest percentage
cuts are in Transportation, General Government and Natural and Economic
Resources.
The Senate also raised $845 million in new revenue, primarily by eliminating
payments to local governments in exchange for allowing another half-cent
sales tax, and one-time borrowing from the highway and tobacco trust
funds. Significant portions of these funds are one-time moneys being
used to for ongoing expenses. Another $51 million will allegedly come
from Project Collect Taxes, but Secretary of Revenue Norris Tolson says
he never told the Senate he can collect that much more in back owed-taxes.
(The Senate had already budgeted Project Collect Tax to raise several
million for 2003.) These budget tactics simply delay the inevitable
pain. The remainder of the revenue being raised is highly regressive,
taxing low- and middle-income individuals more than the wealthy and
not tapping corporations to help with the deficit at all.
The Senate budget also contains $525 million in "expansion"
spending, $15.6 million more than the Governor's budget. Seventy-four
percent of this money goes toward growth in needs and enrollment in
public education, community colleges and Medicaid. The cost of medical
care is going up for everyone, not just Medicaid recipients, and the
number of people enrolling for public school, Medicaid, universities
and community colleges is increasing. In other words, the so-called
"expansion" money is being used to continue to provide the
same services, not new services, to North Carolina residents.
For more in-depth analysis of the Senate Budget, see BTC Reports, "The
Senate's Proposed 2002-03 Budget: Low- and moderate-income people take
the hits and foot the bill," (in pdf format.)
Senator Kinnaird Bravely
Votes No
For the first time during my nine sessions here, a Democrat voted against
the budget in the tightly controlled, Democratic majority Senate. Senator
Ellie Kinnaird (D-Orange) expressed her regret that she could not vote
for the budget bill, but she firmly stated she could not make such draconian
cuts to "our people." "And where did these cuts come
from?" Senator Kinnaird asked. "From programs for the weakest
and most vulnerable among us; those to whom our stewardship has been
given." She noted the legislature could not raise enough money
to avoid these cuts due to the atmosphere of politics by attack ads
and the vilification of anyone who would raise taxes. It was a very
brave move on her part. Click here for Senator
Kinnaird's full speech.
Big Cuts in Health and Human
Services
The Senate cut $263 million in Health and Human Services staff and programs.
This amounts to a 7.2% reduction in state funding for HHS. In addition,
many of these state dollars draw down federal money which would also
be lost. The Senate had two HHS “expansion” items:
1) $109 million into Medicaid to cover
increasing costs and enrollment; and
2) $600,000 in new state money to State
Boys and Girls clubs.
The
Medicaid money simply maintains the current services and eligibility
and the Boys and Girls club money partially replaces $900,000 in TANF
money the clubs lost. The end result is that significant cuts, sometimes
devastating cuts, are made to critical programs serving older adults
with health problems, abused and neglected children, kids and adults
suffering from mental health or developmental disabilities, child care
subsidies and more.
The Senate budget cuts 375.7 positions from the NC Department of Health
and Human Services (HHS). This includes 61 positions in state psychiatric
hospitals, which are already under federal investigation for inadequate
staffing. Also included are 150 positions to be determined by the Secretary
of HHS and coming from throughout the agency. In addition, cuts to programs
and counties will result in significantly more staff losses. For example,
$5.5 million cut to county Departments of Social Services (DSS) for
administrative costs results in a $5.5 million loss of federal matching
funds and a loss of about 390 county DSS staff. These staff provide
critical services, such as determining applicant eligibility and investigation
of abuse and neglect charges.
Temporary Assistance for
Needy Families Block Grant Plan Includes More Cuts
The Senate TANF plan had to make about $34 million in cuts to programs
funded last year with TANF dollars. This year North Carolina has about
$26 million less in TANF funds to spend than last year. That is because
last year the state spent almost all of its carry-forward TANF funds.
Carry-forward is one-time money unspent from previous years. Only about
$9 million in carry-forward is left to be allocated for 2003, unlike
the 2002 TANF budget that allocated almost $60 million in carry-forward.
In addition, the Senate allocated almost $4 million more for cash assistance
to reflect that the Work First caseload has increased and $4.6 million
is spent to repay Federal moneys intended to be used for an automation
project called SACWIS that was never completed.
The result is that TANF funding is eliminated for 12 programs and six
others suffered significant reductions. Two programs that would see
their TANF funds eliminated, were given replacement funding from other
sources: 1) Private Child Caring Institutions would get $1.5 million
in Social Services Block Grant funds instead of that amount in TANF;
and 2) Boys and Girls clubs would get $600,000 in state money instead
of the $900,000 they got in TANF money last year.
Cllick here for a chart comparing
the Senate proposed TANF Plan for 2003 with the TANF Plan for 2002.
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FEATURED
CUTS OF THE WEEK: MENTAL HEALTH AND DEVELOPMENTAL DISABILITY SERVICES
Contributions to this section by Coalition 2001 and NAMI-NC
The impact of extensive cuts to mental health, developmental disability
and substance abuse programming can hardly be overestimated. The Senate
budget would cut $68 million state dollars from these programs and this
would result in the loss of about $62 million in federal money. These
state programs are already in crisis due to chronic underfunding that
has led to significant understaffing in state facilities and lack of
adequate community based services. The US Department of Justice is investigating
the state psychiatric facilities for staffing and other violations that
have led to improper treatment of patients. Federal litigation called
the “Olmstead” decision requires all states to move away from
centralized state facilities and toward more community services and
community placements. Legislators, state and local government providers,
private providers, academics and patients and their families have worked
for two or more years to develop a plan to address these problems, but
these cuts make it impossible to implement the plan.
The Senate does allocate $50 million non-recurring (one-time) money
to the Mental Health Trust Fund. Last year, however, the Governor was
forced to take this money only two weeks after the fund was established
in order to balance the budget. Since most other trust funds are already
sacrificing money in the Senate Budget to balance the deficit, it seems
unlikely this money would survive. Mental health advocates agree they
would rather see that $50 million remain in current line items than
go toward this Trust Fund. The bottom line is persons with mental health
disabilities are going to continue to go without appropriate services
and litigation seems imminent if these cuts are enacted. Here are some
of the proposed cuts:
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$13,554,011
million - CAP-DA.
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This
reduces funding to the previously frozen Community Alternatives
Program for Disabled Adults. This results in the loss of federal
monies also. The CAP-DA program is intended to provide home health
care services to adults so they do not have to live in nursing facilities.
This is North Carolina’s more successful community service
program for adults with mental or physical health problems. The
freeze on CAP-DA began last October and since then about 200 people
a month have gone off the rolls, causing an enrollment drop of over
1000. This freeze was implemented so that no one new enter the program
even if someone left it. At the time the freeze began about 5,000
were waiting for CAP-DA help and the waiting list is now around
6,000. This week the administration partially lifted the freeze
and expects to put about 150 to 175 people onto the program per
month now. This still does not fully refill the 200 positions per
month on average, which become available due to current enrollees
leaving. The first persons to get services will be those who are
waiting in nursing facilities. Persons on the waiting list who are
still living with family members will be put on later, if at all.
DMA will continue to watch costs closely. |
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$18,358,593
million - CAP-MR/DD program.
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This
program provides home health care services to children suffering
from Mental Retardation/Developmental Disabilities. This will result
in a loss of $39.1 million in federal dollars also. As of January
2003, 6002 children were on the waiting list for this assistance.
This program has also been frozen since October, meaning no new
persons are getting this assistance. This freeze remains in place
because spending for CAP-MR/DD is still running high compared to
the amount budgeted for the program. |
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$20 million - Medicaid Case Management.
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This
reduces direct case management services to adults and children by
33%. $5.1 million of this will come from Mental Health Case Management.
All will result in a corresponding loss of federal dollars. In the
Mental Health and other health arenas, case management is considered
a "best practice" for assisting individuals with multiple
and complex service needs. |
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$29.3million
- Area Mental Health, Developmental Disability and Substance Abuse
programs.
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Administrative
dollars were reduced and limits were placed on administrative costs
last year, so direct services are about all that is left to cut.
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$2,895,097 million - State Psychiatric Hospitals.
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This
will result in a loss of federal money and in 61 staff. The US Department
of Justice is already investigating these facilities regarding concerns
about understaffing. |
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NEW REPORTS FROM NC
BUDGET AND TAX CENTER
DISLOCATED WORKERS IN NORTH CAROLINA: Aiding Their Transition to
Good Jobs by Chris Estes of the NC Budget and Tax Center and William
Scheke and Sara Lawrence of Corporation for Enterprise Development.
This report examines how workers are fairing after being laid off
from manufacturing industries not likely to return to the state. The
report found that after six months, when unemployment benefits end,
about 60% of these workers were reemployed and earning half or less
than their previous salary. Report
summary
THE SENATE'S PROPOSED 2002-03 BUDGET: Low- and moderate-income
people take the hits and foot the bill A BTC Reports by Elaine
Mejia, Senior Fiscal Policy Analyst. This report examines the Senate
budget and revenue proposals and their impact on programs, and low
and moderate income North Carolinians. http://www.ncjustice.org/btc/020602report.pdf
SOME SIMPLE FISCAL ADVICE: When Diagnosing Engine Problems It Pays
to Look Under the Hood. A BTC Reports by Elaine Mejia, Senior
Fiscal Policy Analyst. This report examines the shortcomings in North
Carolina's current tax system and offers remedies to help avoid such
large budget shortfalls in the future. http://www.ncjustice.org/btc/020702report.pdf
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