The total state budget for Fiscal Year 2008-2009 (General Fund) is $21.3 billion. Of this money, $11.4 billion is for education (public schools, community colleges, and UNC System combined), $4.9 billion is for health and human services, $2 billion is for justice and public safety (including prisons and courts), and $460 million is for natural and economic resources.

 

 OVERVIEW

Every year, the governor, other state officials and the 170 members of the General Assembly wrestle with a spending plan for North Carolina, a budget that has now grown to more than 21 billion. But it is more than size that makes the state budget so critical. The budget expresses all our key policy decisions and priorities.  It determines who we tax and how much and how we choose to spend our money for programs and services that range from public schools to repairing highways to a state School of the Arts.  Because there is never enough money to do it all, and never will be, the budget reflects the consensus of North Carolina’s elected representatives.  Making decisions about priorities is part of the give and take that drives the state’s annual budgetmaking process. It is a process that involves the governor, the 120 members of the state House, the 50 members of the state Senate, elected officials, appointed officials, local government representatives, advocates for any number of causes, lobbyists, and average citizens with interests in specific programs or projects.

GENERAL FUND

In all the debate over the budget each year, the main focus is on the General Fund, which amounts to just over half of North Carolina’s total budget. The General Fund, financed almost exclusively from state taxes and fees, pays for all forms of public education, the operations of most state agencies (providing all sorts of services, from economic business development to environmental access and monitoring to adult and juvenile correctional institutions, inspections of rides at carnivals and fairs and housing and maintenance of animals and birds at the NC Zoo), and the state’s share of programs in health and human services, like nursing homes and mental health hospitals.

HIGHWAY FUND

A second major part of the budget, the Highway Fund, pays the state’s share of most transportation programs, including roads, airports, and railways and trains. Highway Fund money comes from transportation-related taxes and fees like the gasoline tax, the annual fee for license plates and drivers licenses, titles for automobile ownership, and related sources.

FEDERAL FUNDS

A third major section of the budget is comprised of federal funds that are channeled through state agencies as grants for specific services such as community development, worker training and retraining, health and human services, and environmental programs and services.  The General Fund, more than any other section of the budget, reflects the priorities of state officials for the use of money directly raised in North Carolina. It is the area of the budget that makes North Carolina unique, that reflects what this state’s governor and General Assembly consider important. 

Every citizen of North Carolina, from the youngest infant to the oldest resident, is affected by the state’s budget, either as a contributor through taxes and fees or as a customer of state services. The vast majority of North Carolina’s citizens are both contributors and consumers.  You do not have to receive a government check to be a beneficiary of the state budget.  Nor do you have to get a paycheck with state income taxes withheld to be a contributor to it.

ESTIMATING REVENUES

The state budget is based on the amount of revenues from taxes, fees, and other sources of funds North Carolina expects to collect in the next budget—or fiscal—year, which runs from July1 to June 30.  Those projections are made by economists and financial experts in both the executive and legislative branches of government.  In most cases, the governor and members of the General Assembly try to use conservative projections for next year’s growth in deciding how much money will be available to include in the budget.  In most years, the economy performs better than the conservative estimates, leading to revenue collections that exceed projections. That leaves the state with unbudgeted, one-time funds that can be used for repair and renovation of state facilities, and a “rainy day fund” for emergencies, clean water projects, construction of new facilities, equipment purchases, or other one-time costs.

But when the economy takes a downturn, as it has in the last few years, revenue collections can fall below even conservative estimates, leaving the state with a shortfall. Unlike the federal government, North Carolina has a constitutional requirement that its budget each year be balanced. That means that spending cannot exceed the revenue taken in each year. A “deficit” or “shortfall” in North Carolina means that revenue collections for the year are running behind projections so that spending, by law, must be reduced to meet the lower revenue amounts.

The governor prepares and submits to the legislature the budget—a balanced plan of expected receipts and proposed expenses.  The legislature adopts the state’s final spending plan, but the governor has the constitutional authority to make virtually any spending reductions in that plan as necessary to ensure that the state ends its fiscal year on June 30 with a balanced budget.

 

From “Our State, Our Money: A Citizen’s Guide to the NC Budget,” prepared by the NC Progress Board, available at http://www.osbm.state.nc.us/ncosbm/new_content/Citizen_Guide_to_Budget.pdf, 2003.