Seeing the forest for the trees: Entire year-to-year spending increase in Governor’s FY2016 budget proposal goes to enrollment growth

Last week, Governor McCrory unveiled his two-year budget proposal for July 2015 through June 2017. He has since touted how his plan reinvests in the public services and programs that are essential for economic opportunity and quality of life. However, a close look at his 2016 fiscal year (FY2016) spending plan reveals that he fails to reinvest in a meaningful way in the critical public structures that benefit us all. Genuine progress will continue to be hampered until state lawmakers build a tax system that can adequately match the needs of a growing economy.

Governor McCrory’s proposed budget for FY2016 increases year-to-year spending by nearly $439.8 million, or 2 percent. This is in sharp contrast to past recoveries when state investments were far quicker to return to, and advance beyond, pre-recession levels. Enrollment growth in public schools, the UNC system, and the Medicaid/Health Choice programs is estimated to exceed the year-to-year increase in spending in the governor’s proposal, totaling nearly $442.6 million in FY2016. That means every new dollar increase, on net, is dedicated to funding enrollment growth (see chart below).

It also means that non-enrollment expansion items in the proposal are made possible by cutting or allowing spending to expire for other vital programs that are already stripped bare from previous underinvestment. That’s like rearranging the deck chairs on a sinking ship. Some expansions are also made possible due to the Governor’s decision to further rely on federal funds (which frees up state dollars), smart spending via efficiencies, and a drop in enrollment at community colleges. In some instances, what appears to be an increase reflects renewed funding that already exists today—such as investments in pre-kindergarten and in the Workforce Housing Loan Program.

Changes to the base budget are masking the reality that the governor’s FY2016 budget proposal fails to boost state investments in a meaningful way. Last year state lawmakers crudely redrew the starting point for the budget, which for many decades has been the amount of resources necessary to maintain the current quality of public services that Tar Heels expect. For example, the cost of enrollment growth increases that once would have automatically been part of the base budget—in recognition that they were necessary to maintain service levels—are now deemed “new” spending.

By shifting this foundation for crafting a budget, the Governor and other lawmakers lowered the bar. Now they are claiming credit for their acts of generosity, which in large part merely toe the line as the chart above illustrates. However, budget gimmicks will not hide bigger class sizes, higher tuition rates, people in our communities who are still falling through health care gaps, or the myriad other impacts of the costly 2013 tax plan that are holding back progress.