Gov. Pat McCrory's first budget proposal seeks to set aside nearly $1 billion over the next two years to prepare for unexpected economic downturns, Medicaid shortfalls and natural disasters, as well as to improve neglected state buildings and outdated computer systems.
The new Republican governor said the state wasn't going to be caught flat-footed financially. He also said it would not hide fiscal problems under his watch.
"We have not had enough reserves in our budget," McCrory said in releasing his plan last week. "We're no longer going to play budget tricks, which have been played in the past."
While McCrory could locate reserves thanks to improving tax collections and by declining to propose new signature programs, McCrory's team also used some fiscal maneuvers to help free up more funds.
His budget proposal would intercept more than $275 million from pots of money - many beginning when Democrats led the legislature - earmarked to help tobacco-dependent communities, build parks, dispose of old tires and other purposes. The plan also proposed reducing funds for several non-state economic development agencies by $69 million.
State budget director Art Pope called taking the earmarked funds a budget "restructuring" in which the General Assembly - not boards filled with politically-connected appointees - decide how the funds would be used.
Public dollars will be appropriated "with true transparency for the greatest and highest needs of the state, rather than having tens of millions of dollars going to third-party organizations," Pope told reporters.
The siphoning has many groups and legislators nervous as the General Assembly starts deciding whether to use McCrory's budget as a template for the budget bill it'll create and present to McCrory for his signature by late June. They're worried other state infrastructure needs will be ignored, or that rural areas in the state will lag behind will still struggling with double-digit unemployment rates.
"These dedicated funds go to (fix) those employment problems," said Rep. Mickey Michaux, D-Durham, a former senior budget-writer. "You ought not to be changing the rules in the middle of the stream."
The funding decision is one of many in the $20.6 billion spending plan for next year that has the imprint of Pope, a former state legislator, philanthropist, business executive and North Carolina conservative icon. He's been a critic of legislation that sends state funds directly to outside groups that lack direct legislative oversight.
Legislators from both parties have been known to take some money out of trust funds and special accounts their predecessors created to perform specific purposes to close large state budget shortfalls. The Democrats did it in 2009 and Republicans followed in 2011.
But McCrory's budget proposal takes diverting funds to a new level by intercepting all the money heading to several large trust funds and raking them into the state's pool of expected revenues to run government through mid-2015.
The plan would take the $65 million a year the Golden LEAF Foundation is supposed to receive through the national tobacco settlement involving cigarette companies in the late 1990s and to manage. The private foundation, chartered in 1999, has spent $500 million over its life by making more than 1,100 grants designed to help small towns and regions hurt by the tobacco industry's decline.
The foundation would still keep its fund balance of $730 million, but taking away the annual payment would hurt its ability to offer grants in economically depressed areas, executive director Dan Gerlach said.
"In an era that everybody's worried about jobs and economic development, we are a resource," Gerlach said.
The General Assembly diverted $17.6 million from the foundation's annual tobacco settlement payment in 2011 and $24.3 million in 2012. Pope even served on the board for the past two years, appointed by Senate leader Phil Berger, R-Rockingham. "The Golden LEAF foundation does lots of good things," Pope said while still recommending the interception of annual payments.
McCrory's budget does return about $46 million of the $275 million earmarked for dedicated purposes back to their original locations. The Parks and Recreation Trust Fund would get $15.5 million of the $27.5 million it would otherwise receive annually from a portion of the state land transaction tax. David Pearson, president of Friends of State Parks, a park booster group, said the money would do little beyond repaying debt for previous land purchases and paying previously approved grants for park upgrades.
The N.C. Rural Economic Development Center would see its state funding fall by $10 million annually to $6.6 million. The reduction would mean rural business and communities could lose the potential for creating 2,000 new jobs next year, center director Billy Ray Hall said.
The rural center cut comes as McCrory has said he wants to help rural areas grow economically. McCrory has said his administration is working on a plan to retool the state's economic development programs.