NC 2010 legislative session budget and fiscal policy highlights.

              Fiscal Research Division
Fiscal Brief
Executive Summary
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August 20, 2010
On June 30, 2010, the General Assembly ratified
Senate Bill 897, the Appropriations Act for FY 2010-
2011. The Appropriations Act ( S. L. 2010- 31)
appropriates $ 19.0 billion in General Fund availability
and addresses budgetary gaps caused by $ 787.9
million in revenue shortfalls, $ 430.6 million in
unanticipated costs in the Medicaid program, and
$ 86.6 million from additional enrollment in
community colleges and universities. Of the
adjustments made by the General Assembly to balance
the budget, the most significant was the use of $ 562.5
million in additional federal American Reinvestment
and Recovery Act ( ARRA) funds for Medicaid
assistance. Of this amount, $ 518.9 million from the
Federal Medicaid Assistance Program ( FMAP) is
uncertain; the Appropriations Act includes a
contingency plan to balance the budget in the event
FMAP funds are not forthcoming.
This brief summarizes the major budgetary actions of
the General Assembly. More specifically, the brief
highlights:
 Revenues and revenue adjustments
 The use of Federal ARRA funds
 Budget reductions
 The education lottery
 Budget increases
 Legislative actions related to federal
healthcare reform
 The structural budget deficit in future years
The appendix to this brief provides details on the
actions of the General Assembly in the areas of
revenues and appropriations. The appropriations
section of the appendix is organized by subcommittee
area.
Availability for FY 2010- 11
Revenues
When the General Assembly convened on May 12,
2010, it faced a lower revenue forecast and the loss of
the State estate tax. These two factors resulted in a
$ 787.9 million reduction in General Fund availability
for FY 2010- 11, from $ 19.6 billion to $ 18.8 billion, a
reduction of 4.0%.
The Fiscal Research Division and the Office of State
Budget and Management revised their April 2010
consensus revenue forecast for FY 2010- 11 downward
by $ 702.9 million. The two major factors behind the
lower revenue forecast are: 1) a lower revenue base
from which revenue can grow, the result of lower than
expected sales tax and personal income tax revenues in
FY 2009- 10; and 2) a downgraded economic forecast
for the nation and the State’s economy. The result of
these two factors is that baseline revenue collections
( removing tax law changes) for FY 2009- 10 were
lowered to a 4.5% year- over- year decline compared to
a 2.2% decline forecast in May 2009, and for FY
2010- 11, the forecast downgraded growth from 3.3%
to 2.7%.
In addition to the lower revenue forecast, the State will
lose another $ 85.0 million in Estate Tax revenues. The
North Carolina Estate Tax is tied to the federal internal
revenue code referencing the federal estate tax, which
expired January 1, 2010 ( it is scheduled to be
reinstated in 2011). In the absence of the federal estate
tax no State estate tax will be collected.