ASU asked to slow spending
by Anna Oakes
Gov. Pat McCrory issued a memo March 27 advising state agencies -- excluding entitlements and K-12 public schools -- to discontinue most salary increases, to limit purchasing to minimum amounts for essential purchases only and to reduce administrative spending, including travel.
In addition, allotments to state agencies for the month of April were to be reduced to the average monthly use of state appropriations between July 2013 and February 2014 or to 95 percent of a one-twelfth calculation of appropriations, whichever was lower. McCrory said the state would revisit guidance for the May and June allotments to agencies.
"It's a chunk of money," Peacock said. "Fortunately, we played it conservative this year and held back money."
Peacock said no job cuts were anticipated at ASU as a result of the reduced funding, however.
McCrory's memo noted that the state's unreserved fund balance is in better shape than a year ago, but that an anticipated Medicaid shortfall and "revenue uncertainty" were reasons to exercise restraint for the remainder of the fiscal year.
"By taking prudent action now, the state can fulfill its duty to our citizens and avoid taking more severe action in the closing weeks of this fiscal year," McCrory wrote.
McCrory said the state is projecting a Medicaid budget shortfall between $120 million and $140 million for the 2013-14 fiscal year.
A quarterly revenue report published by the General Assembly's Fiscal Research Division earlier this month indicated that general fund collections through March are $12.1 million above the revenue target of $14.5 billion.
But personal income tax collections declined significantly in the third quarter due to tax changes enacted last year, the report said.
The tax changes lowered the personal income tax rate to a flat rate of 5.8 percent, and the new salary and wage withholding schedule took effect in January. The tax law changes also aimed to broaden the tax base, but "the timing of when those changes will take effect has been difficult to gauge," the division's report stated.
"The result is withholding collections will lag behind original expectations throughout 2014 and will only realign with estimates when taxpayers file next year," it said. In addition, wage and salary growth lagged slightly behind expectations this fiscal year, and winter weather closings may also have reduced withholding collections, the report added.
Through March, North Carolina's personal income tax collections are $221.4 million below target. However, corporate income tax revenue is up $90 million thus far this year, with refunds 30 percent lower than last year, the division said.
A 2.9 percent growth in sales tax collections in the third quarter met targets, but slowed compared to the first and second quarters, which saw growth rates of 3.9 and 4.1 percent, respectively.
"Everything seems to be down," said Peacock, adding that the state should have a clearer financial picture in early May.