State Budget to be Finalized This Week?

The N&O has some details about a tentative budget plan agreed upon by state lawmakers:

Democratic lawmakers tentatively agreed on a final budget deal Saturday that would eliminate a tuition subsidy for some out-of-state athletes and require a 1 percent cut if extra federal money isn’t delivered.

The agreement lays the groundwork for lawmakers to approve their first on-time state budget bill since 2003. It also would direct state officials to take money from the rainy day reserve fund and reduce the state retirement system contribution to help close a potential $525 million gap if federal Medicaid funds never come.

Congress has backed off earlier legislation that would have given $24 billion to states by extending a more generous Medicaid formula for another six months.

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The plan is expected to be voted upon by the House and Senate on Tuesday and Wednesday, then presented to Democratic Gov. Bev Perdue for her signature before the fiscal year begins Thursday.

State lawmakers would be making a mistake by draining what little remains in the state’s Rainy Day Fund and reducing the state pension fund in order to cover Medicaid expenses if the federal government doesn’t extend the financial aid. North Carolina is setting itself up for an even larger budget crisis next year, as nearly $3 billion in revenues used to cover this year’s budget will dry up for FY 2010-11.

The state’s pension fund is already projected to need an additional $650 million over the next two years to stay fully-funded, where will the state find that money?

Shorting the pension fund this year to cover Medicaid expenses would be yet another short-term band aid solution causing even greater long-term financial damage to the state.

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