BRADENTON, Fla. -North Carolina is among several states requiring overtime sessions to piece together budgets for fiscal 2016, which began Wednesday in most states.
Gov. Pat McCrory on Tuesday agreed with lawmakers' request for a continuing budget resolution to keep the state government running for the next 45 days as they finalize a spending plan.
In addition to unsettled decisions about Medicaid and tax reform, lawmakers in the Tar Heel state have yet to reach agreement on what could be the state's largest-ever borrowing program - a $3 billion general obligation bond initiative McCrory proposed.
North Carolina joins other states facing elongated legislative sessions, including Massachusetts, where Gov. Charlie Baker has signed an interim measure to keep government running while budget negotiations continue.
In New Hampshire, Gov. Maggie Hassan vetoed the budget, requiring lawmakers to resume work on that state's spending priorities this summer.
While most states adopted budgets in advance of the July 1 beginning of the fiscal year, some states, including Florida, required additional time to finish work on major policy issues such as Medicaid expansion.
The Sunshine state's regular legislative session was scheduled to end May 1, but an impasse over the budget required more time. The central issue was the Senate's plan to provide more low-income Floridians with insurance, which was opposed by the House and Gov. Rick Scott.
A June special session ended with approval of Florida's budget sans Medicaid expansion.
Scott signed the spending plan into law June 23, though environmentalists are challenging it in court over the implementation of constitutional Amendment 1, a voter-approved measure that allocates 33% of documentary stamp taxes on real estate transfers to purchasing and managing conservation and recreation lands.
The tax revenue is expected to bring in $740 million during fiscal 2016. However, environmentalists allege that lawmakers misappropriated more than $300 million in Amendment 1 cash for impermissible expenses.
As of Wednesday, 42 states had enacted budgets for fiscal 2016, according to the National Association of State Budget Officers, while three states approved temporary spending bills for fiscal 2016: Massachusetts, New Hampshire, and North Carolina. Illinois, Iowa, Pennsylvania, and Wisconsin have yet to fully finalize their budgets, NASBO said.
"We're definitely looking at a couple of more states than we have in the past couple of years having late budgets," said Brian Sigritz, director of state fiscal studies for NASBO.
The number of states experiencing problems negotiating a budget this year is far fewer than NASBO saw in 2009 and 2010 when states fought declining revenues as a result of the Great Recession, Sigritz said in an interview Tuesday.
Since then, some states have seen revenues pickup, albeit at a slower pace.
Collections also have not reached pre-recession levels, he said.
"Most states are still experiencing slow growth and over the last couple months have faced various issues like [declining] oil prices," Sigritz said.
Some budget delays this year have been driven by contentious policy issues, such as tax cuts and tax increases, education funding, pensions, transportation funding, and Medicaid, according to Sigritz.
He also said few states have included major bond packages in their budgets because some lawmakers continue to have negative views about debt financing.
After three years of minimal growth, net tax-supported state debt declined in calendar year 2014 for the first time in the 28 years that data has been collected, Moody's Investors Service said in a June 24.
"The decrease comes as states continue to be reluctant to take on new debt with tight operating budgets, a slow economic recovery, and uncertainty over federal fiscal policy and health-care funding," analysts said. "With those factors, we expect debt levels to remain stable or even decline again in 2015."
Total state tax-supported debt fell by $6.2 billion, or 1.2%, to $509.6 billion in 2014. While $5.3 billion of the decline was due to reclassification of the Texas general obligation mobility fund debt to self-supporting, Moody's said the overall absolute debt level declined by $900 million.
Reliance on general obligation debt varies widely across states, according to Moody's.
"Due to constitutional limitations and political considerations, many states rely on alternative financing methods, including lease financings and special-tax bonds," analysts said. "Nationwide, GO bonds account for 52% of total state debt."
Moody's said few states have announced large new borrowing initiatives, but that is expected to change over the longer term as states address deferred infrastructure needs.
In North Carolina, McCrory has said 2016 is the time for the state to take on new GO debt to meet untended infrastructure and transportation needs.
Earlier this year, he unveiled a $3 billion GO initiative called Connect NC.
Under the plan $1.5 billion would be allocated to infrastructure funding and $1.5 billion to transportation projects.
Lawmakers must agree to place the plan on the ballot for voters to approve.
McCrory, a Republican, has crisscrossed the state over the past month generating local support for the borrowing plan, though he is having a tougher time connecting with the GOP-led General Assembly on the initiative.
The House included debt service only for the $1.5 billion transportation portion of McCrory's plan in its latest version of the budget. The Senate made no provision for the bonds.
McCrory has told lawmakers and voters that North Carolina can afford to address pent-up capital needs.
Earlier this year, he rolled out a study by State Treasurer Janet Cowell stating that North Carolina has the debt capacity to support the governor's financing program.
"This is an excellent time for these bonds [as] interest rates are historically low," McCrory has also said.
On Monday, as legislators remained at odds over unresolved budget issues, including the GO initiative, McCrory wrote a letter encouraging them to pass a continuing resolution.
He also outlined what he would and would not support as negotiations proceeded.
McCrory said he would not back a tax reform proposal that redistributes local sales tax revenues among counties, or any other tax proposal.
"While the ink is barely dry on the tax reform we approved together in 2013, now is not the time to implement major changes to our tax code," McCrory wrote. "Businesses need certainty and continuity and we must give tax reform time to work."
McCrory also said lawmakers should allow a statewide referendum to be held later this year on his bond program.
"It's time for the Legislature to follow this plan and allow the voters to decide on these important investments," he wrote.
McCrory's budget bills were filed in April in the House and Senate, and provide the mechanism for asking voters in separate ballot questions to approve the issuance of $1.5 billion in GOs for transportation and $1.5 billion for other infrastructure needs.
Both bills were referred to their respective appropriations committee. Neither bill has been considered in a hearing so far.
