RALEIGH — Gov. Pat McCrory asked Thursday for more belt-tightening within North Carolina government as pre-emptive actions to protect the state from a Medicaid shortfall and a fuzzy revenue picture.
In a memorandum to state agencies and their leaders, the governor said that while the state’s fiscal picture is much improved compared to a year ago, “the state still needs to exercise restraint for the remainder of the fiscal year” ending June 30. He wrote a similar directive in March 2013.
McCrory’s state budget office this week projected Medicaid expenditures could be up to $140 million above the revenues authorized by the General Assembly this year for the program. While revenue collections are largely on track to cover this year’s budget and slightly above revenues from a year ago, “there is revenue uncertainty for the remainder” of the year, the governor wrote.
McCrory said nearly all state agencies would receive funds in April that’s more in line with actual monthly spending since last July. He also ordered his Cabinet-level agencies to discontinue most salary increases, limit purchases, reduce travel expenses and reconsider contract work. The restrictions don’t apply to Medicaid and other entitlement programs, as well as public schools.
“By taking this 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,” he said in the memo.
Agencies led by other members of the Council of State — the attorney general and state treasurer among them — aren’t required to follow the spending requests because McCrory hasn’t declared a budget emergency, state Budget Director Art Pope said. That’s because there’s currently enough money in reserves and elsewhere to cover expenses. Still, Pope said, council agencies will receive monthly funds at the reduced rate. Council members were being alerted by phone to the directive.
This year’s budget included another $214 million for the state’s savings reserve and $324 million that wasn’t appropriated, the memo said.
“Right now I’m happy to say the state budget is in balance and healthy,” Pope said, but promoting efficiency now will prevent scrambling later in the spring should the Medicaid gap widen or tax collections fall. Lawmakers and the McCrory administration are keeping a close eye on April 15 tax payments, which disproportionately affects the revenue and budget outlook.
Pope said he’s hopeful none of the spending restrictions will affect day-to-day government operations. Holding back on cash could make it easier to fill any budget holes. The General Assembly would have to pass legislation for McCrory to spend the unappropriated money from this year’s budget. The legislature returns in mid-May for its annual work session, which includes adjusting the second year of the two-year budget. Any shortfall this year would affect adjustments for next year’s $21 billion budget.
A year ago, McCrory wrote a similar memo to agencies when the shortfall was estimated to be as high as $262 million, nearly all related to Medicaid. The legislature ultimately had to pass legislation for the governor to spend funds to close a Medicaid budget that reached $484 million.
To point out the state’s relative fiscal health, McCrory wrote the state was paying tax refunds on a timely basis and had a cash balance of $771 million as of Wednesday, compared with $436 million a year ago.