2016-17 State Budget

Analysis of adopted State budget

The NC General Assembly finalized the 2016-2017 state budget on the last day of the legislative session, also the first day of the new fiscal year. Counties will benefit from the inclusion of $40 million in additional funds for behavioral health initiatives, including recommendations from the Governor’s Task Force on Mental Health and Substance Abuse. Strong advocacy work by NCACC and member counties, including a letter of support from the association board, contributed to these recurring and non-recurring funds being included in the final budget.

The budget contains noticeably more earmarks than in recent history, not surprising in an election year with several tight statewide races. State employees receive a 1.5 percent salary increase and a .5 percent bonus, and the legislature set aside $28 million for one-time merit bonuses (including a $12 million shift of funds from a market adjustment reserve fund). While state retirees received an increase, local government retirees did not. The Emergency Response and Disaster Relief Fund (rainy day fund) grew by $10 million.

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  1. Finance Provisions
  2. HHS
  3. Education
  4. JPS
  5. Environment & Agriculture
  6. Commerce & Transportation
  7. Other

The NC General Assembly again made significant changes to the state’s tax and revenue structure. They increased the standard deduction for personal income tax across all filing statuses, and shifted the basis for determining what portion of a multi-state company’s income is taxable in North Carolina. The shift in corporate taxation, over time, will focus the decision more on where customers are located than where the good or service is produced, or where the company has facilities. The bill also gives retailers a “good faith” exception to compliance with taxing the services, and expands special sales tax treatment to recyclers, metal fabricators and ports.

 

The budget also makes the following finance changes that directly impact local revenues:

  • Eliminates the $17.6 million state contribution to the local sales tax distribution, which was a part of last year’s sales tax distribution compromise and was designed to hold all counties harmless for the first year of the new plan; rationale for repeal was that the expanded base brought in more revenue than anticipated
  • Expands the types of retailers that must levy the recently enacted sales tax on repair, maintenance and installation services
  • Repeals the sales tax on automotive service contracts and limits the tax on the repair and maintenance of airplanes and boats
  • Extends by five years a narrowly drawn property tax exclusion related to damaged land previously used for commerce or industry donated to a nonprofit