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Budget Reversion Brings Belt Tightening

Due to a shortfall in the state’s Medicaid budget and uncertainty over revenue, Gov. Pat McCrory has ordered state agencies, including the University of North Carolina system, to reduce spending in April by at least 5 percent. The budget reversion could be extended in future months.

McCrory said the state will overspend on Medicaid by as much as $140 million in the current fiscal year, which ends June 30. The program provides health care coverage to about 1.5 million of the state’s poor, elderly and disabled residents.

Gov. McCrory says state agencies must slow spending in April to help the state cover Medicaid expenses.

In response to the governor’s order, UNC General Administration issued spending guidelines last week limiting expenditures for salary increases, travel and purchases supported by general fund appropriations through June 30. In general, spending will be closely monitored and limited to things that are essential to support the mission of the institution, the guidelines said. Travel is limited to trips that occur as part of an employee’s routine, required job duties. Unless already approved, most salary increases are off the table.

In a memo to the system’s 17 institutions on April 2, Chief Operating Officer Charles Perusse said, “The governor is allowing agencies and institutions to use professional judgment in implementing these restrictions.” He urged budget managers to cooperate in the “conscientious use” of state funds.

Budget Impact at NC State

In a memo on April 3, Provost Warwick Arden and Vice Chancellor Charles D. Leffler said belt tightening at NC State will follow the system’s guidelines, limiting expenditures for salary increases, travel and purchases requiring the use of state appropriated funds.

They said the budget reversion will result in reductions of $1.6 million in the academic affairs budget, $221,829 in the agricultural research budget and $160,637 in the cooperative extension budget. Reserve funds will likely cover the drop in the academic affairs budget, they said. The reductions in the other two budgets will be absorbed proportionately by the College of Agriculture and Life Sciences and the College of Natural Resources.

“When UNC-GA provides further clarification regarding May and June reversions, we will evaluate how to best cover those additional amounts,” they said.

Under a formula issued by the governor, the amount of state funding an agency receives in April will be based on either the average monthly amount it spent in the first eight months of the fiscal year, or 95 percent of its budgeted appropriation for the month, whichever is less.

State appropriated funds of $476 million account for 35 percent of NC State’s $1.35 billion operating budget.