Heard in the Halls is an email service of NAMI North Carolina to provide updates on state legislative and policy issues. Heard in the Halls is produced for community advocates at least monthly and more frequently during sessions of the General Assembly. To be added to the Heard in the Halls list send a message to heard@naminc.org with just "subscribe" (no quotes) in the subject. Because of the variety of e-mail servers, Heard in the Halls is sent in plain text and as a formatted attachment.

February 7, 2002

Unlike the federal budget, the North Carolina constitution requires the governor to balance the state budget. Governor Easley, facing a budget deficit approaching $1 billion, outlined draconian measures Tuesday to balance the budget. On the list of items that will be cut to cover the budget deficit is $37.5 million out of the Mental Health Trust Fund leaving just $10 million remaining. Easley has indicated that if the budget situation improves between now and June 30^th he will return some of the funds taken, with the Mental Health Trust Fund at the top of the list.

But that provides little comfort. This is the second fiscal emergency Easley has declared since he took office. The current billion-dollar deficit is on top of a previous billion-dollar deficit last year. The Governor and General Assembly closed the earlier gap through a combination of spending cuts and tax increases. But dealing with this budget deficit is even harder because there are no easy places left to cut, and a tax increase in an election year will be just about impossible.

Taking money out of the Mental Health Trust Fund will have potentially disastrous effects. It will certainly delay reform efforts and possibly derail them. Reform efforts are based on the development of community-based services and funds from the trust fund were to have initiated the development of those services. Failing to develop community services will raise serious questions as to whether North Carolina has complied with the US Supreme Court Olmstead ruling. While the state may have saved money from the trust fund it may result in a lawsuit costing far more.

Governor Easley exempted education from his cuts. Below is the list of where the reductions will be occurring.

Also of concern is the Governor’s requirement that agencies return 3% of the funds appropriated to them. For the Division of MH/DD/SA that could amount to over $17 million. This is on top of the 4% taken last fall. Earlier reductions did not impact services. But Secretary of DHHS Carmen Hooker Odom has indicated that it will be virtually impossible to reduce costs without harming services. Initial indications are that while current mental health services may be spared, new services that had been approved in the budget (expansion items) will be cut. This includes new Assertive Community Treatment Teams (ACTT) and jail diversion programs. Nearly $2 million in child block grant funds are also likely to be lost as well as renovation and repair funds and critical needs funding for the state hospitals. But the Division continues to review its options to meet its required cuts.

NAMI North Carolina and other advocacy groups will be reviewing options as well to determine how to respond to the Governor’s action. We will send you information as we receive it and as opportunities for action develop.

North Carolina, like many other states, is experiencing vastly reduced revenues because of the recession. The impact, however, is greater in North Carolina because the tax code is based in large part on the sales tax (instead of corporate, income, and services taxes). So when people stop spending in a recession, the state is hit hard. In addition, in a recession more people need Medicaid. About one in eight North Carolinians are receiving Medicaid assistance now. It’s estimated that state Medicaid is over budget in excess of $100 million and that figure could go as high as $200 million.

Want to learn more about the budget situation? Here is a great report completed by our friends at the budget and tax center.
http://www.ncjustice.org/btc/020101report.pdf