Current Realities:

• STATE REVENUE OUTLOOK:   State revenues coming in well ahead of schedule, improved prospects for this year and next will significantly reduce (but not eliminate) the 07-08 structural budget shortfall; caution needed due to reliance on volatile revenue sources: capital gains will fall 25% in 06 and another 10% in 07, corporate tax collections will drop by 9% in 06-07 with deepest reductions likely to be in 07-08, sales tax revenues (28% of our revenue base) has begun to slow to below 6%., real estate tax collections are way down, income tax withholding (40% of the revenue base) has begun to slow;   job growth is beginning to increase but at a small rate (1.4%). {Source:   NC Child Care Coalition Jan 2007 Update #1}
• STATE BUDGET OVERVIEW AND OUTLOOK FOR 2007 LEGISLATIVE SESSION: Total state budget (06-07): $35.6 billion (includes federal funds too). State funds only: $18.6 billion: 52% Education, 22.5% Health & Human Services, 9.6% Justice & Public Safety, 7.5% Reserves, 5.9% Other, 3% Debt Service. Three factors driving state spending: changes in inflation, changes in population, changes in spending priorities in government programs/services. Education, Medicaid & Corrections consume 72.5% of the state budget (state funds only). Changes in total state spending from 96/97 – 05/06 in millions increased: Medicaid: 178.5%, Education: 60.1%, Corrections: 33.0%, All other: 30.7%. Outlook for 2007 session: Pressing areas Education and Medicaid, “mandated” increases for public schools, Medicaid program growth, Debt Service requirements, Universities and Community Colleges; typical expansion budget item requests: State Health Plan, Mental Health, Retirement System Payback, ABC Bonuses (public school teachers), Capital Improvements, State Government Infrastructure; additional high priority items: Budget Stabilization Reserve Account, Repairs & Renovations Reserve. {Source:   NC Child Care Coalition Jan 2007 Update #1}