North Carolina’s budget process is governed by “The State Budget Act,” which stipulates that the budget be prepared on a biennial basis.1 Since the 1975-77 biennium, North Carolina’s General Assembly has put the biennial budget together in the odd-numbered year (long session) in anticipation of returning in the even-numbered year (short session) to fine-tune it and make adjustments for changing economic factors.
The budget process begins with the governor submitting his recommended budget to the General Assembly after it convenes in January of each odd-numbered year. The recommended budget contains: (1) predictions regarding available revenue; (2) estimates of appropriations necessary for continuing existing programs at current levels and any recommended reductions (the continuation budget); (3) expansions of existing programs or additional new programs or other expenditures (the expansion budget); and (4) capital improvements (the capital budget).
In both the House and the Senate, the Appropriations Committee and the Finance Committee are responsible for simultaneously crafting separate parts of the budget. The Appropriations Committee determines how much money should be spent in each category while the Finance Committee establishes how much revenue will be available to fund these expenditures. The Appropriations Committee is divided into issue area subcommittees responsible for reviewing the line item continuation budgets of North Carolina’s respective state agencies.
The committees also review expansion requests that originate with each agency or with the governor. Each subcommittee receives a spending target it cannot exceed without authority from the chairs of the full committee. The subcommittees recommend their budgets to the full Appropriations Committee, which combines all of the subcommittee budgets, votes on these combined budgets, and passes the resulting budget on to the full chamber for a vote. Amendments to the budget can be offered and votes taken in subcommittee, full committee, and on the chamber floor. Because the budget generally includes changes to taxes or fees, votes must be taken twice on separate days in each chamber – the first vote is called “second reading” and the second vote is called “third reading.”
The House and the Senate traditionally take turns initiating the budget process each biennium. The House, for example, will create its own version of the budget, vote on it, and send it to the Senate. The Senate will then create its version – but it may or may not use the House budget as a starting point. The following biennium, the order will be reversed. In the interest of expediting the budget process, House and Senate committee members will sometimes meet jointly towards the beginning of the session to discuss budget matters. Once the House and the Senate approve their respective versions of the budget, members from each chamber are appointed to a conference committee responsible for reconciling the two proposed budgets. Especially when the chambers are divided by political party – as happened during the 1995-1996 and 1997-1998 biennia – the two budgets will be quite different. When its negotiations are complete, the committee will recommend a reconciled version of the budget to both chambers. The full House and Senate must then vote for or against the conference budget without amendments.
After the conference budget passes the House and the Senate, it goes to the governor who may either sign the budget into law or veto the budget, sending it back to the General Assembly. Once the budget is signed by the governor, it goes to the Office of State Budget and Management (OSBM), which must certify the budget. Thereafter, each agency is permitted to begin operating under the new budget.