The House passed its budget last week by a final vote of 77 to 40. All but one Republican voted for the budget and all but one Democrat voted against it. With the Governor, Senate, and the House having each put forward different budgets, the budget discussions will now move to a conference committee composed of House and Senate conferees whose job it will be to put forth a compromise budget. My expectation is that I’ll be named one of the conferees with respect to the Education portion of the budget.
Two years ago, we crafted a budget that addressed a multi-billion dollar deficit. It did so by reducing state spending, setting priorities, and living within our means.That budget also cut taxes by more than a billion dollars.Because of the decisions made two years ago, we are on more stable financial footing than we were in 2011.
The House budget proposal protects core services while taking advantage of opportunities for increased government efficiency. The total budget provides $20.57 billion for 2013-2014. This is roughly the same as the recommended budgets of both Gov. McCrory and the State Senate.The House was able to keep state spending at a reasonable level despite an increase in Medicaid costs and enrollment growth over the last year.
The House budget proposal:
- does NOT authorize new debt through Two-Thirds Bonds or Certificates of Participation
- adds $200 million to both the Savings Reserve and the Repairs & Renovations accounts, and $10 million to the Disaster Relief Reserve
- provides $28 million in capital investments
- fully funds the State Health Plan with a directive to find efficiencies moving forward
- funds the repair, renovation and expansion of National Guard Armory facilities in NC
- fully funds the State Retirement System
- fully funds Job Development & Investment Grant (JDIG)
- funds Medicaid
- provides compensation for victims of the state-sponsored Eugenics program
- reflects revenues project under the House’s tax reform bill, Tax Simplification and Reduction Act (HB 998)
- creates a $10 million Salary Adjustment Fund in first and second year
- provides $160 million in second year for a Compensation Adjustment Reserve
- provides 5 bonus days for state employees in the first year
In speaking about the budget, Speaker Thom Tills said, “The House budget proposal is a responsible plan that will promote job growth and economic activity in North Carolina.”He added, “It is the latest example of the efforts of House Republicans to right-size state government and make our state the best-managed state in the country.” My take would be that the budget is the product of decisions made about revenues, and it is still quite possible that significant changes will occur in the conference committee.
Specifically, one can’t craft a budget until one knows what the revenues are. With both the Senate and the House putting forth competing tax reform plans, the two bodies have not agreed on the revenue side of the budget and that means that the budget negotiations will depend on the parallel negotiations that will occur on tax reform.
Here are some more specifics on the various parts of the budget:
The House budget focuses on education by stressing the need for innovation in schools and protecting dollars that directly impact the classroom. The House budget proposal provides $11.5 billion for education — a reduction of 2.2%. It includes $7.9 billion to the K-12 system (a 1% reduction), which is smaller than the Senate’s cut and similar to Gov. McCrory’s proposal. It funds several new initiatives that focus on school choice, technology and innovation, and school safety. The education budget restores funding for the Teaching Fellows and NCCAT programs and reduces the LEA flexibility adjustment, and it provides $26 million in lottery funds for digital learning initiatives in the K-12 budget. The Community College system receives $1 billion in the House budget (a 2.4% reduction). The House plan budgets $2.6 billion for the UNC system, which is a reduction of 5.5%. This reduction is larger than the Senate, but smaller than Gov. McCrory’s budget proposal.
Health & Human Services (HHS)
The House Health & Human Services budget takes steps to protect our most vulnerable citizens and ensure that critical services continue. The HHS budget funds the Medicaid Rebase and takes steps to continue to reform and ultimately fix Medicaid. The HHS plan establishes short-term assistance for group home recipients until a permanent solution is implemented statewide.Under the House budget, an additional 5,000 Pre-K slots are funded, bringing the total to 30,000. Eligibility for Pre-K changes from 75% of NC median income to 130% of the federal poverty level.
Natural & Economic Resources (NER)
The NER budget funds a new program focused on growing the bioenergy sector in North Carolina. The House budget funds the Clean Water Management Trust Fund, but makes the CWMTF part of the Department of Environment & Natural Resources. The House plan funds the Wildlife Resources Commission at an 11% reduction.The NER budget also funds the Rural Center, Biotechnology Center, Grassroots Science Museums, and the High Point Market Authority.
Justice & Public Safety (JPS)
The JPS budget provides $25 million to upgrade the VIPER system, a communication system for emergency responders. The House plan restores 16 magistrate positions that were eliminated in 2011-12.It increases funds to expand electronic monitoring for probationers, and funds additional probation and parole positions to meet requirements of Justice Reinvestment Act. The House plan also adds 19 additional toxicology positions in the State Crime Lab, and expands an existing program to include funding for substance abuse treatment for high-risk offenders.
The House Transportation budget streamlines government by eliminating 631 vacant positions, working to implement Gov. McCrory’s transportation plan, and conforming to House Bill 817 (Strategic Transportation Investments). The House Transportation budget focuses on funding projects associated with economic development opportunities to increase job development potential. The plan also maintains the fare structure and rates for currently tolled ferries, and it provides more than $300 million for resurfacing.
Additionally, the House budget develops a state motor fleet management system. The House budget directs the Department of Cultural Resources to seek non-state resources to fund historical sites and museums, while funding historical sites appropriately, lessens reductions to the Arts Council Grants and the Roanoke Island Commission and fully funds the House plan for voter identification (VIVA) (H 594 Voter Information Verification Act).
My biggest disappointment with the budget is with respect to salaries for teachers, faculty, and state employees. Except for a 1% pay raise last year, there has been no pay raise since 2008. This is a problem if we hope to recruit and retain teachers, faculty and state employees.
Among my other concerns is what is being done within the NER budget, specifically taking away the independence of the Clean Water Management Trust Fund by placing it under the Department of Environment & Natural Resources and abolishing the Natural Heritage Trust Fund. I also don’t support the 11% reduction at the Wildlife Resources Commission.
What must be understood is that the budget, like tax reform, is really a process. Three steps have occurred in the process: The Governor proposed a budget; the Senate adopted its budget; and now the House has adopted its budget. The next step in the process if for the House and Senate to appoint conferees and they will get together along with the Governor’s representatives and negotiate a final budget.
My hopes for the budget are (1 that the Senate and the House can resolve their difference on tax reform so that we’re working from the same numbers when projecting revenues, (2 that we can find monies to provide pay raises for state employees, including teachers and faculty members, and (3 that the final budget does not incorporate the House and Senate changes to the Clean Water Management Trust Fund, the Wildlife Resources Commission, and the Natural Heritage Trust Fund.