Representative Harry Warren
♦This past week was the last week that the General Assembly was convened for the “long” session. The session ended Friday afternoon after much debate over various pieces of legislation that span subject matter from state budgets to voter ID. This week’s newsletter will focus on the budget, but I will include a link to both bills for your convenience, should you wish to read the actual texts. Since both bills contain a large amount of information, I will send you another update next week focusing on the Voter Information Verification Act (VIVA). The 14 page Voter ID bill was sent to the Senate in April and was returned on Thursday as a 56 page omnibus bill with 58 other provisions affecting the electoral process. Here is the link to HB 589 – VIVA.
Now let’s take a look at the budget:
SB 402 – Appropriations Act of 2013. This compromise House–Senate version of the budget, (Conference Report), contains some very good provisions and also contains some policy provisions that I personally didn’t agree with. The unfortunate thing is that you don’t get to vote on what you like and don’t like. The budget is a “package deal” – in for a penny, in for a pound, so to speak. There is no line–item veto. I preferred the House budget over both the Senate and this final compromise budget for a number of reasons, but the process of forming legislation is a group effort that is comparable to herding cats. I would have preferred and did advocate for, a 1% raise for state employees/teachers and a continuation of the Masters’ program for those currently in the program. As a member of the Finance Committee, I did not have a part in developing the budget; the budget creation is the responsibility of the Appropriations Committee and its various sub-committees.
I did not support the Eugenics or Excellent School provisions because they were policy provisions that I believe should not have been included in the budget without having gone through the legislative committee process first. This compromise budget was placed on line the Sunday before the vote; hard copies were distributed the following day with a caucus for explanation and questions on Monday afternoon. The bill was on the floor for a first concurrence vote on Tuesday. As a conference report, the bill was not subject to amendments but required a straight up or down vote. The vote count on Tuesday was 66 aye to 52 no; Wednesday’s vote was 65 to 53. If the measure hadn’t passed, there might have been a need to pass another “continuing resolution” to keep the government operating past July 31, when the current continuing resolution expires.
Any budget produced and released by one party is going to be criticized by the opposing party and caste in the least favorable light possible, primarily for political advantage. Budgets by either party are also going to be criticized by every fraction depending upon or hoping to receive State funding. Even in cases of an increase in funding, there is often a complaint that more is not enough. I am not going to advocate for or against this budget. I will only say that it is the best that could be agreed upon by the two chambers charged with the responsibility for drafting it. The points that I share below are just some of the facts from the various sub-sections of the budget.
Summary of Proposed FY 2013 – 15 Biennial Budget
General Provisions (General Fund)
| Actual FY 12 – 13 | Continuation | Conference | % from Actual |
| $20,093,606,523 | $20,243,669,050 | $20,630,767,645 | +2.7% |
● Fulfills our obligation to state employees by fully funding the state retirement system and state health plan.
● Provides 5 bonus leave days for state employees.
● Ensures budgeting certainty for cities, counties and towns by providing localities with some transitional hold harmless funds.
● Sets aside approximately $230 million for the rainy day fund to protect against future shortfalls, bringing the total to approximately $650 million.
Summary of Proposed FY 2013 – 15 Biennial Budget
Education
| Education | Actual FY 12 – 13 | Continuation | Conference | % from Actual |
| K-12 | $7,705,071,707 | $7,984,924,757 | $7,867,960,649 | 2.1% |
| Comm. Colleges | $1,012,401,083 | $1,037,430,475 | $1,021,295,467 | 0.9% |
| UNC System | $2,663,562,434 | $2,709,551,807 | $2,520,644,276 | -3.0% |
| Total | $11,381,035,224 | $11,731,907,039 | $11,472,304,386 | +0.8% |
Public Schools
● Provides $23.6 million to continue funding the Excellent Public Schools Act, which will strengthen student literacy, improve graduation rates and increase accountability. Repeals requirement for parent workshops (and does not fund the required $23 million)
● Eliminates guaranteed lifetime employment for teachers by replacing the outdated tenure system and employing teachers through contracts that are renewed based on job performance.
● Continues our commitment to implementing a pay for excellence system by including $10.2 million in the second year to fund annual pay raises for the most effective teachers.
● Implements opportunity scholarships in the second year of the biennium.
● Provides funding to implement critical school safety measures, such as resource officers, and expand the use of technology and innovation in schools.
● Eliminates the K-12 flex cut for local school districts, implemented by Democrats under former Gov. Bev Perdue, to make the education budget process fully transparent.
● Continues phase out of Teaching Fellows, maintains support for Teach For America
● Funds new initiatives
○ AP, CTE, and Education Innovation Grants
Community Colleges
● Restores $33 million in recurring state funds to our community colleges.
● Funds the N.C. Back to Work program, providing nearly $5 million to allow for a more effective job placement program.
● Provision to study NC Guaranteed Admission Program (NC GAP).
UNC System
● Incorporates the administrative and operational savings, instructional efficiencies and program consolidation efforts identified by the university system in their Strategic Directions Plan.
● Increases tuition for out-of-state students at the undergrad level in the second year by 6% or 12.3% varying by campus.
Summary of Proposed FY 2013 – 15 Biennial Budget
Health and Human Services
| Actual FY 12 – 13 | Continuation | Conference | % from Actual |
| $5,008,983,415 | $4,615,870,375 | $4,993,788,323 | -0.3% |
Significant actions include:
Division of Medical Assistance (DMA) The proposed budget appropriates $3,461,950,119 to DMA for FY 2013-2014, an increase of $392 million from the Continuation Budget.
● Allows the Governor and DHHS to develop a Medicaid reform plan and report back to the General Assembly with the details and final approval. Establishes a Medicaid advisory group that consists of 5 members, one House member, one Senate member, and three Governor appointees (one will be chair).
Reductions
● $52 million in both years of the biennium to increase the amount the State will retain from the hospital assessment program. The total amount of the assessment retained by the State will now be $95 million.
● $3.3 million in FY 2013-2014 ($5 million in the second year) to increase the nominal copay for eligible Medicaid services to the maximum allowed by CMS (currently $3.90), effective 11/1/13.
● $23 million in FY 2013-2014 ($48 million in the second year) to reduce hospital outpatient payments from 80% to 70% of cost.
● $27 million in FY 2013-2014 ($45 million in the second year) to implement a shared savings plan effective July 1, 2013
● $14 million in FY 2013-2014 ($30 million in the second year) for prescribed drugs based on changes in brand and generic reimbursement, reduces dispensing fee for brand drugs by $1, and allows DMA to prior authorize mental health drugs, if it decides it is clinically appropriate.
● $18 million in FY 2013-2014 ($26 million in the second year) to freeze rates for services subject to automatic increases, except services with a federal mandate, nursing home case mix, MCO capitation, and rates set externally to DHHS.
Expansion
● $434 million in FY 2013-2014 ($557 million in the second year) for the Medicaid rebase.
● $49.7 million in FY 2013-14 ($114 million in the second year) for 69,683 new recipients in 2014 from ACA “woodwork” and decreases the disproportionate share allotment.
Division of Central Management and Support (CMS) The Conference report appropriates $75 million for CMS in 2013-14, an increase of $21.1 million (39.1%) from the Continuation Budget. The majority of this increase is related to the funds for historically funded non-profits, funds for the Department of Justice Settlement Agreement, and Supplemental Assistance for Group Homes.
Significant Actions
● Provides $9.5 million in State funds and $3.8 million in federal funds for non-profits in FY 2013-14. Requires DHHS to establish a competitive non-profit block grant process by 2014-15.
● Provides fund at the Governor’s recommended level for the U.S. Department of Justice Settlement Agreement
● Establishes a supplemental, short-term assistance for group homes for recipients who lost Medicaid personal care services funds. The supplemental funds are capped at a maximum of $4.6 million for FY 2013-14, with a maximum monthly payment per recipient of $464/month. The intent is to provide these supplemental support until the new-tiered State-County Special Assistance Block Grant is implemented statewide.
Other Significant Actions
Public Health
● Reduces up to 15 positions at the Oral Health Section of Division of Public Health
● Does not require DHHS to close 4 of the 16 Children’s Developmental Services Agencies, but permits DHHS to identify positions to eliminate in order to achieve $10 million in savings. Directs DHHS that those agencies with the highest caseloads of children from rural and medically underserved areas of the State shall remain open.
● Reduces State funds for the Aids Drugs Assistance Program (ADAP) to reflect current spending levels. This reduction is not expected to have an impact on ADAP drug purchases due to the increased availability of federal receipts and the anticipated impact of the Affordable Care Act.
Mental Health
● Provides $2 million for statewide implementation of the NC Child Treatment Program to provide training on evidence-based treatment of children and to develop an online database.
● Provides $2 million for statewide implementation of telepsychiatry.
● Directs the Department to implement a two-tiered payment system for the three-way contracts. The two-tiered system will provide an enhanced payment for patients assessed at higher acuity levels.
Division of Child Development (DCDEE)
● Provides Lottery funds of $12,400,000 to fund 2,500 Pre-K slots. This will bring total slots to 27,500.
● Does not change Pre-K eligibility
Summary of Proposed FY 2013 – 15 Biennial Budget
Natural and Economic Resources
| Actual FY 12 – 13 | Continuation | Conference | % from Actual |
| $364,097,878 | $345,916,108 | $371,247,970 | +2.0% |
● Moves Clean Water Management Trust Fund to DENR, under DENR supervision (ED and staff); Establishes new fund purposes and reconstitutes Board of Trustees. Directs CWMTF to allot monies to Jordan Lake Nutrient Management Demonstration Project, to study nutrient management in Jordan Lake i.e. clean water.
● Reconstitutes Board of Parks and Recreation Authority
● Environmental Management Commission, Coastal Resources Commission and Coastal Resources Advisory Commissions are all reconstituted. (HB 1011/SB 10)
● Increases fees for fishing licenses and permit fees—most used are listed:
○ Replacement license: 10 to 12.50
○ Commercial Fishing license: 200 to 250
○ Recreational Fishing license: 100 to 125
○ Recreational Fishing Tournament Fee: 100 to 125
● Increased Funding for Dredging; Includes Shallow Draft and Lakes
○ Fees are set by vessel size
Commerce
● Commerce is given the flexibility to reorganize to establish the public-private partnership.
● Allocates $1 million in 2013-14 for BRAC to protect and expand our state’s military bases and economy.
● State Aid
○ Creates a competitive grant program in the second year of the biennium
○ Funds the Support Center, Biotechnology Center (with provision to study), fulfils commitment to Johnson & Wales, RTI, Grassroots Science Museum and the High Point Market Authority. Wake Forest Regenerative Medicine funded through Education budget.
● Launches an accountable new Rural Economic Development Division within the state Department of Commerce – led by a new Assistant Secretary – with a focus on improving rural services and addressing rural needs
○ Will administer grants or loans to counties set out in statute (80 highest rankings)
○ Funds available for grants may only be used 5 defined statutory uses
○ Establishes Rural Infrastructure Authority—16 member Board
Agriculture
● Provides $1.5 million R for the Marketing Division
● Funds Bioenergy Development at $900,000 R in FY 2013-14 and $1.5 million R in FY 2014-15.
● Funds Research Stations equipment at $2.5M NR in both years of the biennium.
● Funds the Agriculture Water Assistance Program (AgWRAP) at $500,000R.
● Allocates $2 million of the Tennessee Valley Authority (TVA) Settlement funds in both years of the biennium to the NCDA&CS as follows:
○ $500,000 for AgWRAP
○ $500,000 for environmental mitigation project grants
○ $1 million for the Farmland Preservation Trust Fund
Summary of Proposed FY 2013 – 15 Biennial Budget
Justice and Public Safety
| Actual FY 12 – 13 | Continuation | Conference | % from Actual |
| $2,290,415,867 | $2,372,758,253 | $2,368,675,193 | 3.4% |
● Appropriates $9mil nonrecurring for DPS Enterprise Resource Planning System.
● Reduces ALE’s budget by $1.75mil recurring.
● Eliminates State appropriation to the Butner Public Safety Authority.
● DPS Law Enforcement Funds: 8 State Capitol Police positions, 69 vacant Highway Patrol positions, Highway Patrol fuel, Highway Patrol aircards, Highway Patrol mobile computers, VIPER Operations and Maintenance, VIPER Tower Construction, VIPER P25 Upgrade, National Guard Armories Repair and Renovation.
● Reduced inmate healthcare budget by $9 mil recurring. Savings realized from completion of new prison hospitals, increased Medicaid reimbursements, and payment cap on billed charges.
| Facility | Closures |
| Duplin Correctional | Closed 8/1/13 |
| Robeson Correctional | Closed 8/1/13 |
| Bladen Correctional | Closed 10/1/13 |
| Wayne Correctional | Closed 10/1/13 |
| Western Youth Institution | Closed 1/1/14 |
| Johnston Correction | Converted from Medium to Minimum |
| Lenoir Youth Development Center | Closed 10/1/13 |
| Richmond Youth Detention Center | Closed |
| Buncombe Youth Detention Center | Closed |
● DPS Community Corrections & Juvenile Justice Funds: substance abuse treatment for high risk offenders, new Parole Commission positions, probation and parole officer positions in accordance with the Justice Reinvestment Act, electronic monitoring equipment, recurring funding for a new western multipurpose group home for children, additional $1 mil in Juvenile Justice Community Programs, and the Safer Schools Initiative.
● Department of Justice Funds: 19 new toxicology positions in the Crime Lab for the Western part of the State, $1 mil nonrecurring for Crime Lab equipment, $1 mil recurring to fund the Sheriffs; Education and Training Standards Commission. Do not transfer the SBI to DPS.
● Indigent Defense Services Funds: $3.7 mil nonrecurring for private assigned counsel
● Administrative Office of the Courts: $4 mil recurring reduction to admin budget, funds 22 additional magistrates, increase budget for interpreters, witnesses, and juries by $1 mil recurring, keeps court reporters’ funding the same.
● Sheriffs’ Association receives 5% of Misdemeanant Confinement Fund or $1 mil, whichever is less.
● Funds Tarheel ChalleNGe drop-out prevention program for at-risk youth. Converting an existing facility in Stanly County to save capital costs in partnership with the National Guard.
● Funds converting Samarkand (a vacant juvenile justice facility) into an overnight training camp for the Department of Public Safety to consolidate training and reduce costs.
Summary of Proposed FY 2013 – 15 Biennial Budget
General Government
| Actual FY 12 – 13 | Continuation | Conference | % from Actual |
| $398,481,636 | $421,067,414 | $422,758,845 | 6.1% |
● No closure of historic sitesDepartment of Cultural Resources
● Reduces appropriation to Arts Council administration (remaining funds $1.3m), no change to grant appropriation.
State Board of Elections
● Fully funds plan for voter photo identification (held in reserves)
● Provides matching funds for HAVA to upgrade voter registration system
Department of Administration
● Funds the Youth Involvement Division
● Eliminates the Displaced Homemakers Program; the receipts will now be transferred to the Domestic Violence Center Fund, serving all 100 counties.
Department of Revenue
● Funds implementation of tax reform through positions and technology.
Office of State Budget Management
● Increases positions to better manage budget and respond to requests from legislature.
Office of Administrative Hearings
● Funds implementation of the regulatory reform bill.
Summary of Proposed FY 2013 – 15 Biennial Budget
Transportation
Signification actions include:
● Supports the governor’s vision for overhauling the North Carolina Highway Trust Fund, which consolidates various funding streams to prioritize and accelerate transportation infrastructure projects at the state, regional and local level by an estimated 35 percent over the next ten years.
● Keeps House numbers on Contract Resurfacing, System Preservation, and General Maintenance Reserve. Provides funding for targeted maintenance needs, focusing on improving, repairing and replacing structurally deficient bridges and roadway resurfacing.
● Funds the replacement of information technology systems critical to DMV customer service improvements and extended operating hours at driver license offices.
● Ferry Tolling Keeps currently tolled ferries tolled at the same rate. Ferries that are currently not tolled may only be tolled if all locally impacted MPOs and RPOs adopt a ferry tolling resolution. Allows DOT to engage in receipt generating activities within ferry division (internet, advertising, naming rights).
● Keeps the Division Small Construction Fund which is discretionary money for Board of Transportation members.
● Appropriates $3 and $4 mil nonrecurring for Economic Development Program funds.
● Motor Fuels Tax is capped at 37.5 cents.
● Added $100 annual fee for electric vehicles; no fee on hybrid vehicles.
● Optional driver’s education fee is increased to $55 (Senate budget was $65, House kept fee at $45).
● Gives DOT authority to hire outside legal counsel to defend transportation projects.
● New provision in italics- Highway Use Tax is calculated at 3% of the sum of the retail value of the vehicle plus any fee regulated by GS 20-101.1. GS 20-101.1 covers dealer administration fees. The new provision makes it so that the Highway Use Tax now applies to any dealer administration fees.
● Funds Shallow Draft Navigation Channel Dredging Fund.
● Keeps bike/ped planning grant funding at $250,000 recurring.
I hope you found this presentation of the budget helpful and an easy way to understand some of the complexities of the funding process.
Sincerely, Harry
N.C. House of Representatives District 77, Rowan County
611 Legislative Office Building Raleigh,
North Carolina 27603
(919) 733-5784
