2012-13 Conference Committee Budget Closely Resembles Senate Budget Plan

Conference Budget: $20.18 B

Senate Plan: $20.15 B
House Plan: $20.28 B
Perdue’s Plan: $20.91 B
FY 2011-12 Budget: $19.68 B
Spending approved for FY 2012-13 last year: $19.94 B

The “compromise” budget bill crafted by the conference committee was approved by both chambers of the state legislature Thursday, meaning the bill now moves to Gov. Perdue’s desk. Perdue has 10 days to sign or veto the spending proposal. If she doesn’t act in 10 days, the budget will become law.

The Senate voted 30-15 in favor of the budget, with the House approving by a 71-45 vote. It is notable that the Senate vote was on purely partisan lines, while in the House five Democrats joined the unanimous  Republican support in favor.

Overall, the conference budget compromise tends to favor the Senate plan far more so than the House budget proposal. The budget appropriates $20.18 billion – much closer to the $20.15 billion included in the Senate proposal than the $20.28 billion the House plan sought. The $20.18 billion is $240 million more than the spending amount approved for 2012-13 in the two-year budget plan last year; and is half a billion more than the amount budgeted for the current fiscal year.

Several significant differences between the House and Senate budget plans needed to be ironed out by the conference committee, here is how those issues were resolved:

Pay Raises for State Employees, Retirees

The final budget plan includes a 1.2 percent salary increase for state employees (including teachers), along with a 1 percent cost-of-living (COLA) adjustment for state retiree pension payments. The Senate plan had included a 1.2 percent pay raise for state employees, while setting aside $84 million for local school districts to use for pay raises or to retain personnel, whereas the House plan would have instead offered a one-time, across-the-board $250 bonus to permanent teachers and state-funded employees.

The COLA increase was also included in the Senate budget plan, but no such increase was included in the House proposal.

K-12 Public Schools

The conferees approved $7.5 billion for K-12 public schools, about $28 million more than the Senate budget bill and $185 million more than the House budget bill.

The conference spending plan would mark a $42 million increase in state appropriations over the current 2011-12 budget. Highlights include:

• Providing a 1.2 percent pay raise for public school employees.
• Canceling $143 million in local budget cuts.
• Providing $27 million to implement several provisions of the SB 795, the Excellent Public Schools Act – which was included in the Senate budget plan. The Senate plan had allotted $47 million for the Act’s full implementation. The provisions that were included in the conference budget include:
  • A program for improving third-grade literacy and ending social promotion.
  • Calls for establishment of merit pay plan for local school districts.
  • The conference budget failed, however, to approve, two provisions watched closely by education reformers. Language to amend teacher career status, a key provision of SB 795, was not included in the final budget. Also, legislation to provide tax credits for businesses that make contributions to scholarship organizations (HB 1104) was also left out of the conferees bill. Technically the legislation could still be approved.  However, time may be its biggest enemy.
  • Ending continued funding for several non-profits such as Governor’s School and Teaching Fellows Program (the House budget bill supported both groups) in favor of NC Teacher Corps, a program for mid-career professionals who want to transition to the teaching field.

One-time Money, Unnamed Corporate Welfare Money Earmarked

In regards to using one-time funds to help fill the budget gaps, the conference budget comes out much closer to the Senate’s budget plan, which relied less on one-time funding than did the House proposal. Like the House and Senate plan, however, the conference budget drains $121 million from the “Compensation and Pay Performance Pay Reserve,” which had been set up to implement a reform to state compensation to include more merit-based pay increases. The conference budget also taps into $45 million from the One North Carolina Fund to help balance the General Fund. The Senate plan had hoped for $50 million from the fund, while the House plan would have transferred $30 million.

The conference budget also earmarks $5 million of that One NC Fund transfer for an unnamed economic development project “not to be subject to the terms of the One NC Fund.”

And unlike the House budget, the conference budget does not rely on one-time anticipated extra lottery funds to help finance their spending plan.

Rainy Day Fund

The House budget set aside no money into the state’s Rainy Day Fund, in spite of nearly $500 million in extra money carrying over from the current fiscal year. The Senate budget set aside $139 million.

The conference budget settled on $123 million to set aside into the Rainy Day Fund.

Medicaid Shortfall Addressed

The conference budget sets aside $154 million of anticipated surplus revenue from the current fiscal year to address the Medicaid shortfall. The budget further sets aside another $100 million in reserves to help offset any further potential shortfalls for the coming year, by implementing “flexibility reductions” upon many state agencies.

Gas Tax Capped for One Year

Like the Senate plan, and in contrast to the House budget proposal, the conference budget would cap the state’s gas tax at 37.5 cents per gallon. The cap, however, would be temporary and only in effect during the 2012-13 fiscal year.

Rules for Day Care Nutrition

The Senate budget plan was unique in that it included an update to nutrition standards for child care facilities. The most relevant of these was the “parental exception” allowing home-packed meals to be exempt from the standards, and it also bars state inspectors from examining meals sent from home. The proposed rules are in response to an incident in Hoke County that garnered national attention.

The conference budget also includes this provision protecting parents’ ability to prepare lunches for their children without fear of them being inspected.

Eugenics

The conference budget leaves out any compensation to victims of the state’s eugenics program. The House had sought $11 million in its budget to compensate victims of the state’s former forced sterilization program $50,000.

Leisure Activities to Receive More Taxpayer Dollars

In spite of claims of extreme belt-tightening, the conference budget still allocates roughly two million in additional taxpayer dollars to non-essential leisure activities, while leaving many more millions of such funding untouched.

• More than half a million dollars in additional funding for the Transportation, History and Art museums are included in the conference budget – all of which are recurring commitments.
• Another additional half a million taxpayer dollars are provided for additional support for Tryon Palace.
• $1.5 million in grant money to the N.C. Symphony is included in the conference budget. This is in addition to the millions of taxpayer dollars they already receive.
• Leaves $5.6 million in spending on “Basic Arts Grants” and “grassroots arts” programs intact.