FY 2013-14 Senate Budget Proposal: Large Tax Cut, Spending Nearly Identical to McCrory’s Plan

Last night, the North Carolina state Senate unveiled its two year state budget proposal. Total spending included for FY 2013-14 comes to $20.58 billion, which would be roughly $400 million higher than the current year’s budget, good for a 2.3 percent increase. The Senate’s plan is about $17 million less than Gov. McCrory’s budget proposal released in March, less than a one percent difference.

The Senate plan designates a $217 million “finance package” for FY 2013-14 and $553 million for FY 2014-15, referring to the net revenue impact of their tax reform proposal. The details of the tax plan, however, are not included in the Senate’s budget proposal, and should likely be introduced in separate legislation.

Highlights of the Senate budget plan include:

Education

• Elimination of the LEA “adjustment” utilized in recent years. This practice involved the state sending LEAs higher amounts of money only to have the LEAs return part of the funds. Under the Senate plan, $376 million is increased for LEA funding, but offset largely by reductions reflecting the actions of LEAs in recent years
• $286 million of that reduction comes in the form of lowering classroom teachers, part in parcel with a slight increase in student-teacher ratios for classrooms. The reduction reflects the cost-saving measures used by LEAs in recent years
• Another $142 million reduction in K-12 spending comes from reducing the overall allotment for teacher assistants, with remaining TA funding directed more heavily toward kindergarten and first grade
• Extra $18.6 million to fund provisions of the Excellent Public Schools Act, which passed last year
• Changes are made to the work agreement contracts for teachers. Under the Senate plan, new teachers would sign one-year contracts, and teachers with more than three years experience would sign contacts ranging from one to four years. $10.2 million is set aside in FY 2014-2015 to allow superintendents to provide $500 pay raises to teachers signing four year contacts
• Increases Community College tuition by $2.50 per credit hour for both in-state and out-of-state students
• Implements a UNC management flexibility reduction of $48 million, with no change in tuition

 

Medicaid/HHS

• Sets aside an extra $306 million to fill current year Medicaid shortfall
• Includes a net overall increase of $340 million largely due to calculation errors last year requiring larger than expected increases for the coming year
• $49.7 million increase in FY 2013-14 and $114 million in 2014-15 to accommodate more Medicaid enrollees due to provisions in Obamacare. While the state refused Medicaid expansion under Obamacare, tens of thousands of additional enrollees are expected in response to other provisions under the law
• Transfers 2,500 slots from Pre-K (formerly More at Four) in FY 2013-14 and a total of 5,000 in FY 2014-15 as well as $12.4 million and $24.8 million respectively to the child care subsidy program. Under the subsidy program that funding will serve 2,600 and 5,200 children in each year

 

Commerce

• Allocates $27 million for Global Transpark debt repayment
• Establishes a new Rural Economic Development Division to address rural needs, at a cost of $7 million. But also eliminates state support for the NC Rural Economic Development Center – saving $16.6 million
• Appropriates $9 million to the  One North Carolina Fund – the Governor’s corporate welfare fund
• Allocates $51.8 million to the Job Development Investment Grant program (JDIG)
• Eliminates the Clean Water Management Trust Fund, establishes a new water and land conservation trust fund
• Creates a new “Water Infrastructure Authority” (WIA) to consolidate funding efforts for public water and wastewater infrastructure needs
• Appropriates $1.5 million for agriculture marketing and the Wine and Grape Growers Council
• Reduces by 50 percent the operational support for the NC Biotechnology Center – saving $8.6 million
• Eliminates operational support for the Biofuels Center – saving $2 million
• Includes $1.8 million in nonrecurring funds for the North Carolina Symphony and The Bridge Down East nonprofit

Justice & Public Safety

• Transfers the State Bureau of Investigation to the Division of Law Enforcement in the Department of Public Safety. Also shifts to the direct control of the Attorney General the NC State Crime Laboratory, Public Corruption Investigation Unit, and DOJ Information Technology Positions
• Closes 7 correctional facilities to reflect declining prison population

Elections

• Repeals the NC Public Campaign Fund for Superior Court judges, saving $2.3 million
• Appropriates $1.5 million for the implementation of a voter photo ID program

State Employees

• No pay raise for state employees and teachers
• Allocates an additional $36 million to the state retirement system to keep up with rising state pension costs
• Appropriates an additional $34 million to cover rising costs of the State Health Plan for state employees