Jun 15

Senate Rolls Out Responsible, Balanced Budget

Raleigh, N.C. – The North Carolina Senate is proposing a balanced budget that protects the state’s long-term fiscal health, smartly invests in public education and core priorities, cuts taxes and supports job growth and economic development statewide. With an overall increase of around 2 percent, the $21.47 billion plan keeps state government spending in line with population growth and inflation and comes within less than a quarter percent of the governor’s proposal.

Following responsible budgeting decisions, major tax reforms and historic tax cuts enacted by Republicans, North Carolina is expected to have a $400 million surplus in this year’s budget. The Senate proposal uses the additional dollars to help shore up rainy day and repair and renovation funds by $800 million and deliver broad tax relief to the North Carolina families and businesses that helped grow the state’s economy – reducing the personal income tax by more than $3 billion over the next five years alone. It also makes good on repeated promises from state leaders of both parties to end the transfer of hundreds of millions of dollars from the Highway Fund to the General Fund and ensure that money is finally spent on building and maintaining safe roads and bridges.

“Voters expect us to keep our promises andmaintain the budgeting and spending discipline and commitment to pro-growth tax reforms that helped give us a $400 million surplus this year,” said Senate Leader Phil Berger (R-Rockingham). “I’m grateful to members of the Senate for crafting a structurally sound, sustainable budget that does just that, by setting priorities, living within our means and taking steps to let North Carolinians keep more of their own money.”

The plan also takes significant steps to ensure highly-qualified teachers are at the head of every classroom in the state, the factor proven to have the greatest positive impact on student achievement. It fulfills the commitment to increase starting teacher pay to $35,000, making North Carolina a regional leader and far more attractive to those considering the profession. And it increases funding for classroom teacher positions by more than $270 million over the biennium to reduce class sizes in Kindergarten to a 1:17 and in grades 1-3 to a 1:15 teacher-student ratio – a level research has repeatedly shown is key to academic success in early grades.

It accomplishes this while incorporating a comprehensive plan to make North Carolina more competitive for new jobs and laying the groundwork for reforming the state’s broken Medicaid program.

The Senate’s budget proposal for fiscal years 2015-2017 also:

In Education  –

  • Increases funding for K-12 public schools by $453 million, for community colleges by $5 million and for the University of North Carolina system by $160 million over two years.
  • Fully funds enrollment and enrollment growth for K-12, community colleges and universities.
  • Continues major education reforms and codifies into law the Leandro court rulings that affirmed every child in the state has a constitutional right to the opportunity to receive a ‘sound basic education.’ It also requires local districts to implement a plan to improve student performance at schools that earn a school performance grade of D or F.
  • Provides an additional $58 million for textbooks and digital resources over two years.
  • Allocates an additional $12 million to fully fund the requirements of the Excellent Public Schools Act, including the Read to Achieve program created to ensure students can read proficiently by fourth grade.
  • Increases support for the opportunity scholarship program by close to $7 million each year.
  • Provides in-state tuition for veterans at the state’s community colleges and universities and increases funding for the National Guard Tuition Assistance Program.

In Health and Human Services  –

  • Creates a new Health Benefits Authority to administer North Carolina’s chronically troubled and over-budget Medicaid program and lead the state toward a patient-focused, cost-minded vision for the program.
  • Begins the process of Medicaid reform through a new system that will achieve budget predictability and sustainability, promote competition and ensure Medicaid recipients receive the best care at the lowest cost to taxpayers.
  • Increases Medicaid payment rates to primary care physicians by 22 percent and to obstetricians by 26.5 percent to help expand the number of physicians accepting Medicaid patients, encourage greater use of preventative care and reduce unnecessary emergency room costs.
  • Builds a stronger health information exchange to increase access to critical information that helps doctors and hospitals develop better tools for improving health outcomes.
  • Prevents monopolies and allows low-cost, high-quality health care providers to compete in an open market by responsibly phasing out the outdated and failed certificate of need system by 2019.
  • Expands the budget of the Office of the Chief Medical Examiner by 35 percent in the first year and by 63 percent in the second year to ensure county medical examiners are better trained and better paid, replace obsolete equipment and make regional autopsy centers sustainable.
  • Extends the foster care age to better support foster children as they transition to independence.

In Taxes and Economic Development –

  • Extends the state Job Development Investment Grants (JDIG) program for an additional two years while providing an additional $5 million in one-time funding. It also meets current Job Maintenance and Capital Development (JMAC) obligations to help maintain jobs in rural North Carolina.
  • Creates a new economic development tool for attracting major manufacturing projects – like automobile and aerospace manufacturers – that commit to investing at least $750 million and creating at least 2,000 new North Carolina jobs.
  • Reduces the tax burden on North Carolina families and small businesses by cutting the personal income tax rate from 5.75 to 5.5 percent beginning in 2016.
  • Keeps the promise of lower corporate income taxes by allowing the rate to fall to four percent in 2016 and three percent in 2017 and moves to calculating corporate income tax on the basis of a single sales factor over three years.
  • Streamlines and reduces the franchise tax by 33 percent – cutting what is effectively a statewide property tax on both large and small businesses.
  • Enables all areas of the state to receive a fair share of sales tax revenues by phasing in a new system where 80 percent of sales tax revenues are allocated based on where people live, with 20 percent allocated based on the county where a sale takes place.
  • Provides additional funds to support Rural Economic Development grant programs, bringing total annual funding to $17.5 million.
  • Provides $6 million in nonrecurring funding for the One North Carolina Small Business program, which provides grants to early-stage technology companies.
  • Directs that Rural Infrastructure Authority Grants be allocated to local governments in Tier 1 & 2 Counties and in rural census tracts of Tier 3 counties.

In Agriculture and the Environment –

  • Increases funding for the Clean Water Management Trust Fund and the Parks and Recreation Trust Fund.
  • Improves efficiency by creating a new, streamlined Department of Natural and Cultural Resources (DNCR) to oversee the state zoo, aquariums, Museum of Natural Sciences and parks system.
  • Expands support for the aquaculture industry and provides additional funding for dredging to ensure valuable economic activity at the North Carolina coast can continue.

In Justice and Public Safety –

  • Increases funding for essential court system needs – like interpreters, expert witnesses and juror fees – by more than 30 percent and allocates an additional $5 million to support operations at the Administrative Office of the Courts.
  • Provides more than $1.5 million over two years to increase the capacity of the state’s efficient Business Court.
  • Takes steps to address the longstanding backlog at the State Crime Lab by creating six new technician positions and providing funding for outside toxicology and DNA analysis to ensure cases are processed more quickly.
  • Funds equipment and instruction to train law enforcement offices on appropriate use-of-force.
  • Increases the recurring budget for vehicle replacement for the State Highway Patrol by 60 percent and provides significant additional resources for vehicles for the State Bureau of Investigation and Alcohol Law Enforcement.

In Transportation –

  • Eliminates $216 million in transfers from the Highway Fund to the General Fund, ensuring transportation revenue is spent on building and maintaining roads and bridges.
  • Continues implementation of the Strategic Transportation Investment (STI) law passed two years ago to remove politics from the transportation decision-making process.
  • Increases STI funding by $334 million, which will add 70 new highway projects and allow numerous projects to be accelerated over a ten-year period – without incurring any new debt.
  • Adjusts DMV fees to reflect inflation since the last adjustment a decade ago.
  • Increases and stabilizes aid for municipalities by providing close to $300 million over two years for maintenance of city roads.
  • Includes $445 million to replace structurally deficient bridges across the state, adds $66 million to improve the condition and safety of secondary roads and increases recurring funding for pavement preservation to $100 million, extending the life of an additional 8,270 miles of roads.

In Salaries and Benefits –

  • Follows Gov. McCrory’s lead in providing targeted, market-based pay raises to attract and retain highly effective state employees.
  • Fulfills the General Assembly’s commitment to increase starting teacher salaries to $35,000 and, offers a step increase to teachers, assistant principals and principals, and ensures that all classroom teacher salaries are paid for through recurring dollars.
Teaching Experience Annual Salary
0 – 4 years $35,000
5 – 9 years $38,250
10 – 14 years $41,250
15 – 19 years $44,250
20 – 24 years $47,000
25 + years $50,000
  • Provides $21.3 million each year to raise pay for community college instructors.
  • Offers a step increase for State Highway Patrol troopers, clerks and magistrates
  • Invests more than $38 million over two years to boost salaries for correctional officers.

Elsewhere –

  • Supports North Carolina’s military and veterans by adopting the governor’s recommendation to establish a more efficient state Department of Military and Veterans Affairs and providing close to $1.7 million to support military installations.
  • Provides funding to implement the Achieving a Better Life Experience Act (ABLE Act) to help disabled children and their parents save money to meet the costs of their disability.
  • Adopts the governor’s proposal to create the Department of Information Technology, which is expected to save $30 million over the biennium by reducing duplicative spending and increasing consolidation.

The Senate Appropriations subcommittees will meet at 4 p.m. Monday to review their portions of the Senate budget, and the complete proposal will be made available for public review on Monday night atwww.ncleg.net.

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