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 House Budget Overview – May 3, 2019

Top-Line Budget Overview  

The House budget is consistent with the successful spending plans approved by the Republican-led North Carolina General Assembly this decade with strong commitments to:

·        Education the Top Priority 

·        Responsible Spending

·        Balanced Budgeting

·        Tax Reform

·        Strong Savings Reserves

·        Disaster Relief

·        Funding Core Needs and Services

·        Salary Increases/Retiree Supplements/Benefits

·        State Capital Infrastructure Funds (SCIF)

·        Transportation Connectivity

The House budget will continue successful results driving North Carolina’s economic growth:  

·        AAA credit ratings

·        Low Unemployment

·        Rapid Job Creation

·        Best State for Business Awards

·        Economic Expansion

·        Aggressive Population Growth

·        Connecting Urban and Rural Communities

This is a state budget the people of North Carolina can be proud of and excited about:

·        This House budget reflects the “kitchen table” priorities of North Carolina families.

·        Our smart savings and balanced budgets provided disaster relief without raising taxes.

·        It is a visionary spending plan for our state and especially our school systems.

·        Four key distinctions between the House budget and Gov. Cooper’s budget: 

o   The Governor proposes to eliminate the State Capital Infrastructure Fund

o   The Governor proposes to eliminate future funding for Opportunity Scholarships

o   The Governor’s budget exceeds our consensus debt capacity by $2 billion

o   The Governor proposes no tax relief for families and businesses, the House does

·        The successful results of Republican state budgets this decade compel us to maintain the direction of balanced spending, limited debt, tax relief, and a focus on education.

Top-Line Budget Details

Education Priorities

o   Salary increases for teachers, support staff, community college, university faculty

o   Establishes Teacher Directed Classroom Supplies Allotment with $15 million

o   Provides additional $20M over two years to Textbooks and Digital Resources

o   Expands Teaching Fellows program to two more universities

o   School Safety: Mental health ($49M), SROs ($10M), training & equipment ($16M)

Responsible Spending

o   Limits state budget growth to 3% and commits bulk of new funding to education

Balanced Budgeting

o   Unlike Governor’s budget, House plan does not exceed consensus debt capacity

Tax Reform

o   Increase zero-tax bracket again to help working families

o   Franchise tax relief to encourage businesses to locate to North Carolina

o   Modernizes the sales tax code to reflect reality of online sales, stabilize revenue

o   Adopts pro-growth market-based sourcing, tax exemptions for key industries

Strong Savings Reserve

o   Transfers $105M to savings reserve, brings rainy day fund to $1.36B

o   Rebuilding the Rainy Day Fund after $1B commitment to hurricane relief

Disaster Relief

o   Appropriates remaining $94M balance of $849M Florence Recovery Fund

Funding Core Needs and Services

o   Fully-funds Medicaid transformation from fee-for-service to managed care

o   $73 million over two years to implement Raise the Age

State Employee Salary Increases/Retiree Supplements/Benefits

o   Fifth consecutive compensation increase for state employees of 1% or $500

o   Sixth and seventh teacher pay raise focused on veteran educators

o   Higher raises for principals, corrections officers, court administrators

o   Ties school counselor pay to pay scale for psychologists and speech pathologists

o   Provides 1% supplement for state employee retirees

o   Transfers $665M for Retirement System and State Health Plan

State Capital Infrastructure Funds  (SCIF)

o   Transfers 4% of General Fund tax revenue or $953 million to SCIF

o   Transfers ¼ of General Fund unreserved balance or $249 million to SCIF

o   Provides $470M for Repairs and Renovations, New Capital Improvement Projects

 Highlights of the House Education Budget 

The House budget provides $14 billion dollars in FY 2019-20 and $14.3 billion dollars in FY 2020-21, an increase of $270 million over enacted 2018-19 budget (an increase of 2%) and $192 million (an increase of 1.4%) over proposed 2019-20 budget.

Summary:

The House education budget maintains the Republican-led legislature’s consistent focus on:

•         Workforce development and job training for cutting edge economic industries

•         Expanding school choice options like charter schools and Opportunity Scholarships

•         Rewarding teachers, principals, assistant principals and support personnel with raises

•         Improving low-performing schools with innovative solutions and investments

•         School safety grants to secure classrooms and provide safe learning environments

•         Increase total education funding to support enrollment growth

Community Colleges

• Provides $2.4 million for Community Colleges’ share of the statutorily-required Residency Determination System, a centralized system for verification of residency status for all postsecondary students in North Carolina.

• Provides $8 million in 2019-20 and $11.5 million in 2020-21 for workforce development.

• Provides an additional $2.8 million to fund Career Coaches, community college employees who are placed in partnering high schools to provide career and college guidance.

Salary Increases for Community College Employees

Provides $6.9 million in FY 2019-20 and $13.9 million in FY 2020-21 to provide salary increases to Community College personnel based on the priorities of the Community College System and local community colleges.

Community Colleges Special Provisions

• Changes the matching requirements for the Career Coach program based on the economic tier of the county in which the campus is located. Colleges in tier-one counties will not be required to provide any matching funds in order to participate in this program.

• Allows the community college system to earn FTE for instruction in local jails.

K-12 Public Education

• Provides $47.5 million in each year of the biennium to fund the increase in the average salary of various public school positions.

• Provides $3 million in FY 2019-20 and $53.6 million in FY 2020-21 to fund average daily membership (ADM) adjustments.

• Provides an additional $30 million in FY 2019-20 and $53.2 million in FY 2020-21 to fund five School Safety Grants for: School Resource Officers, School Mental Health Support Personnel, Safety Equipment, Students in Crisis, and Safety Training.

• Provides $15 million in each year of the biennium to establish the Teacher Directed Classroom Supplies Allotment, which will allocate $145 per eligible classroom teacher to purchase supplies from an online vendor.

• Provides an additional $11.3 million in FY 2019-20 and $8.8 million in FY 2020-21 for the Textbooks and Digital Resources Allotment.  The revised total requirements for this allotment, including ADM adjustments, are $73.3 million in FY 2019-20 and $70.8 million in FY 2020-21.

• Provides an additional $700K in FY 2019-20 and $1.3 million in FY 2020-21 to accelerate the implementation of several components of the State’s Digital Learning Plan.

• Provides $1 million in FY 2019-20 for the SBE to contract with a third-party organization to develop a weighted student funding model for the State’s public schools.

• Provides additional $30 million of funding for the Classroom Materials/Instructional Supplies/Equipment Allotment. The revised total requirements for this allotment, including ADM adjustments, are $62.5 million in each year of the biennium.

• Provides $2 million to create High Achieving Scholarships for high-performing high school students who attend a North Carolina Community College

• Provides nearly $1 million in FY 2019-20 to fund a virtual early learning pilot, whereby the State Board of Education (SBE) will contract with a third-party organization to offer computer-assisted instruction to at-risk, preschool-age children.

Salary Increases for Teachers and Instructional Support Personnel

The House budget appropriates $118.5 million in FY 2019-20 and $228 million in FY 2020-21 to increase teacher and instructional support compensation. Specifically, the House budget:

It increases the base teacher salary schedule for teachers with 16 or more years of experience by $500 to $8,500 annually, effective January 1, 2020. The House budget also reinstates graduate degree salary supplements.

It ties school counselor pay to the pay scale provided to psychologists, speech pathologists, and audiologists, effective January 1, 2020.

Provides funding for recruitment bonuses to school districts receiving funding from the small county allotment. 

The estimated annualized average State-funded salary increase for teachers and instructional support personnel who are employed in FY 2018-19 and remain employed on January 1, 2020 is 4.6%, or $2,300, and individual increases range from 1% to 16.3% (individual base salary increases range from $500 to $8,500). 

The average State-funded salary base for teachers and instructional support is projected to grow by approximately 3.1%, or $1,600. The estimated annualized average teacher pay in FY 2019-20, including local supplements and bonuses, is approximately $55,600, however, due to the January 1st effective date, the actual FY 2019-20 average is estimated at $54,800 

The greater of a 1% or $500 increase to noncertified employees of local school systems, effective January 1, 2020.

Salary Increases for Principals and Assistant Principals

The House budget provides $16 million in FY 2019-20 and $32 million in FY 2020-21 to increase principal and assistant principal compensation.

Implements a new principal salary schedule that compensates principals based on student headcount (ADM), experience, and student growth, effective January 1, 2020.

Increases the assistant principal schedule to the base teacher salary schedule “A”+20% (previously “A”+19%), effective January 1, 2020.

The estimated annualized average State-funded salary increase for assistant principals who are employed in FY 2018-19 and remain employed in FY 2019-20 is 6.3%, or $3,700. The annualized average State-funded salary base for assistant principals will grow by approximately 4.9%, or $3,100.

Eliminates graduate degree supplements currently provided to assistant principals, effective January 1, 2020.

The annualized average State-funded salary base for principals is projected to grow by approximately 10%, or $7,500.

K-12 Public Education Special Provisions

• Directs DPI to issue a request for proposal for an independent research organization to develop and propose alternative funding mechanism for the State’s public school by December 31, 2020.

• Codifies the Advanced Teaching Roles program to enable additional local school administrative units to develop new models of job responsibility and compensation for participating teachers.

• Prohibits local boards of education from modifying school calendars after start of the school year except in the event of certain crises and prevents supervisors from approving personal leave requests for teachers without the confirmation of a substitute teacher’s availability.

• Adds Economics and Personal Finance as a high school graduation requirement and mandates related professional development for the teachers of those courses. 

• Directs the State Board of Education to establish a three-year virtual early learning pilot program targeted toward at-risk, preschool-age children.

• Abolishes the Textbook Commission and devolves the responsibility for textbook adoption to local boards of education.

• Maintains the 15-point grading scale for the School Performance Grades and rebalances their composition to 51% school achievement and 49% school growth.

• Adds one credit in arts education as a graduation requirement and broadens the definition of Program Enhancement Teacher Allotment to include all grades K-12.

• Establishes a new Teacher Directed Classroom Supplies Allotment to provide $145 per teacher for the direct purchase of school supplies.

• Creates Competency-Based Education Pilot Program to provide up to five LEAs with flexibility to advance students to higher levels of mathematics courses based upon mastery of content.

• Codifies the School Safety Grants Program to provide funds for school resource officers, students in crisis, school safety training, and school mental health personnel.

 University of North Carolina System

• Provides $33.6 million in FY 2020-21 to fund UNC’s estimated enrollment growth. 

• Provides $35.0 million in each year to support summer term enrollment in the UNC System. Funding will be utilized to reduce the cost of tuition in summer courses to increase facility utilization, student persistence and degree completion rates, and reduce time-to-degree.

• Provides $2.3 million in FY 2019-20 and $4.3 million in FY 2020-21 for Data Analytics, UNC’s information technology initiative to provide the Board of Governors, UNC System, and UNC institutions with clear, timely, and consistent financial data. Funds will support the creation of a new financial data warehouse.

• Provides $1.0 million in FY 2019-20 and $3.0 million in FY 2020-21 to increase funding for faculty recruitment and retention efforts.

• Provides $2.2 million in FY 2019-20 and $2.6 million in matching funds to the College Advising Corp. (CAC) to expand the placement of college advisers in North Carolina public schools. Funds made available to CAC shall be matched on the basis of $2 non-State funds for every $1 in State funds.

• Provides $4.8 million in each year of the biennium to the UNC School of Medicine’s Asheville Campus, a joint program between the UNC School of Medicine, other UNC System universities, and the Mountain Area Health Education Center.

• Provides $4.8 million in each year of the biennium to the Southern Regional Area Health Education Center for surgery and family residencies in the SR AHEC services area and for facility and structural improvements associated with current residency programs.

• Provides $2.0 million in each year of the biennium for the NCSU Innovation in Manufacturing Biopharmaceuticals effort to serve as matching funds for a federal grant from the National Institute of Standards and Technology.

• Provides $1.4 million recurring and $26,000 nonrecurring in FY 2019-20 and $3.4 million recurring and $792,000 in nonrecurring for staff, operating expenses, and equipment for the North Carolina School of Science and Math – Morganton campus.

UNC System Special Provisions

• Allows the carryforward of unexpended FY 2018-19 UNC enrollment growth funds to be used for financial obligations related to NC Promise institutions through FY 2020-21.

• Provides a matching grant to the College Advising Corps to expand the placement of college advisers in North Carolina public schools.

• Increases the carryforward percentage for UNC institutions from 2.5% to 7.5% for one-time expenditures that do not impose additional financial obligations on the State. Funds carried forward in excess of 2.5% of the General Fund appropriation in that budget code may be used for repairs and renovations.

• Provides funding for a one-year tuition grant program for students graduating from the North Carolina School of Science and Math beginning with graduating class of 2019-20 year.

• Transfers up to $2.5 million of unexpended Opportunity Scholarship funds to the Department of Administration, Division of Nonpublic Education for data collection from nonpublic schools and to maintain a Website to provide information to students and parents to assist them in the selection of nonpublic schools.

• Combines the Children with Disabilities Grant and the Education Savings Account programs into the North Carolina Personal Education Student Accounts for Children with Disabilities Program to provide the option for a parent to better meet the individual educational needs of the parent’s child.

UNC System Salary Increases

The House budget provides $15 million in FY 2019-20 and $30 million in FY 2020-21 to the UNC system to provide salary increases to its employees.

 

Highlights of House Health and Human Services Budget

The House Budget for the Department of Health and Human Services in FY 2019-20 includes net appropriations of $5.6 billion, which is $209 million above the amount enacted for FY 2018-19. This is a 3.9% increase. FY 2020-21 includes net appropriations of $5.8 billion, which is $207 million above the amount in the House budget for FY 2019-20. This is a 3.7% increase.   

Division of Aging and Adult Services

• Provides an additional $1.1 million R and $3.9 million NR in FY 2019-20 and $3.9 million R and $1.1 million NR in FY 2020-21 for the Home and Community Care Block Grant (HCCBG). Funding is comprised of general funds and local match.

The HCCBG provides funding for in-home and community based services for older adults, allowing them to continue residing at home. The funding increase will allow an estimated 2,000 additional seniors to access HCCBG services.

Division of Aging and Adult Services Special Provisions

• Increases the State-County Special Assistance Personal Needs Allowance from $46.00 per month per recipient to $70.00 per month per recipient effective October 1, 2019. Funds to support this change are located in the Division of Social Services Budget (Total requirements of $4.5million in FY 2019-20 and $6 million in FY 2020-21). 

Division of Central Management and Support

• Provides $2.1 million NR in Year 1 and $1.1 million NR in Year 2 for loan repayment incentives to recruit doctors and dentists to practice in rural areas of the State.

• Provides $400,000 NR in Year 1 and $350,000 NR in Year 2 to develop and implement a two-year pilot program in Cumberland County to provide health care and job training services to unemployed veterans.

• Provides $500,000 R and $450,000 NR expansion to the DHHS competitive grants program to be allocated to NC food banks, NC Senior Games, and Special Olympics NC.

• Provides $750,000 NR to the Miracle League of the Triangle to build an accessible baseball field in Durham for players with special needs.

Division of Central Management and Support Special Provisions

• Authorizes DHHS to work with the Department of Military and Veterans Affairs, Community Care of NC, and Maxim Healthcare to develop and implement a two-year pilot program in Cumberland County to 1) provide care coordination services to veterans to increase their access to healthcare and 2) to recruit and train un/underemployed veterans as community healthcare workers. 

Division of Child Development and Early Education

• Provides $5 million NR in FY 2019-20 and $2 million NR in FY 2020-21 to Smart Start.

• Increases funding for the Child Care Subsidy Program by $7 million NR each year of the biennium. The additional funding will serve an estimated 1,100 children each year.

• Increases the NC Pre-K rates for child care centers by 2% in FY 2019-20 and by an additional 6% in FY 2020-21 with the intent that the funds be used to increase the salaries of teachers working in child care centers to address the disparities in teacher salaries among those working in child care centers compared to those working in public schools or Head Start centers. Funding of $1.7 million R in FY 2019-20 and $5.3 million R in FY 2020-21 is provided for this purpose. 

• Provides $1 million NR in each year of the biennium to Reach Out and Read, a program that works with pediatricians to provide books to their youngest patients.

Division of Health Benefits  

• Rebases Medicaid with an additional $30.2 million in net General Fund appropriation in FY 2019-20 and $195.9 million in FY 2020-21.

• Budgets a total of $232.9 million NR in FY 2019-20 and $198.4 million NR in FY 2020-21 to support Medicaid Transformation projects, including funding from the Medicaid Transformation Fund of $55.9 million and $51.2 million, respectively.

• Provides an additional $1.1 million R in FY 2019-20 and $3.3 million R in FY 2020-21 to add 150 Innovations Waiver slots, effective March 1, 2020.

• Provides $12.0 million R in each year of the biennium to support “in lieu of” services for individuals with intellectual and developmental disabilities who are moving to community-based supported living situations.

• Provides funds for wage increases for direct service personnel working in community-based group homes. $5.7 million R in FY 2019-20 and $11.3 million R in FY 2020-21 is appropriated for the increases, which are intended to align the wages paid to direct service personnel at group homes with the wages paid to State employees in State-owned developmental centers.

• Increases Medicaid recipient copayments to $4 from the current $2 or $3 level, effective November 1, 2019. Providers collect the beneficiary copayments, and the amount paid to providers for Medicaid claims is reduced, saving the State an estimated $3.5 million R in FY 2019-20 and $5.0 million R in FY 2020-21.

• Budgets $150.2 million NR in FY 2019-20 and $11.4 million NR in FY 2020-21 from the Medicaid Transformation Fund to pay the runout of claims for individuals transitioning to Medicaid managed care.  

Division of Health Benefits Special Provisions

• Directs the Department to conduct an actuarial analysis and wage and hour study of the North Carolina Innovations waiver program to determine the adjustments needed to align the wages paid to direct service personnel providing waiver services with the wages paid to State employees at State-owned developmental centers.

• Establishes a Tribal Option for Medicaid Transformation. The Department of Health and Human Services (DHHS) is authorized to contract with an Indian managed care entity or Indian health care provider to assist in the provision of health care or related services to Medicaid and NC Heath Choice beneficiaries who are members of federally recognized tribes or are otherwise eligible to enroll in the option. 

• Alters hospital assessments for the transition to Medicaid managed care and establishes a new Medicare Rate Supplemental and Directed Payment Program that will pay hospital-based physicians the Medicare rates for Medicaid claims. The new physician program will be funded with a new hospital assessment. DHHS will calculate the hospital assessment rates annually, the Governor will include the rates in the proposed State budget each year, and the General Assembly will set the assessment rates.

Division of Health Service Regulation

• Provides $350,000 NR in both years of the biennium to continue the Community Paramedicine Pilot Project. The project allows paramedics to divert persons to community based initiatives designed to avoid non-emergency use of hospital emergency departments.  

Division of Mental Health, Developmental Disabilities and Substance Abuse Services

• Provides $8.8 million R for 60 FTE’s and operating costs at new Broughton Hospital 2020-21.

• Provides $1 million NR for the replacement of obsolete automated medication dispensing carts in FY 2019-20 at the 8 state operated facilities.

• Provides $5 million NR for substance abuse services in FY 2019-20 and FY 2020-21.

• Provides $8 million NR for Group Homes bridge funding in FY 2019-20.

• Provides $23.0 million NR for Group Home stabilization and transition in FY 2020-21 to develop and implement a plan for new Medicaid services, increase LME/MCO payment to facilitate transition to a more appropriate and sustainable model, and continue the group home bridge funding.  

Division of Mental Health, Developmental Disabilities and Substance Abuse Services Special Provisions

• Single Stream Funding for MH/DD/SAS Community Services redistributes recurring single stream reductions included in FY 2018-19 budget based on base allocation of single stream funds for FY 2019-20 and FY 2020-21, eliminates the requirement that LME/MCO’s maintain spending or utilization at FY 2014-15 levels.

• Requires the Department to report on the use of three-way bed funding that includes system for beds or bed days purchased, the process used to ensure that funds are used exclusively for those medically indigent, the amount of funds paid by inpatient and non-hospital detoxification facility and other initiatives to reduce State psychiatric hospital use. 

• Extends the date for spending or encumbering Dix Hospital Property Funds for the construction or conversion of beds to June 30, 2020.

Division of Vocational Rehabilitation Services

• Provides $540,000 NR in 2019-20 and $270,000 NR in FY 2020-21 to purchase equipment for the North Carolina Assistive Technology Program in order to maintain a statewide inventory of up-to-date assistive technology equipment to be used for assessments, training, and short term loans.

• Provides approximately $1.2 million R to expand employment services for individuals with disabilities. Funding is comprised of general funds and federal match.

Highlights of the Agriculture and Natural and Economic Resources Committee (AgNER)

 

Total proposed spending for AgNER is $574.8 million in 2019-20, $27.9M (4.63%) less than FY 2018-19 budget, and $616.1 million in FY 2020-21, $41 million (7.19%) more than FY 2019-20.

Agriculture

• Provides $1M NR for emergency response equipment, initial attack bulldozers, tractor plows.

• Provides $86,415 R and $7.5M NR for operating reserves to open new Ag Sciences Center.

• Provides an additional $1.2 million for a total of $5.5 million in FY 2019-20 to the Farmland Preservation Trust Fund for the purchase of easements to promote sustainable farms.

• Provides $1.5M to town of Mount Olive for University of MO agricultural education program.  

Commerce

• Provides $1 million to the One NC Small Business Fund in both years

• Transfers $22.4 million nonrecurring out of cash balances of economic development funds

• Increases NC Biotech by $500,000 recurring and $500,000 nonrecurring

• Provides $2.5 million nonrecurring to the Carolina Small Business Development Fund  

Environmental Quality

• Provides $3.5M for State match for Clean Water and Drinking Water State Revolving Funds

• Provides $591,472 recurring for seven new positions related to emerging compounds

Natural and Cultural Resources

• Provides $500,000 recurring for historic site maintenance

• Provides $930,517 R and $750,000 NR for nine State parks through Connect NC bonds.

• Provides $4M NR for the Parks and Recreation Trust Fund for a total of $20.2 million

• Provides $4 million nonrecurring in additional funding for the Clean Water Management Trust Fund for a total of $18.3 million

 

Highlights of the Justice and Public Safety Committee

The House Budget proposal for the State’s criminal justice agencies under the House Justice and Public Safety Committee totals $2.84 billion in FY 2019-20 or 1.8% above the FY 2018-19 enacted budget and is $2.87 billion in FY 2020-21 or 2.2% above the FY 2019-20 base budget.

Administrative Office of the Courts (AOC)

• Raise the Age: Provides funding for 3 deputy clerk, 8 assistant district attorney, 3 assistant district attorney legal assistant, and 4 district court judge positions to support implementation of the Juvenile Justice Reinvestment Act, or “Raise The Age:” $1.4 million in FY 2019-20, $1.8m in FY 2020-21, and 18 FTE.

• Guardian ad Litem: Provides funding for 5 Guardian ad Litem positions in FY 2019-20, increasing by 4 to 9 total positions in FY 2020-21: $278k in FY 2019-20, $953k in FY 2020-21, and 9 FTE.

• Assistant District Attorneys: Provides funding for 5 assistant district attorney positions in FY 2020-21 to address existing deficiencies in court personnel: $628k in FY 2020-21 and 5 FTE.

• Support for Commissions: Provides funding for the Human Trafficking Commission, NC Innocence Inquiry Commission, and Sentencing and Policy Advisory Commission for positions and operating costs: $518k in FY 2019-20, $543k in FY 2020-21, and 3.5 FTE.  

AOC Special Provisions

• Continues a funding mechanism for AOC to build a balance over time to support the e-Courts technology project.

• Directs School of Government to study the feasibility and cost of creating an Office of Prosecutorial Services as an independent entity.  

Office of Indigent Defense Services (IDS)

• Private Assigned Counsel Rates: Provides funding to increase Private Assigned Counsel rates: $2m in each year of the biennium.

• Raise the Age: Provides funding for a juvenile resource defender position to support implementation of Raise the Age: $88k in FY 2019-20, $109k in FY 2020-21, and 1 FTE 

• Public Defender Support: Provides funding for an assistant public defender in District 29A, McDowell and Rutherford, and to cover start-up and ongoing costs related to a new public defender district in District 27B, Cleveland and Lincoln: $420k funds in FY 2019-20, $261k in FY 2020-21, and 1 FTE.

IDS Special Provisions

• Creates a new Public Defender District in Cleveland and Lincoln Counties.

• Modifies the appointment process for chief public defenders to give a senior resident superior court judge 60 days to appoint.

Department of Justice (DOJ)

• Sexual Assault Evidence Collection Kits: Provides funding to analyze and outsource untested sexual assault evidence collection kits: $3m NR in each year of the biennium.

• Base Budget Technical Adjustment: Makes a technical adjustment to Legal Services base budget in accordance with the State Budget Act: (-$3.1m annually).

• Appellate Attorneys: Provides funding for 2 appellate attorneys: $250k in FY 2020-21 and 2 FTE.

• State Crime Lab Positions: Provides funding for 3 Forensic Scientist positions and 2 Drug Chemist positions: $155k in FY 2019-20, $517k in FY 2020-21, and 5 FTE.

• Criminal Justice Fellows: Provides funding for the Criminal Justice Fellows program: $332k in FY 2019-20 and $664k in FY 2020-21.

Department of Public Safety (DPS)

• State Bureau of Investigation (SBI): Provides funding for lease expenses and 14 additional SBI agents, including support for the new Behavioral Threat Assessment (BETA) program: $2.2 million in FY 2019-20, $2 million in FY 2020-21, and 14 FTE.

• Inmate Substance Abuse Treatment. Provides funding to create a new 32-bed in-prison intermediate substance abuse treatment slots: $351,657 in FY 2019-20, $388,873 in FY 2020-21, and 5 FTE.

• Long-Term Care Facility. Provides funds to create a 16-bed long-term care facility at Central Prison: $3.5 million in FY 2020-21 and 35 FTE.

• Raise the Age: Provides funding to the Division of Juvenile Justice to support implementation of Raise the Age. This includes new court counselor, administrative, and management positions, support for additional detention beds, community-based and residential programs, and expanded funding for the county-based Juvenile Crime Prevention Councils: $25.2 million in FY 2019-20, $42.3 million in FY 2020-21, and 184 FTE.

DPS Special Provisions 

• Makes the Boxing Commission independent of the Secretary of DPS.

• Requires DPS to report quarterly on its progress of implementing its prison reform efforts related to rules, policies, procedures, staffing, infrastructure and security improvements, and modifications to housing capacity.

• Requires DPS to develop a long-term plan to meet Standard Operating Capacity requirements to staff and operate prisons.

 

Highlights of the House General Government Committee Budget 

The budgets for the agencies within the General Government Committee total $428.1 million for FY 2019-20 and $409.9 million for FY 2020-21. The FY 2019-20 budget represents a 1.2% decrease from FY 2018-19 and a 4.3% decrease from FY 2019-20 to FY 2020-21.

General

• Provides funding for 7 FTE for data analytics positions across multiple agencies

Administration

• Provides funding for software development and implementation of a new real estate information system, including 2 FTE

State Budget and Management

• Creates a new competitive grant program ($300,000 recurring beginning in FY 2020-21) for State agencies to evaluate outcomes of existing programs

Elections

• Appropriates $3 million in each year of the biennium for a federal grant to modernize the State’s election system and enhance security infrastructure

Housing Finance Agency

• Provides $20 million for the Workforce Housing Loan Program for increasing multi-family affordable housing units throughout the State

• Directs the Program Evaluation Division to study the State Home Foreclosure Prevention Project

Insurance

• Provides $700,000 to build an investigative management system to better track insurance fraud

Military and Veterans Affairs

Creates a State veterans’ cemetery trust fund to begin preparing for maintenance needs once the cemeteries reach capacity 

Revenue

• Eliminates all vacant positions in the Submissions Processing Division and certain receipt-supported positions funded by the Collections Assistance Fee

• Provides funds for the operations and maintenance of essential IT systems, including tax fraud analysis

Treasurer

• Eliminates vacant receipt-supported positions that have been unfilled for over a year

• Adds oral cavity and pharynx cancers to the covered diseases for firefighters’ line of duty death benefits

 

Highlights of House Appropriations Committee on Information Technology

 

The net appropriation provided for the Department of Information Technology in FY 2019-20 is $57,018,546, which is a $4.6 million less than the FY 2018-19 budget. The net appropriation for FY 2020-21 is $59 million ($2 million above FY 2019-20).

• Provides $1 million recurring in FY 2019-20 for Cybersecurity upgrades; an additional $500,000 recurring for cybersecurity is appropriated in FY 2020-21;

• Provides $1.5 million in recurring funds in FY 2020-21 for CJLEADS;

• Provides $2.5 million recurring for NC HealthConnex;

• Provides $15 million recurring from the State Capital and Infrastructure Fund for the GREAT grant program for broadband providers and co-ops to expand broadband infrastructure in rural areas; and

• Provides a nonrecurring appropriation from the IT Reserve Fund of $750,000 in FY 2019-20 and FY 2020-21 to fund the NC Outcomes Longitudinal Data System.

 

House Appropriations Committee on Capital 

• Authorizes $501.7 million in capital projects for State agencies; $75.7 million of which is appropriated in FY 2019-20 and $55.4 million of which is appropriated in FY 2020-21;

• Authorizes $590 million in capital for UNC System projects, $86.5 million of which is appropriated in FY 2019-20 and $104.4 million of which is appropriated in FY 2020-21;

• Provides $375 million for Repairs and Renovations over the biennium;

• Fully funds the Water Resources Development Projects requests;

• Provides $15 million recurring to the GREAT grant program for broadband providers and co-ops to expand broadband infrastructure in rural areas; and

• Authorizes $42.8 million for other projects, $29.8 million of which is appropriated in FY 2019-20 and $13 million of which is appropriated in FY 2020-21.

Capital Projects Special Provisions

• Identifies $200 million of UNC System projects in House Bill 241 (Education Bond Act).

 

Highlights of House Transportation Committee Budget 

The House Appropriations Committee on Transportation proposes a budget for FY 2019-20 of $2.3 billion, which is $82.9 million or 4% above enacted budget for FY 2018-19 and $2.4 billion for FY 2020-21 which is $99.9 million or 4% above proposed budget for FY 2019-20.

Highway Trust Fund

The Highway Trust Fund expenditures total $1.6 billion in FY 2019-20, which is a 4% increase over the enacted budget for FY 2018-19 or $59 million more in spending. For FY 2020-21, the total spending is $1.7 billion which is a 4% increase over the proposed FY 2019-20 budget or an additional $57 million.

Revenue Forecast

• Combined Highway Fund and Highway Trust Fund revenue is projected to increase by approximately 4% in FY 2019-20 and by 4% in FY 2020-21.

• The increased revenue is due to: o Increased consumption and the auto-adjusted higher tax rate for diesel and gasoline.

• Continued growth of the highway use tax revenues associated with new and used car sales.

• Indexing of DMV fees in FY 2020-21, beginning in July 2020. 

Department of Transportation

• Provides 1 additional FTE in the Office of Civil Rights to assist in meeting minority participation goals within NCDOT.

• Provides approximately $98 million additional funds for contract resurfacing of the State maintained roads and approximately $44 million additional funds for municipalities to resurface and maintain their road infrastructure through the Powell Bill program.

The lion-share of the additional funds available for NCDOT is being programmed for road resurfacing. Additionally, general maintenance receiving approximately $24M over biennium.

• Provides funds to create a Commercial Airport grant-in-aid program and makes available approximately $70 million annually.

• Funds Rail Infrastructure efforts. Approximately $58 million is appropriated over the biennium for North Carolina’s rail infrastructure, including overhauling locomotives for the Piedmont and Carolinian trains, local train station repairs, and the competitive grant program to improve safety and railroad infrastructure. This amount also includes funds to construct a rail connector at the Global TransPark.

• Restores funding to the State Maintenance Assistance Program (SMAP) for all fixed route transit systems. This is an additional $17 million over the biennium.

• Provides funds to support Passenger Ferry Service and address increased Operations and Maintenance (O&M) expenditures in the Ferry Division. This is a total of $9.5 million over the biennium.

• Provides funds to assist with the DMV Move. The Division of Motor Vehicles is receiving an additional $9 million over the biennium to support its headquarters move to Rocky Mount and pay for the new lease.

• Funds the State-run License Plate Agency (LPA) relocation. A special provision requires the DMV to consider a lease or purchase for their new LPA location in the City of Raleigh.

• Firms up the License Plate Agencies’ compensation budget. The budget for License Plate Agencies’ compensation is being increased in this budget to pay for services provided for the State.

• Provides funds for 6 additional FTEs to address records integrity backlogs at the Division of Motor Vehicles.

• Provides funds to the NC Ports Authority of $11 million over the biennium to raise power lines across the Cape Fear River near the Port of Wilmington.

• Increases funds for the Strategic Transportation Initiatives program by $130 million over the biennium for highway and transportation construction projects out of the Highway Trust Fund.

Special Provisions

• Capital, Repairs, and Renovations Provides approximately $24 million for needed repairs to DOT division offices and DOT office space. Included are Polk Maintenance Shop, Ocracoke Ferry quarters, Currituck Maintenance & Storage and Northampton County - Jackson shops.

• Powell Bill Requirement for 80% of the additional Powell Bill funds to be spent on Contract Resurfacing activities.

• Aerospace & Intelligent Transportation – There is $2.5 million appropriated to create a new commission to begin looking at the economic impact of creating an Electric Vertical Takeoff and Landing & Unmanned Aircraft Systems corridor in NC focused on research and development of new technology to better serve the State. This authorizes a new contract for a study to review market potential and create a strategic approach to win at the next generation of mobility.

• Names a Bridge in memory of Lance Corporal Nicholas S. O’Brien. The bridge is located over Stanley Creed on Black Snack Road in Gaston County.

• Light Rail Projects The bill removes restrictions specific to light rail projects submitted to the Statewide Transportation Initiatives Program.

• Realigns the Hearings Unit budget to meet the intent of prior years’ legislative directives to make the budget requirements fully receipt-supported.

• Antique Plates - The age of a vehicle is reduced from 35 years to 25 years in order to get an “antique” license plate.

• DMV Study Requirement of DMV to examine the employee and material costs of moving headquarters to Rocky Mount.

• The Selma Union Station Depot will receive $257,500 for station maintenance and repairs.

• NCDOT and NC Ports will conduct an analysis of Ports and offshore wind energy to provide services for cargo, transportation, trade and identify improvements to enhance the ability of the State to foster the growth of offshore wind supply chain industries in NC. Additionally, an economic development study will be conducted to evaluate business advantages and economic climate to be able to effectively compete in attracting offshore wind energy supply chain industries to the State.

Highlights of Salaries and Benefits Changes in House Budget

State Employees

The House budget appropriates $44.8 million in FY 2019-20 and $89.2 million in FY 2020-21 to provide salary increases for State employees. Specifically:

• The greater of a 1% or $500 increase to most State employees in State agencies and UNC employees subject to the State Human Resources Act, effective January 1, 2020.

• A 5% increase to certified correctional personnel, effective January 1, 2020.

• A 5% increase to Trial Court Coordinators and Administrators

• $15 million in FY 2019-20 and $30 million in FY 2020-21 to the UNC system.

State-Funded Local Employees (excluding Teachers/Instructional Support and Principals)

The House budget appropriates $22.4 million in FY 2019-20 and $44.8 million in FY 2020-21 for the following:  

• $6.9 million in FY 2019-20 and $13.9 million in FY 2020-21 to provide salary increases to Community College personnel based on the priorities of the Community College System and local community colleges.

• The greater of a 1% or $500 increase to noncertified employees of local school systems, effective January 1, 2020.

Teachers and Instructional Support Personnel

The House budget appropriates $118.5 million in FY 2019-20 and $228 million in FY 2020-21 to increase teacher and instructional support compensation. Specifically, the House budget:

• Increases the base teacher salary schedule for teachers with 16 or more years of experience by $500 to $8,500 annually, effective January 1, 2020.

• Reinstates graduate degree salary supplements.

• Ties school counselor pay to the pay scale provided to psychologists, speech pathologists, and audiologists, effective January 1, 2020.

• Provides funding for recruitment bonuses to school districts receiving funding from the small county allotment.

The estimated annualized average State-funded salary increase for teachers and instructional support personnel who are employed in FY 2018-19 and remain employed on January 1, 2020 is 4.8%, or $2,300, and individual increases range from 1% to 16.3% (individual base salary increases range from $500 to $8,500).

The average State-funded salary base for teachers and instructional support is projected to grow by approximately 3.1%, or $1,600. The estimated annualized average teacher pay in FY 2019-20, including local supplements and bonuses, is approximately $55,600, however, due to the January 1st effective date, actual FY 2019-20 average is estimated at $54,800.

Principals and Assistant Principals

The House budget provides $16 million in FY 2019-20 and $32 million in FY 2020-21 to increase principal and assistant principal compensation. Specifically:

• Implements a new principal salary schedule that compensates principals based on student headcount (ADM), experience, and student growth, effective January 1, 2020.

• Increases the assistant principal schedule to the base teacher salary schedule “A”+20% (previously “A”+19%), effective January 1, 2020.

• Eliminates graduate degree supplements currently provided to assistant principals, effective January 1, 2020.

The annualized average State-funded salary base for principals is projected to grow by approximately 10%, or $7,500.

The estimated annualized average State-funded salary increase for assistant principals who are employed in FY 2018-19 and remain employed in FY 2019-20 is 6.3%, or $3,700. The annualized average State-funded salary base for assistant principals will grow by approximately 4.9%, or $3,100.

Benefits Summary

The House budget provides additional net appropriations of $173.1 million in FY 2019-20 and $527.3 million in FY 2020-21 to support increasing costs associated with benefits provided to State-funded employees and fund benefit enhancements described below. In summary, the House budget provides the following:

• $34.7 million in FY 2020-21 to provide a one-time 1% retirement supplement for retirees.

• $39.9 million in FY 2019-20 and $148.0 million in FY 2020-21 to increase employer premiums to the State Health Plan for active employees.

• $127.1 million in FY 2019-20 and $338.5 million in FY 2020-21 to increase contributions to State retirement systems and the Retiree Health Benefit Fund for retiree medical benefits.

• $6.1 million in both FY 2019-20 and FY 2020-21 to provide funds to State employers to pay short-term disability benefits under Session Law 2018-52. There is a corresponding reduction of the same amount reflected in the contributions to State retirement systems above.

 

Highlights of Tax Reform in House Budget

· Increase standard deduction from $20,000 to $20,750 for married filing jointly taxpayers.

· Allow an income exclusion for distributions from IRAs to charities by taxpayers age 70½+. 

· Reduce the franchise tax rate from $1.50 to $1.00 over two years, and eliminate one of the three franchise tax bases, 55% of the appraised value of real and tangible personal property.

· Require a multistate corporation to calculate its sales factor, for apportionment purposes, based on the percentage of income attributed to the consumption of products and services in the North Carolina marketplace.

· Obligate a "marketplace facilitator" that meets the same threshold applicable to remote retailers to calculate, collect, and remit sales tax on a third-party seller's behalf.

o Response to the Supreme Court decision in South Dakota v. Wayfair

o The Department of Revenue already implemented a requirement that non-marketplace online retailers collect and remit sales taxes

o Levels the playing field between online and brick and mortar establishments 

o Updates tax code to reflect reality of increasing online sales

o Ensures consumer fairness, everyone who purchases an item properly pays sales tax

· Allow an income tax deduction for amounts received as a JDIG, JMAC, or OneNC grant.

· Extend the following sunsets for four years:

o Historic rehabilitation tax credit.

o Sales tax exemption and refund for professional motorsports racing teams

o Sales tax exemption for aviation gasoline and jet fuel sold to an interstate air business.

· Provide tax and regulatory relief to out-of-state businesses that perform disaster-related work during a disaster response period at the request of a public utility or a public communications provider; and to allow the Secretary of Revenue to issue a temporary license to an importer, exporter, distributor, or transporter of motor fuel in response to a disaster declaration.

· Expand the category of vehicles eligible for a historic vehicle special license plate by reducing the age of an eligible vehicle from at least 35 years old to 25 years old. Broadens the scope of the property tax benefit available to "antique automobiles."