In this Living
Income Update:
2005
State Budget Summary
Selected Budget Line Items by Topic
2005 STATE BUDGET SUMMARY
The 2004 Session of the NC General Assembly ended on Sunday, July 18
at 6:14am after a 19 hour marathon of waiting, debating and voting
on bills. The 2005 budget, passed during the final day, is the best
we have received in four years. Nonetheless, while legislators did
what they could to address North Carolinians' needs, those needs have
grown so great after three years of budget cutting, population growth,
recession and long term job market changes that legislators could barely
scratch the surface. This was especially apparent in efforts to deal
with child care subsidy waiting lists, low-wealth school system needs,
the growing number of uninsured and the well-documented need to fund
reforms in the child protection system.
This budget is better because there was more money available and legislators
used restraint in cutting taxes. For the first time since 2000 the
state saw a moderate budget surplus rather than a budget shortfall.
At the start of session, the two Speakers of the House promised no
new tax cuts or increases and they mostly stuck to it. (Some smaller
tax credits and cuts were passed.) To his credit, Governor Easley apparently
agreed to this arrangement as well, in spite of the fact that he had
proposed reducing corporate income tax liability. This prevented legislators
from giving away some of the limited surplus money and ensured that
the money available went mostly to programs and salaries that had been
neglected during the previous three years of budget shortfalls. For
example, for the first time since the 2000-01 budget, state employees
received a permanent raise of $1,000 or 2.5%, whichever is greater.
The Justice Center has long advocated for a flat pay increase, which
most benefits the state employees at the bottom of the pay scale who
are not earning a living wage, and this pay scheme is an excellent
nod to this need. While it will not equal the 5% across the board raise
for which state employees had lobbied, $1,000 will equal a 5% or greater
increase for the lowest paid state workers.
Most of the debate in the Health and Human Services budget focused
on where to spend additional money instead of on where and how deeply
to cut. Unfortunately for some programs, additional money meant only
maintaining the current services available, but there is real expansion
of some programs. The limitations of the revenue available in the face
of state and local needs also were apparent. For example, in spite
of $24m increased funding, the child care subsidy program will not
be able to remove any children from the waiting list, but should avoid
having to remove children from the program who currently get a subsidy.
Public Education is facing some serious problems in this budget. While
$50m new funding is allocated to reduce third grade class size to 1
teacher per 18 students, $27m is cut from local school systems' base
budgets. When added to the $44m recurring cut to their base budgets
made last year, this amounts to a sizable decrease in operating funds
that seems likely to affect classrooms. Schools are given flexibility
to choose from where to take these cuts and budget language encourages
them to avoid hurting classrooms or programs for at-risk or special
needs children, but that may be impossible given the size of the cut.
There remains concern that the students and school systems most in
need will suffer the greatest. In addition, Judge Manning who presides
over the Leandro litigation has ordered the state to provide at least
$22m more toward the poorest school systems, but the legislature failed
to do this.
Substantial
amounts were allocated this session toward corporate incentives and
cash
grants. Legislators put $20m more into the One North Carolina
fund, "known as the governor's walking around money," $4.5m
in the JDIG business grant program and $4m toward developing a "test
race track" for NASCAR. The rationale for this $28m spending spree
is to attract more jobs to the state and keep the NASCAR jobs we have.
A bill failed, however, that would allow the state to get these moneys
back if the recipient company does not create the jobs for which it
gets the grant.
This budget pays only small attention to the workers who are unemployed
due to plant closings or who are reemployed in the new low-wage jobs
coming into the state. While many legislators say any job is better
than no job, they appear unwilling to deal with some of the consequences
of low-wage work; Health Choice, the subsidized health insurance program
for children of low-wage workers will be frozen on January 1 and no
additional children will come off the child care subsidy waiting list
that now tops 25,000. Some displaced-worker needs were given a nod
with an allocation of more money to community college retraining programs
and the start of a pilot program to help prevent home foreclosures
in a few counties most affected by plant closings and mass layoffs.
Much more must be done for our growing population of low-wage, uninsured
workers created by the new economy.
Some legislators left session more cognizant of the need for major
tax reform. Our current system has been widely recognized as outdated
for years, but now it is also riddled with loopholes that this year
came in the form of tax credits and exemptions targeted toward specific
industries or groups. Governor Easley has already held a commission
and issued a report on modernizing the tax code. In addition, the top
tax bracket for couples earning $200,000 or more and one-half cent
of the state sales tax are set to sunset at the end of 2005, significantly
decreasing revenues for the SFY 2006 budget and perhaps, providing
legislators with further motivation to fix the entire tax system.
The bottom
line is that, with the notable exception of the cut to local schools,
this budget does begin to address needs that have been
neglected during the years of economic and revenue downturn. The state’s
revenues have not yet recovered to a place that can address all of
the needs caused by recession and revenue shortfalls, but this budget
is a good start with what was available. While they created several
new small tax loopholes, Legislators avoided the pitfall of giving
away revenue through untargeted, broad-based tax cuts. For the most
part, legislators were reminded and understood that spending on good
programs that meet the needs of North Carolinians is good government
and they did fairly well to meet that challenge.
SELECTED
BUDGET LINE ITEMS
Below is a summary of some of the key budget items affecting low-income
North Carolinians. Anything link takes you directly to a bill.
You can see the entire budget, election results and any bill at www.ncleg.net.
In a separate document, the Justice Center will send out a complete
review of legislation passed this session
that has implications for low and moderate-income North Carolinians
and those who serve them.
Economic Security
| 1.
Job Training for Workers |
| |
$4m
additional is appropriated to the New and Expanding Industry
Training (NEIT) program at the community colleges. |
| |
$2m
additional is allocated to the Focused Industrial Training
(FIT) program at the community colleges. This replaces $1.6m
that was previously allotted from the Worker Training Trust
Fund and adds $400,000. |
 |
Community
College tuition was increased 7%. |
 |
Not
all programs and employees previously funded with Worker Training
Trust Fund money have been provided new sources of revenue. |
2.
Wage
|
|
The
wage standard of 110% the average weekly county wage was eliminated
as a requirement for a business to receive a state-backed industrial
revenue bond. Senate
Bill 1063. |
3.
Temporary Assistance to Needy Families Block Grant
– TANF
Block Grant Chart, 2004-05 |
| |
PRIMARY
TANF CHANGES MADE IN 2004: Work First rolls have remained low
throughout most of the last year and so TANF dollars going toward
cash assistance was reduced by $10m. Legislators took a $3.99m
cut in state maintenance of effort funds because of this reduction,
but TANF does not work on a matching basis. Whether this cut
can be sustained is unclear and will provide a challenge to DSS
and HHS controllers. $2m for substance abuse services was cut
which means that no TANF funds are being used for mental health
or substance abuse services for the first time since TANF began.
The money freed up by these reductions went primarily toward
child care subsidies, in an effort to prevent the need to cut
off children who are currently receiving subsidy. The child protective
services automation system NCFAST received an additional $2,087,298
to begin expanding the system statewide. Three new items made
the TANF funding list this year: After School Services for AT-Risk
Students in Middle School, YWCA of the Central Carolinas Youth
Development programs and Maternity Homes. Adolescent Pregnancy
Prevention Coalition makes up for its loss of TANF money with
a new $150,000 from the Maternal and Child Health Block Grant. |
| |
|
| |
|
| |
|
HOUSING
| ss |
$1,725,000
new money for the Housing Finance Agency to start a home protection
and foreclosure assistance program in a few counties that have
been hardest hit by plant closure or mass layoff and have seen
an increase in foreclosure filings as a result. |
PUBLIC EDUCATION
| 1.
Funding for children at-risk of failing, with Limited English
Proficiency or at other disadvantage. |
|
No
additional funding for at-risk, Limited English Proficient (LEP)
or disadvantaged students. The State Board of Education and State
Superintendent Mike Ward requested that legislators put $22m
toward a new “Disadvantaged Students Fund” that could
be used to help the schools with high dropout, poverty and failure
rates. The Senate created the new category of funding and put
$12m toward it, but it did not make the final budget agreement.
The Governor’s and the House’s original budget proposals
would have cut at-risk student funding, and the SBE requests
did manage to eliminate that cut. |
| |
Judge
Howard Manning, presiding over the Leandro lawsuit, was angered
that $22m was not allocated to the newly proposed disadvantaged
student fund, but Governor Easley indicated he will explore
options within the executive budget act for him to find the
needed money for this program. Judge Manning is to have another
hearing in two weeks.
|
|
No
legislative action to increase accountability of local school
systems regarding how they spend the at-risk and LEP money
they already receive.
|
| |
$2.5m
more for Small County Supplemental Funding. |
| |
$5m
more for Low Wealth Supplemental Funding. |
| 2.
Dropout Prevention |
|
No
new school counselors funded, no new dropout prevention programs
implemented.
|
3.
Third Grade Class Size Reduction |
| |
$50.5m
to Reduce Third Grade Class Size - The Governor worked hard
to ensure legislators fully funded his request to reduce third
grade class size from 1 teacher to 22 students down to 1 teacher
for 18 students. Clearly research indicates that students do
much better in classes of a 1 to 15 ratio or smaller, and this
is an important step in that direction. Nonetheless, many legislators
and members of the education community lamented the large amount
of money this item required, especially since additional cuts
were made to local school systems’ base budgets. |
4.
Flexibility Cuts to Local School Systems |
|
$27.7m
is cut from Local Education Agencies (LEA’s) across the
state. The State Board of Education must let local school system’s
know how much they will be cut within the next two weeks. This
is on top of a $44.3m recurring cut made to LEAs in last year’s
budget. In other words, local school systems are actually being
cut a total of $72m this year. There is special provision (budget)
language providing school systems with the flexibility to cut
these funds as they choose, but that encourages them not to
cut in a way that affects classroom instruction, at-risk or
LEP students. Nonetheless, with a cut of this magnitude it
seems likely that some, if not many, systems will have to cut
in these areas. In addition, this potentially compounds the
problems at low-wealth and small schools where funding is already
inadequate. |
5.
Vocational Programming |
| |
$4.4m
for additional Public School vocational education teachers
and support
|
| |
Five
new High School Workforce Development Pilot Projects to be
created where local school system, community college or university,
and local employers work together to ensure that high school
and higher education curricula are aligned with the workforce
training needs of employers and that students have access to
accelerated training opportunities. This is the first part
of state-match funding needed to get $10m from the Gates Foundation. |
HEALTH
| 1.
NC Health Choice |
|
NC
Health Choice, the subsidized health insurance program for children
of low-wage working parents, will stop taking new children into
the program when it freezes on January 1, 2005. $6.6m more was
allocated to the program, but the number of uninsured children
is growing so quickly that even more funding is needed to keep
the program open beyond this date. Legislators considered, but
did not, expand Medicaid to cover all Health Choice children
under 5 years old. This would ensure those children receive Medicaid
and reduce the current Health Choice rolls by nearly 26,000 kids
thereby enabling Health Choice enrollment to continue. It also
would have saved the state some money since Medicaid reimbursement
rates for health providers is lower than that offered by Health
Choice. This seems a no-brainer but has been rejected by the
legislature two years in a row after consideration. |
2.
Medicaid and Health Choice Coverage and Services
|
| |
No
cuts to Medicaid and Health Choice coverage or services were
made. Senator Purcell played a critical role in ensuring this. |
| |
Children
who qualify for EPSDT services in the Medicaid program will
now be able to go to a wider variety of health providers. Children
must be referred to these providers to get Medicaid coverage.
Licensed psychological associates, licensed professional counselors,
licensed marriage and family therapists, certified clinical
addictions specialists, and certified clinical supervisor can
now receive reimbursement. |
| |
Adults
receiving Medicaid will also be able to receive services from
a wider variety of health providers. Medicaid-eligible adults
may self-refer to these specialists and receive coverage. Added
to the eligible list of providers are licensed or certified psychologists,
licensed clinical social workers, certified clinical nurse specialists
in psychiatric mental health advanced practice, and nurse practitioners
certified as clinical nurse specialists in psychiatric mental
health advanced practice, licensed psychological associates,
licensed professional counselors, licensed marriage and family
therapists, certified clinical addictions specialists and certified
clinical supervisors. |
| 3. Cigarette Tax |
| |
The
legislature did not even consider the cigarette tax increase,
in spite of public support, bi-partisan legislative support,
successful press conferences, broad media coverage and a recent
increase in the Virginia tax – not to mention the health
benefits. |
4.
Community Health Services
|
| |
$7m
for a grant program for community health services. $5m will
be available to federally qualified community health centers
and $2m for state designated rural health centers and public
health departments. |
| 5.
School Health Nurses |
| |
$4m
in state money plus $3.25m from the Maternal and Child Health
Block Grant will provide a total of $7.25m for 145 new school
health nurses. They will be distributed to meet the greatest
needs in the schools with the least money and the highest nurse
student ratios. |
| 6.
Hunger and Nutrition – WIC Farmer’s Market Program |
| |
$156,630
allocated to reinstate the WIC Farmer’s Market Program.
This will again draw down federal money. This program allows
WIC recipients to use their vouchers in local farmer’s
markets. |
| 7.
Aids Drug Assistance Program |
| |
$2,765,622
increase in funding for the Aids Drug Assistance Program to meet
growing prescription costs. This increase does not change our
very low income eligibility requirement of 125% of federal poverty
level. |
LONG TERM CARE
| 1.
Long-Term Care Criminal Record Checks |
| |
The
Department of Health and Human Services will serve as a clearinghouse
for criminal record checks conducted on individuals seeking employment
in long-term care facilities. The North Carolina Department of
Justice will return the results of national criminal history
record checks for employment positions not covered by federal
law to DHHS’s Division of Facility Services. The sum of
$200,000 was appropriated to DHHS to implement the background
checks system. In addition, the sum of $250,000 in non-recurring
funds will be transferred from DHHS to the Department of Justice
to be used to upgrade the existing billing system currently used
for criminal record checks. |
| 2.
Centralize Criminal Record Check Functions |
| |
Directives
are given to the Department of Health and Human Services to centralize
all activities throughout DHHS relating to the coordination and
processing of criminal record checks required by law. The centralization
is to be implemented by January 1, 2005. The budget assumes $2m
in savings from centralizing these functions. |
| 3.
Study Issue Related to Mentally Ill Residents of Long-Term Care
Facilities |
| |
Directives
are given to the Department of Health and Human Services to
work with long-term care providers and advocates for the elderly
and
the mentally ill to study issues concerning the care of mentally
ill individuals residing in long-term care facilities. Among
the seven categories of issues to be studied are the following:
1.
Examining whether current State statues and Departmental rules
adequately address the populations served by long-term
care facilities.
2.
Exploring the development of separate licensure categories
within the adult care home and nursing home designations
to address the various populations being served. Examining
the
criteria
for admission of mentally ill individuals to long-term
care facilities to ensure that the health and safety of all
residents
are safeguarded.
3.
Identifying specific problems that exist due to mixing aging
and mentally ill populations, etc.
|
| 4.
DHHS Study Medical Institutional Bias |
| |
An
independent entity will study whether the State’s Medicaid
program has a bias that favors support for individuals in institutional
settings over support for individuals living at home. The study
must include consideration of all in-home services paid under
the State's Medicaid program, including CAP/DA, home health,
and personal care services. If a bias is found, the study must
determine and recommend ways to eliminate the bias. |
MENTAL HEALTH/DEVELOPMENTAL DISABILITY/SUBSTANCE ABUSE SERVICES
| 1.
Services |
| |
$10m
allocated to the Mental Health Trust Fund to help support more
community services across the state. |
|
Eliminated
- $2m TANF funding for Residential Substance Abuse Services
for Women with Children. This is the first year since it’s
inception that NO TANF MONEY is spent on substance abuse or
mental health services.
|
2.
Funding to Local Management Entities (LMEs) |
|
$2m
cut to the LMEs. |
EARLY CHILDHOOD EDUCATION
CHILD WELFARE
| 1.
Intervention |
| |
The
results here are mixed. Overall, this is an improvement as a
result of very hard work by Rep. Beverly Earle, Rep. Jennifer
Weiss, Rep. Verla Insko, and several Senators, including Senator
William Purcell. The net results of some of this remain unclear. |
| |
The
Study
bill SB 1152 includes the option of a study of the child
welfare system and whether reforms are improving system “weaknesses.” |
| |
$2,717,298
of TANF money was allocated toward NCFAST, the child protection
statewide computer system, which is an increase from $630,000
allocated last year. NCFAST will be able to move ahead in its
effort to go statewide. |
|
On
the down side, legislators reduced welfare automation funding
by $5.4m. It is not clear yet what the net impact will be. |
| |
An
additional $5m ($4m state money and $1m TANF) is allocated for
hiring 75-100 additional child protection workers. |
| |
$750,000
is allocated for program support and training for the counties
already participating in the Multiple Response System (MRS) Pilot
Program. This was not funded to expand statewide as we hoped. |
|
CUTS:
Child Welfare Contracts are cut $500,000 and funds for the Training
Centers are cut $300,000. |
| 2.
Foster Care and Adoption |
| |
$1m
additional TANF money allocated for a total of $3m for the Special
Needs Adoption Fund. |
| |
$1.6m
new allocated to increase the Foster Care and Adoption Assistance
rates by $25/month. Representative Jeff Barnhart (R-Cabarrus)
sponsored a $50/month increase.
|
| |
$550,000
allocated to increase Guardian Ad Litem Attorney fees from $35/hour
to $45/hour. |
Juvenile Justice
| 1.
Youth Development Centers |
| |
Modify
Youth Facility Debt Authorization – HB 1795 is law and
allows the state to obtain $4.46m in debt financing to begin
the next stage of planning and design of the proposed new youth
development centers. |
| |
Finance
Vital Projects – HB 1264 is ratified and awaiting the Governor’s
signature. There is a chance the Governor could veto this bill.
Besides allowing the state to obtain nearly $400m in Certificates
of Participation (COPs) debt to build up to 10 health related
facilities at 10 different UNC system schools, this bill would
allow the state to incur $35m in COPs to finance the construction
of up to five of the Youth Development Centers. During negotiations
of this bill, the Governor expressed concern that the debt amount
allowed is too high and may put the state’s financial status
at risk. |
| 2.
Juvenile Crime Prevention Councils |
|
$500,000
more allocated to the JCPCs, which is better than a sharp stick
in the eye, but far short of the millions needed. |
|
$75,000
cut from Communities in Schools DJJDP funding. This is down from
the House proposal to cut $347,500, but is still harmful to the
program. |
|
