NC Justice Center's Living Income Initiative E-mail Update

July 25, 2002

Volume 2, Issue 8
The Living Income Initiative is a special project of the NC Justice and Community Development Center. It is
supported completely through contributions and foundation support. You can contribute directly by mail at
Living Income Initiative, P.O. Box 28068, Raleigh, NC 27611. Email us at sorien@ncjustice.org


IN THIS ISSUE:
• HOUSE PASSES TWO REVENUE BILLS
• HIGHLIGHTS OF HOUSE HHS PROPOSED BUDGET V. SENATE HHS BUDGET
• GOVERNOR ISSUES EMERGENCY ORDER REDUCING CLASSROOM SIZE
• LEGISLATURE PASSES RESOLUTION CONTINUING SESSION/GOVERNMENT ANOTHER 30 DAYS

You can get more information about the legislature, your representatives and the state budget at the General Assembly Web Site http://www.ncleg.net. Go to Bill Information to obtain bills discussed in this update.


HOUSE PASSES TWO REVENUE BILLS

This week, after much debate and effort, the House passed two bills that will raise a total of about $350m in new revenue for this fiscal year to help with the budget deficit. The House also released fiscal documents that indicated how much they would take from various trust funds, get from the increased delinquent tax collection efforts. All in all the House raises about $63 million less than the Senate does in its budget. In addition, the first draft of the House budget shows they make fewer cuts and some more expansions. The bottom line appears to be that the House is short about $140 million to pay for the budget as it appeared this week. So here are the two main points:

POINT ONE: THE TWO REVENUE BILL PASSED THIS WEEK ARE PROGRESSIVE (they do not tax poor more than wealthy or corporations) AND THEY RAISE ABOUT $350 M IN NEW REVENUE FOR STATE FISCAL YEAR 2002-03
a. The 2002 Fee Bill (House Bill 1670) raises about $30 million for the state general fund by increasing fees for various registrations, court costs, certificates etc. that state government provides or oversees. This bill passed the House 97 - 15 on third reading. Some additional money is collected directly by agencies as a fee for a service provided and these funds often cover cuts made to that agency elsewhere in the budget. The Senate will send the bill to committee, can make changes to it and then will vote on it and send it back to the House. Changes seem unlikely or only of a technical nature in the interest of time.
b. The Budget Revenue Act of 2002 (Senate Bill 1292) does many things, but the net effect is that its impact is very progressive. This means that corporations and/or wealthy pay more toward these revenue increases than do low-income individuals who paid for much of last year's revenue increases. This is an excellent result. The sales tax will not be increased another half-cent as discussed earlier in the House. The state will stop collecting a half-cent of the sales tax at the end of this year and the counties can begin collecting that half-cent starting January 1, 2003. Several corporate loopholes are also closed. House members deserve much credit for passing such a balanced, fair package. The Bill passed 84 to 26, with 57 Democrats and 27 Republicans voting for it and 26 Republicans opposed. The Senate can only vote this bill up or down and cannot make amendments to it. It is expected to pass the Senate without any problem.
POINT TWO: THE HOUSE HAS NOT RAISED ENOUGH MONEY
 
The House plans so far revealed raise $63 million less than the Senate, and their current budget spends more than the Senate Budget spends. This leaves the House budget short about $140 million. In addition, there are several items still not funded (see Governor's order on classroom size below) and they still make some very painful cuts to programs and services. One such House cut would eliminate over 1,000 teaching assistants from public schools and another would cut $27 million from public school budgets with local school systems deciding where to make the cuts. Thus far local systems have primarily cut programs for at risk students, which is a likely indicator of where further cuts would come.
BOTTOM LINE: THE HOUSE DESERVES TREMENDOUS CREDIT FOR PASSING A BALANCED, PROGRESSIVE REVENUE BILL BUT THEY MUST RAISE MORE MONEY TO AVOID SERIOUSLY HARMFUL CUTS.

(TOP)


HIGHLIGHTS OF HOUSE HHS PROPOSED BUDGET V. SENATE HHS BUDGET

Early in the week the House release a first draft of their proposed budget for Health & Human Services. While many huge cuts remains, it is an enormous improvement over the Senate's Budget. Unfortunately, the House budget is still short about $140 million and more cuts could still come out of the HHS budget. In fact, one House member said, "We could get another $95 million out of HHS easily." Below is a summary of the cuts made and not made in the House HHS budget. This is not a complete list. Rumor has it that Rep. David Redwine and Rep. Ruth Easterling, worked hard to avoid many of the Senate HHS cuts. Expect this budget and other department budgets to be reviewed and possibly cut more, in the next two weeks.

1.

House cuts $109.2 m less than Senate HHS Budget

a.

House Cuts $44.6 m in recurring money

b.

Senate cuts $153.8 m in recurring money

c.

House also spends about $24.2m more than Senate in Non-recurring money. (H-$25.7 v. S- $1.5m)

2.

House Funds several new HHS expansion items equaling $53.9m:

a.

More at Four

$28m

b.

Child Care Subsidies

$18.8m (replaces TANF cuts of about $4m)

c.

Autism Funds

$280,000

d.

Housing for Mentally Ill

$500,000

e.

Residential Substance Abuse Services for women with kids

$1m

f.

Healthy Start

$250,000

g.

Health Carolinians

$750,000

h.

Asthma Ed

$100,000

i.

Boys & Girls Clubs

$550,000 (also in Senate, replaces $900,000 TANF cut)

j.

Food Banks

$1m (also in Senate at $900,000)

k.

Special Needs Adoption Fund

$2m

l.

Work Central Career Advancement in Edgecombe

$500,000 (replaces $650,000 TANF Cut)

3.

House doesn’t take or reduces some big cuts the Senate proposed in its budget:

a.

Area Mental Health Authorities

$0 House - $29.2m cut Senate

b.

Cap MR/DD

$0 House - $18.4 cut by Senate

c.

Cap DA

$0 House - $13.5 cut by Senate

d.

Medicaid Dental Services

$0 House - $5m cut by Senate

e.

Long Term Care Efficient Provider

$0 House - $15 cut by Senate

f.

Medicaid Case management services

$7.7m cut by House - $20m cut by Senate

g.

State Lab Pap Smear Program

$0 House - $1 m cut by Senate

h.

Local DSS Staff

$1 m cut by House - $5 m Cut by Senate (= 392 staff)

i.

Special Adult Care Home Specialist Fund

$0 House - $1.4m cut by Senate

j.

Direct Voc. Rehab Client Services

$1.9 cut by House - $3.5 cut by Senate

k.

Elimination of Positions in Office of the Secretary

$0 House - $5m cut by Senate (= 150 positions)

l.

Local Smart Start Partnerships

$20m cut by House - $24m cut by Senate

4.

House Makes some new or increased cuts:

a.

Welfare Automation

$8m cut by House - $0 Senate

b.

Home and Community Care Block Grant for Older Adults

$347,000 cut by House - $0 Senate

c.

State Mental Retardation Centers

$2.3m cut by House (= 56.5 positions) - $330,354 cut by Senate

d.

Family Resource Centers

$865,000 cut by House - $698,866 cut by Senate

e.

Eliminate State DSS Positions

$8895,136 cut by House (=56 positions) - $0 cut by Senate

f.

State Maternity Home Funds

$438,354 cut by House - $0 cut by Senate (these are to be replaced by TANF, which will mean a change in the TANF block grant)

5.

Change in Medicaid Forecast

 

 

The House budget predicts that Medicaid will overspend by $85m this fiscal year and provides Medicaid with that much more money to cover the cost. The Senate and the Governor provided Medicaid with $110m to cover larger increases in costs for this fiscal year. This $25m change could be fairly accurate, but it is hard to know. Some costs have been going down in Medicaid, but it is hard to forecast budget costs to this level of detail in a $6 billion program.

(TOP)

GOVERNOR ISSUES EMERGENCY ORDER REDUCING CLASSROOM SIZE

In a very unusual move, the Governor issued an emergency order to fully implement More at Four, the Governor's new pre-school program for children at-risk of doing poorly in public schools, and to reduce Kindergarten and First Grade class size. The governor told local school superintendents to start hiring the new teachers needed for this school year. The Governor said he had authority to do this in order to meet the Leandro court order, which found the state was not providing to all students the education they are guaranteed by the State Constitution. Specifically, Leandro finds that at-risk students are not getting the services they need.

Normally, funding new items - such as expansion of the More at Four program or hiring of new teachers - is only a legislative function. Constitutional separation of powers prohibits the Governor from allocating money for new items without legislative approval, unless certain emergency circumstances exist. The Governor says meeting the requirements of Leandro is such an emergency. Whether this order passes legal muster or not, it is an excellent thing to reduce class size and to better prepare all kids for school.

It is not yet clear from where the money will come to pay for this. This angered many legislators, since they are working hard to carefully craft a budget for this year. Governor's staff has said the money will not come from further cuts to HHS. Since the House is not proposing to use Hurricane Floyd funds, perhaps that will be the funding source for these projects. This question remains a mystery, but suffice it to say nothing is dull in Raleigh.

(TOP)

LEGISLATURE PASSES RESOLUTION CONTINUING GOVERNMENT ANOTHER 30 DAYS

As the legislature continues to struggle to put together a budget, they must keep government running. The new fiscal year started July 1 without a new budget, and so legislators passed a continuing resolution keeping themselves in session and the Government running until July 31. This week they took up a bill to allow session to continue and Government to run until August 30. While it is good to take care of this business before the last minute, it is depressing that we may still be here another full month. With primaries now set for September 10, hopefully they will get motivated to leave before the end of August!

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