Leading budget writers offer details on $20.6 billion plan [The News & Observer (Raleigh, N.C.)]

May 21--RALEIGH -- The state Senate's$20.6 billion budget signals a fundamental remake of state government in which some health care providers who treat poor people will be paid based on efficiency, teacher pay will be based on merit, and low-income people receiving medical care at no or low cost will have to pay more.

The state legislature, in Republican hands since 2011, started a transformation of a state government and public education in the last two years by shuffling state departments and cutting budgets. And now, the legislative majority has an accommodating partner in a new Republican governor, rather than the veto-wielding Democrat it faced previously.

While the new Senate budget proposal would increase state spending 2.3 percent, it includes significant changes in how schools, the government health insurance program for the poor, and even rural economic development programs work.

"I think it follows the general philosophy of holding the line on spending, doesn't create brand new programs, and narrowly tailors programs to help the disadvantaged," said Dallas Woodhouse, Americans for Prosperity North Carolina state director.

Where Woodhouse sees a narrow tailoring, Senate Minority Leader Martin Nesbitt, an Asheville Democrat, sees gutting and underfunding.

"They're doing things I've never ever heard mentioned," Nesbitt said. "I just see it in program after program after program. We're defunding programs that work."

Major changes in the two-year budget include closing the state's three treatment centers for drug abusers and alcoholics, eliminating all dental hygienists from the state Division of Public Health, and dissolving rural economic development partnerships while shifting the job to Raleigh state offices.

Some of the money spent on the state addiction treatment centers and state dental hygienists will be sent to communities to do the work there, said Sen. Ralph Hise, a Spruce Pine Republican.

Hise said beds in the addiction treatment centers are expensive, and there's no evidence that they work any better than community treatment.

5,600 positions eliminated

In advance of Gov. Pat McCrory's plan to change the state Medicaid program to privatized managed care, the Senate proposal would withhold 4 percent of payments for some health services to create a pool of money to reward providers who meet efficiency and performance criteria.

These weighty changes come with reductions in state jobs, more than 1,600 in all. That's not counting about 4,000 teacher assistant jobs to be lost with a change in how classrooms are staffed.

Unlike McCrory's budget, the Senate proposal includes no broad raises for state employees or teachers.

The State Employees Association of North Carolina said the budget does wrong by state employees and devalues public services.

Natalie Beyer was disheartened to read the education budget, and sees no end to the slide in the state's ranking for teacher pay or per pupil spending.

Beyer, a volunteer board member with Public Schools First NC, said too many big policy issues that should be debated by parents, school officials and others are being pushed through a budget process. The nonpartisan group is a statewide advocacy organization.

"North Carolina is 48th in per-pupil funding for education. We were hopeful that we would advance, not retreat," said Beyer, also a Durham school board member. "I'm afraid this budget is a retreat from our commitment to our students.

"I think teacher morale is at an all-time low," she added. "It's becoming more and more challenging to retain experienced teachers. NCAE reported it takes 15 years for a teacher in North Carolina to finally make $40,000. We can choose to invest in people, and our teaching professionals deserve our investment."

UNC system happier

UNC leaders were happier with the Senate proposal than McCrory's, which had a bigger overall cut and a 12 percent tuition increase for out-of-state students at some campuses. The Senate budget proposes no tuition increases beyond those already approved by the UNC Board of Governors.

"It's far better financially than the governor's budget," said Charles Perusse, chief operating officer of the UNC system.

The UNC system had proposed its own efficiency savings in recent months as part of a new strategic plan. Both McCrory and the Senate incorporated those savings, and added cuts to UNC on top of that.

In coming up with efficiencies, Perusse said, "the goal going forward was to redirect savings into things that would improve student outcomes and grow the economy."

Changes would be in store for the state's youngest students too. The proposal moves 2,500 spaces in the N.C. Pre-K program, state preschool for 4-year-olds, to the child care subsidy program. Parents do not pay for N.C. Pre-K, but they do pay some of the costs of child care when they use a subsidy.

Shifting costs

The budget includes changes for some pregnant women on Medicaid, taking those whose incomes are between 133 and 185 percent of the federal poverty level and purchasing insurance for them on the new health care exchange required under the new federal law. The state will pay the premiums, and women's out-of-pocket expenses will be capped, Hise said.

Adam Linker, a policy analyst with the N.C. Health Access Coalition, said shifting low-income pregnant women to the insurance exchange is part of the legislature's pattern of privatizing services.

"It shifts costs to low-income people and makes health care more difficult to obtain," he said.

Senate's proposed budget

Here are some of the proposals in the Senate budget.

Education K-12

* Provides no raises for teachers in 2013-14, but funds a $500 merit increase for some teachers in 2014-15.

* Eliminates a $376 million cut that school districts had sustained in recent years but does so by enlarging class size limits. Thus there will be fewer teachers.

* Cuts teacher assistants in second and third grade.

* Phases out salary supplements for master's degrees for teachers who didn't already have them in 2013-14. The supplements would be ended in 2014-15.

* Provides nearly $19 million to carry out changes in Excellent Schools Act.

* Ends funding for N.C. Center for the Advancement of Teaching and the Teaching Fellows program.

* Increases funding for Teach for America, which recruits teachers for high-need school districts.

* Reduces funding by $28 million for school bus replacement, which means buses will be replaced less frequently.

* Cuts the Department of Public Instruction budget by 2.5 percent.

Community Colleges

* Changes enrollment funding model, reducing by $20 million.

* Increases tuition for degree-seeking students from $69 to $71.50 per credit hour for North Carolina residents, and from $261 to $263.50 for nonresidents.

* Eliminates senior citizen tuition waiver.

* Restores $10 million in previous cuts to be used for performance funding for colleges that meet student success goals.

* Spends $10 million on one-time equipment purchases.

* Reduces customized training by $2 million.

* Reduces funding for a minority male mentoring program by 20 percent and expands the mission of the program to serve all students at risk of dropping out.

UNC System

* Cuts $48 million to campuses, in addition to UNC's previously planned $26 million in savings through its strategic plan.

* Adds no additional tuition increases beyond those already approved by the UNC Board of Governors.

* Phases out UNC tuition grant for students who graduate from the N.C. School of Science and Mathematics and attend a UNC campus (eliminated in 2014-15).

* Reduces revolving loan program for teachers pursuing certification by National Board for Professional Teaching Standards.

* Provides $2 million in start-up money for the N.C. Center for Vaccine Innovation, a collaboration of several research campuses.

Health and Human Services

* Spends $434 million for continuation of the Medicaid program at its current level, accounting for changes in enrollment and health care services used.

* Transfers 2,500 slots in the first year and 5,000 slots in the second year from N.C. Pre-K , the state's preschool for at-risk 4-year-olds, to child care subsidy.

* Transfers $2.9 million in block grant money to expand Project C.A.R.E., a program that helps families care for people with dementia at home.

* Eliminates 48 jobs in the Oral Health Section at the Division of Public Health, saving about $2.9 million. Sends about $1.6 million of that money to local health department dental clinics.

* Closes the state's three Alcohol and Drug Abuse Treatment Centers, saving about $38 million and cutting about 550 state jobs. A portion of that money, $10 million, will be used for community-based and residential addiction treatment.

Justice/Public Safety

* Transfers about half of the State Bureau of Investigations' 423 jobs to the Department of Public Safety from the N.C. Attorney General's office.

* Adds equipment and 19 new jobs to state crime lab, which will come under direct control of the AG.

* Eliminates three positions in Alcohol Law Enforcement administration including the assistant director.

* Closes six prisons: Bladen County, Duplin, Robeson, Wayne, Buncombe and Orange and the Western Youth Institution in Morganton.

* Eliminates three full-time, currently filled positions in the Division of Juvenile Justice.

* Closes the Lenoir Youth Development Center and Detention Centers in Richmond and Buncombe counties.

* Eliminates the 12 Superior Court judges not assigned to Business Court. The Senate had tried to eliminate these positions in a bill earlier this session.

Transportation

* Lets schools increases fees for driver education class from $45 up to $65.

* Collects $1.5 million in new fees from electric and hybrid car owners: Electric car owners would pay a $100 annual fee. Owners of hybrid cars, who also pay tax on the gas and diesel fuel their cars and trucks consume, would pay a $50 fee.

* Increases Division of Motor Vehicles budget to upgrade technology and allow more offices to open their doors on Saturdays.

* Charges tolls on all seven ferry routes by Nov. 1, with rates high enough to generate $5 million to $10 million a year in revenues. Implements Gov. Pat McCrory's proposed Strategic Mobility Formula to determine how most transportation funds are distributed across the state, including modifications recently made in the House of Representatives.

* Cancels the legislature's "Red Route" study ban, which has prevented N.C. DOT from winning regulatory approval of any route for the next leg of the Triangle Expressway, extending the Interstate 540 Outer Loop across southern Wake County from Holly Springs to I-40 near Garner.

* Cancels three other toll projects: the Mid-Currituck Bridge, the Cape Fear Skyway and the Garden Parkway.

* Bans government drones and drone snooping.

* Provides money for dredging shallow coastal channels, with $2.3 million from the gas tax and money from Wildlife Resources Commission fees, to maintain navigation channels in coastal waterways.

Staff writers Jane Stancill, Mary Cornatzer, Lynn Bonner and Bruce Siceloff

What's next

Senate leaders expect to approve the budget this week and send it to the House.

The House has its own ideas for budgeting, and that's likely to create some bumps before the legislature agrees on a plan that McCrory will sign.

The House may include compensation for eugenics victims, which the Senate does not want. The House wants to keep Special Superior Court Judges that the Senate cans in its budget. The House and Senate also have different ideas for teacher tenure, which the Senate eliminates and the House wants merely to alter. And the House budget may include money to pay for vouchers for public school children who move to private schools.

Staff writer Lynn Bonner

Bonner: 919-829-4821

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