From the Office of Representative Jimmy L. Love, Sr. June 15, 2009

In the past year, as the global economic crisis that has gripped the world finally reached North Carolina, tax collections in our state slowed significantly. The most recent projections show that our revenue this year will be about $4.6 billion short of expectations. At least 34 other states will also have smaller budgets in the year ahead, and the revenue picture is expected to worsen in many places.

Faced with this crisis, we have scoured our budget looking for efficiencies, outdated programs and ways to save limited resources. We ended up with a proposal that eliminated about $3.7 billion in spending – the largest budget reduction in the history of our state – and made difficult choices to do away with some needed programs and services that we can’t afford. We worked hard to protect as much of our investment in education as we could without devastating other areas of our budget. We also added new taxes and some fees so that we could retain those services that we – and you – hold most dear. Our proposed $785 million revenue package would allow the state to:

_ Protect class sizes, teacher pay and prevent some teacher layoffs

_ Restore 2,590 K-3 teacher jobs and about 600 UNC system jobs.

_ Restore about 350 school counselor and social work jobs and about 350 principal and assistant principal jobs.

_ Restore community college jobs

_ Restore money for students at risk of dropping out of school

_ Restores money for low-wealth counties

_ Minimize program cuts and layoffs in our nationally renowned Smart Start early childhood program

_ Restore cuts to Medicaid program, which provides health care to an increasing number of our residents

_ Restore funding to some community-based mental health programs and other services for the mentally disabled

_ Restore Medicaid physical therapy, occupational therapy, and speech therapy programs

_ Restores cut to basic support care services for vocational rehabilitation, and restore funding for independent living programs in vocational rehabilitation

_ Restore funding for 179 jobs in the state courts and for 155 Victim Witness Legal Assistants

_ Partial restoration of operating reserves for the Department of Environment and Natural Resources, the Department of Agriculture, the Department of Commerce and the Department of Labor

Even with this revenue increase, we rely heavily on cuts to balance this budget. For every $1 in proposed new revenues, we have recommended about $3 in cuts.

The information below highlights the proposed two-year budget being considered by the House. These numbers do not reflect any of the proposed restorations, which will not receive a final vote until Saturday. We will then negotiate the differences in our plan with the Senate before presenting a final proposal to Gov. Perdue for her signature.

I hope you will contact me if you have questions, or if I can be of service. Thank you as always for your support and your interest in our state.


Economy and Jobs

_ Workforce Investment Act (WIA) ARRA Funds ($79.8 million):
Would appropriate federal American Recovery and Reinvestment Act (ARRA) funds for workforce development as follows:
_ Local Workforce Development Boards: $56.7m
_ State Administration: $ 1.5m
_ Statewide Projects: $ 8.1m
_ North Carolina Community College System 12 and 6 Program: $13.5m

_ Regional Economic Development Partnerships ($5 million):
Would transfer $5 million from the cash balances remaining in various fund codes within the Department of Commerce that are being transferred to the General Fund

_ Commerce Boards and Commissions:
Would move $69 million in funds for Utilities Commission, State Banking Commission, ABC Commission, ABC Warehouse and several other groups from independent control to General Fund. The move creates more accountability for these programs and frees up money for other programs within the Natural and Economic Resources budget area.

_ Financial Assistance Funding (-$2 million)
Reduces funding for financial assistance within the Ag Cost Share program


Education

_ Teacher Pay:
Teacher pay alone comprises 32.4 percent of our total budget. Despite this large percentage, we were able to hold teacher pay steady in a very difficult year.

_ Enrollment Growth ($157 million):
Would fully fund enrollment growth as the community colleges deal with increasing enrollment and demand for worker training programs. According to the 2008-09 spring semester census, enrollment has increased by 15,259 full-time equivalents (or FTEs) above the 2008-09 budgeted enrollment of 201,625. This is a 7.6% increase and brings 2009-10 budgeted enrollment to 216,884.

_ UNC Need-Based Aid ($47 million):
Would increase the UNC Need-Based Student Financial Aid Program to accommodate growth in eligible students and hold current recipients harmless from increased costs. There is $116.4 million appropriated from the Escheats Fund for the program.

_ Resident Status for Nonresident Students ($28 million):
Would save $28 million by repealing the resident status granted in 2005 to nonresident students on full scholarships. Campuses will no longer be reimbursed for this tuition discount.

_ Dropout Prevention ($26 million):
Would continue a House initiative to provide small grants to community-based dropout prevention programs across the state. To date, about 140 programs have received grants through the program.

_ Increase Class Size (-$786 million)
Would decrease funding for the Classroom Teachers allotment consistent with increasing the student-to-teacher funding allotment ratio currently set by the State Board of Education for each grade by 2 in FY 2009-10 and by 3 in FY 2010-11

_ At-Risk Student Services (-$120 million):
Allotment would be reduced by about 31% in FY 2009-10 and 22% in FY 2010-11 from the continuation budget levels of $226.6 million in FY 2009-10 and $228.0 million in FY 2010-11.

_ Teacher Assistants (-$260 million):
Would eliminate funding for Teacher Assistants (TAs) serving students in Grade 3 at North Carolina public schools. Funds will be allotted on the basis of ADM in grades K-2. LEAs may continue to place TAs in grade 3 classrooms if they so choose.

_ Public School Transportation (-$60 million):
Would reduce funding for the allotment, which supports the salaries of transportation personnel as well as the maintenance of yellow buses, by approximately 15% in both years of the biennium

_ Literacy Coaches in Public Schools (-$24 million):
Would eliminate funding for all 200 Literacy Coaches

_ More at Four (-$20 million):
Would reduce General Fund support for More at Four by 11.6%. The Office of School Readiness shall use the average FY 2008-09 average reimbursement rate of $5,000 per slot in allocating funding. The FY 2009-10 continuation budget includes $86 million in General Fund and $84.6 million in Lottery support for this program. A related provision, includes More at Four amongst a list of programs to be examined for consolidation in one entity solely responsible for early childhood programs, beginning in FY 2010-11.

_ Community College Tuition Increase (-$61 million):
Would increase curriculum tuition by $8 per credit hour, from $42 to $50. Tuition for full-time students will increase by a maximum of $256 per year, from $1,344 to $1,600.

_ UNC System Tuition Increase (-$69.5 million):
Would increase annual tuition by the lesser of $200 or 8% at all UNC institutions in FY 2009-10. This tuition increase is applied to both resident and nonresident students at the undergraduate and graduate levels.

_ Resident Status for Nonresident Students in the UNC System (-$28 million):
Would repeal the resident status granted in 2005 to nonresident students on full scholarships. Campuses will no longer be reimbursed for this tuition discount.

_ Aid to UNC Hospitals (-$20 million):
Would reduce the $46 million annual appropriation to UNC Hospitals by $10 million


Health

_ Medicaid Swap With Counties ($519 million):
State continues with plan to take on Medicaid costs once paid by counties, freeing up money in those communities for other local needs, such as education. Under the plan, every county would be able to count on at least $500,000 in additional revenue.

_ Medicaid Growth ($408 million):
Adjusts budget to allow for Medicaid caseload growth.

_ Consolidate Case Management Services ($139 million):
Would save $324 million by consolidating case management services throughout the Medicaid program and using greater case management by Community Care of North Carolina.

_ Implement a Preferred Drug List ($90 million):
Would save $90 million by implementing a preferred drug list

_ Provider Rate Reductions (-$310 million)
Would reduce Medicaid provider rates by 5.5% in FY 2010 and 6% in FY 2011. Applies to all public and private providers except for federally qualified health centers, rural health centers, school-based and school linked health centers, State institutions, hospital outpatient, pharmacy, and the non-inflationary components of the case-mix reimbursement system for skilled nursing facilities.


Transportation

_ Secondary Road Improvement Funds Reprogrammed to Maintenance ($126 million):
All FY 2009-10 funding and half of the FY 2010-11 funding for the secondary roads improvement program from the Highway Fund is reprogrammed to statewide maintenance programs to prevent further deterioration of the state highway system due to reduced transportation revenues and maintenance expenditures.

_ Intrastate System (-$168 million):
Reduces funds for the Intrastate System to $359,883,973 for FY 2009-10 consistent with new revenue estimates and statutory formula

_ Urban Loops (-$68 million):
Reduces funds for the Urban Loops to $113,674,786 for FY 2009-10 ($34,597,070 NR) ($33,276,334 NR) consistent with new revenue estimates and statutory formula

_ Public Transportation Funds (-$42 million):
Funding to the New Starts program is reduced. The total budget for the Public Transportation Division is $74,647,962 in FY 2009-10 and $75,493,962 in FY 2010-11.

_ Small Construction Funds (-$28 million):
Funds for small construction are reduced to align overall expenditures for the Highway Fund with projected revenues for the 2009-11 biennium. The total budget for small construction is $7,000,000 in both years of the biennium.

_ Contingency Funds (-$6 million):
Funds for contingency construction are reduced to align overall expenditures for the Highway Fund with projected revenues for the 2009-11 biennium. The total budget for contingency construction is $12,000,000 in both years of the biennium.


Energy and Environment

_ Farmland Preservation Trust ($2 million):
Transfers $2 million from the cash balances remaining in various fund codes within the Department of Commerce that are being transferred to the General Fund.

_ Clean Water SRF ARRA Funding ($70.7 million):
Appropriates federal American Recovery and Reinvestment Act funds to the Division of Water Quality for the Clean Water State Revolving Loan Fund.

_ Drinking Water SRF ARRA Funding ($65.6 million):
Appropriates federal American Recovery and Reinvestment Act funds to the Division of Environmental Health for the Drinking Water State Revolving Loan Fund.

_ Leaking Underground Storage Tanks ARRA Funding ($7.5 million):
Appropriates federal American Recovery and Reinvestment Act funds to the Division of Waste Management for the Commercial Leaking Underground Storage Tank program.

_ Oyster Reef Program (-$2 million):
Reduces funding for the Oyster Reef program by 50%, leaving $1,000,000 to continue the program.

_ Financial Assistance Funding (-$2 million):
Reduces funding for financial assistance within the Ag Cost Share program.

_ Neuse River Rapid Response Team (-$203,000)
Reduces funding for the Neuse River Rapid Response Team and eliminates two positions.


Justice and Public Safety

_ Close Eight Prisons (-$32.7 million)
We propose closing eight prisons in the 2009-10 fiscal year:

_ McCain Correctional Hospital will close on April 1, 2010. To maintain services associated with McCain, Hoke (April 1) and Odom (February 1) Correctional Institutions will be converted from medium custody to minimum, eliminating 155 positions. Additionally, Nash (October 1) and Pamlico (March 1) Correctional Institutions, both medium custody, will be double-celled with 99 additional positions.

_ Umstead Correctional Center will close Oct. 1 and Guilford Correctional Center will close Nov. 1, with a position reduction of 95. Lincoln Correctional will be converted to minimum custody on Sept. 1, and Warren Correctional will be double-celled for medium custody inmates on Nov. 1. Lincoln will lose 28 positions and Warren will gain 18.

_ The Wilmington Residential Facility for Women will close Sept. 1. The reduction for Wilmington is reduced by $168,740 in the first year of the biennium to allow for 10 additional contractual beds at the Center for Community Transitions in Charlotte.

_ Gates and Union Correctional Centers will close Oct. 1 and Haywood Correctional Center will close on March 1 with a total position reduction of 112.

_ Cleveland Correctional Center will close Dec. 1 with a reduction in positions of 50. Craven Correctional Institution will be double-celled effective Dec. 1 with a position increase of 7.


Notes
House Speaker Joe Hackney and Senate President Pro Tem Marc Basnight reaffirmed their support for the military this week by meeting with members of the National Guard and Reserve. The chamber leaders then each signed a resolution agreeing to work with reservists and Guard members who are deployed. Several staff members of the General Assembly and two representatives are active reservists.
Please remember that you can listen to each day’s session, committee meetings and press conferences on the General Assembly’s website at www.ncleg.net. Once on the site, select "audio," and then make your selection – House Chamber, Senate Chamber, Appropriations Committee Room or Press Conference Room.