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No Medicaid relief in Easley’s $18.9B budget proposal Governor's proposal keeps intact County Public School Building Capital Funds (ADM Fund) Flush with a $2 billion budget surplus, Gov. Mike Easley presented his recommended adjustments to the 2006-07 state certified budget May 9 to the General Assembly for its consideration. A quarter-cent sales tax decrease, new funding initiatives for the courts and at-risk families, increased education funding, and numerous capital projects are included in the governor’s $18.9 billion budget - $1.6 billion, or nearly 10 percent, above that adopted for 2006. Despite over-collections in revenues this year exceeding $1 billion and unanticipated revenue growth next year of $700 million, Governor Easley did not offer up any plans for county Medicaid relief. Instead, the $65 million in unanticipated savings in state Medicaid costs that was targeted by the House Select Committee on Health Care for county Medicaid relief was diverted to other gubernatorial initiatives. The state’s revenue growth for 2005-06 is projected to come in at 12 percent versus the 5.3 percent as budgeted. Revenue growth was fueled by economy-based sources such as a 12 percent increase in individual income taxes, an 11 percent increase in sales taxes, and 26 percent growth in corporate tax receipts. A consensus projection for 2006-07 agreed to by the governor’s office and the General Assembly’s Fiscal Research Division calls for a slowing of overall baseline growth from the budgeted 5.2 percent to 3.2 percent, with sales tax collections declining to 4.1 percent growth. As noted above, Easley calls for a quarter cent state sales tax decrease effective Oct. 1, 2006. The state’s most recent half-cent sales tax is set to expire June 30, 2007. The governor also recommends reducing the Highway Trust Fund transfer to the general fund by $195 million, thereby increasing funding available for road construction. Easley’s budget caps the gas tax at January 2006 levels, replacing the lost $23.5 million in highway monies with a general fund appropriation. By statute, the state’s Rainy Day Fund receives 25 percent of the credit balance or $324 million, while the governor sets aside $200 million for the state’s renovations and repairs. Much talk has centered on the use of lottery proceeds targeted for class size reductions and pre-K at-risk children. The governor “reprograms” the $212 million in state proceeds from the state lottery to pay for teacher salary increases, full funding for Low Wealth, and high school improvements. Additional monies are made available for his “More at Four” program for at-risk children. The governor’s budget increases the estimate for lottery proceeds for school construction from $161.5 million to $170 million and requests that these monies be officially appropriated to the ADM Fund. We are grateful that Governor Easley held to his promise and left intact corporate tax receipts flowing to the ADM Fund. Teachers would receive salary increases averaging eight percent, with a step increase plus a flat $2,250, to bring their salaries above the national average by 2008-09. School administrators would receive a seven percent increase. All state funded non-certified school employees would be paid at least $20,112, comparable to the minimum salary set in 2005-06 for other state employees. State employees and university faculty would get four percent, with an additional four percent going to full-time community college faculty and professional staff. In all, state salary enhancements would consume more than $600 million in general fund dollars. State retirees would receive a 3.7 percent COLA, requiring a $48 million appropriation. Of special interest to counties, Gov. Easley proposes additional funding for schools, for mental health, for courts, for private well testing, and sets aside $50 million for emergency disasters. These and other budget requests are outlined below. Education Much of the governor’s new funding is directed at his prior education initiatives and increased enrollment in public schools, community colleges and universities. The state expects more than 38,000 new K-12 students next year, nearly doubling its original estimate for growth. Easley revisits his earlier recommendation for full funding of the low-wealth formula and provides additional funding for disadvantaged students to be distributed in all school districts. The governor also continues his emphasis on high school performance by expanding the Gates Foundation’s Learn and Earn program, his virtual high school initiative and his high school within a high school program. No funding is provided to restore the $44.3 million in the LEA negative reserve or the authority of LEAs to seek sales tax refunds. Restoring the negative reserve was the top priority of the State Board of Education. A special provision would move “More at Four” from the Department of Health and Human Services to the Department of Public Instruction.
Human Services The governor’s budget lowers the state’s 2006-07 Medicaid costs by $150 million based on higher federal payments, greater federal drug costs coverage, and lower overall expenses from the General Assembly’s cost containment efforts. Since the $150 million was already a part of the base budget for 2006-07, these freed-up monies are being used to support other expansion items found elsewhere in the budget, despite the House Select Committee on Health Care’s recommendation for $65 million of state Medicaid savings to be targeted for county Medicaid relief. While the Legislative Oversight Committee for Mental Health proposed additional funding of $156 million to get mental health reform back on track, the governor recommends $60 million, including $15 million for the Mental Health Trust Fund, $16 million to expand community capacity, and $5 million to expand substance abuse treatment at ADATCs. New state dollars would support the 5,500 developmentally disabled clients who were threatened with the loss of Medicaid services. The governor’s “Healthy Families” initiative adds millions more for child care subsidies, foster care, early intervention, and universal vaccines. Counties will be asked to enforce statewide private water supply well construction standards, and funding is recommended for state technical assistance and water testing.
Justice and Public Safety The governor’s “Secure Communities” initiative funnels tens of millions for additional judicial staff, assistant attorneys, and deputy clerks of courts to handle case backlogs. Counties are required to find and fund office space for these additional state workers. Millions more will support new and expanded technologies such as the upgraded Statewide Fingerprint Identification System (SAFIS), $10 million for the voice interoperability project (VIPER), and new courtroom and criminal history information systems.
Natural and Economic Resources The governor proposes a private well water safety program by having counties enforce statewide private water supply well construction standards. No funding changes are requested in the state’s clean water management trust fund with a continuation of $100 million in the second year of the biennium. The One NC Fund — for economic development incentives — would receive $10 million annually, and $5 million is recommended for matching federal program funds for small business development. Other economic development incentives are provided for in proposed sales tax reductions and refunds for research and development and motor sports. Local governments will help fund these incentives through loss of sales tax receipts.
The governor recommends spending $764 million in capital improvements, partially offset by federal monies and other receipts. Higher priced projects add to the state’s debt service through the issuance of certificates of participation.
The Senate drafts the first legislative response to the governor’s proposal. Rumor has it that the Senate plans to conclude its budget work before the Memorial Day holiday. We applaud them in their diligence and again, and ad nauseum, plead for county Medicaid relief. |