House budget amended on floor to increase county Medicaid relief to $100 million

• Individual county Medicaid relief in House budget (PDF)

With many of our House members citing county Medicaid relief as the most pressing issue facing the General Assembly, the first substantive floor amendment to the House’s budget proposal, H1473, was to increase county Medicaid relief from $60 million to $100 million. Offered up by NCACC Past President Bill Owens, lauded by Democrats and Republicans alike, the amendment was adopted unanimously by the full body. $50 million would be shared by all counties based on their proportion of actual 2006-07 Medicaid expenses to the statewide county total. $40 million would be shared by those counties whose Medicaid eligible populations are 25 percent or greater of their total population, and $10 million would be targeted to those counties with Medicaid eligibles between 20 and 25 percent. Each county’s Medicaid relief would be provided in 12 equal payments credited monthly against the county’s 2007-08 Medicaid costs (Sec. 6.16).

The House rejects Gov. Easley’s budget proposal to restructure lottery proceed allocations, which would decrease the percentage of revenues set aside for county school construction. However, a special provision (Sec. 5.2) that appropriates the lottery proceeds for next year would authorize the state’s budget director to decide which of the four permissible categories would receive any revenues in excess of the appropriation. The House budget appropriates $350 million of the anticipated lottery proceeds to education, with $140 million set aside for school construction. This is lower than the appropriated amounts of $425 million and $170 million for 2006-07, reflecting more realistic sales estimates.

The House also rejects the governor’s budget recommendation to levy a statewide $2 per ton landfill tipping fee to support assessment and remediation of abandoned landfills and hazardous waste sites. This would be in addition to any fee levied by counties to support landfill operation and availability.

The $20.3 billion general fund budget would increase state spending by 7.4 percent or $1.4 billion, including capital expenditures. The April surprise – personal income tax collections – is helping fuel this increase. Anticipated over-collections in revenues this year exceed $1.1 billion.

The House extends for two more years the quarter-cent sales tax and the 8 percent upper income personal tax bracket set to expire July 1, providing $300 million in additional revenue. In lieu of the governor’s plan to eliminate or lower state income taxes for individuals and families making $25,000 or less, the House’s budget provides for an earned income tax credit program at 5 percent of the federal EITC. The House also renews the long-term insurance tax credit, implements an adoption tax credit, and provides targeted economic development tax relief for software publishers, research and development, renewable fuel facilities, and aircraft parts manufacturers. Capacity is set aside to implement manufacturers’ and farmers’ energy tax relief, military reserves tax relief, and a tax credit for employing former prisoners.

The House concurs with the governor’s recommendations on school and community college faculty salary adjustments. Teachers would receive salary increases averaging 5 percent, with a step increase plus a flat $1,240, to bring their salaries above the national average by 2008-09. New teachers paid at step 0 would receive a $250 signing bonus at the year’s end. Community college faculty and professional staff would also receive 5 percent. School administrators would receive an average 4.44 percent increase. Employer contribution rates for retirement and other benefits are set at 7.96 percent, while annual contributions for health coverage are $4,284 for indemnity and $4,097 for ppo.

A last-minute increase for state employees and university faculty would raise their salaries by 4.25 percent. State retirees would receive a 2 percent COLA, requiring a $27.2 million appropriation, while local retirees would see a 2.2 percent increase. State employer contributions for employee and retiree health costs would cost $313 million over the biennium, in spite of hefty co-payments and deductible increases, with the state facing a 14.9 percent increase in health premium costs for the indemnity plan. All told, salary and benefits costs consume more than one-half of the overall budget increase, or $782 million.

In lieu of the governor’s proposal for a $1.4 billion bond referendum, the House relies on certificates of participation to fund capital projects at $449 million, in excess of the State Treasurer’s debt capacity at $384 million for each of the next 10 years. No funding is provided for water and sewer grants – most of the COPS are for prisons and university facilities.

The following highlights those budget items of interest to counties.

Education

The House, like the governor, directs much of the new funding to education initiatives and increased enrollment in public schools, community colleges and universities. The UNC system faces some reductions to implement the President’s efficiencies and middle management cuts.

Greater public school allotment funding is provided for academically gifted and talented, children with disabilities, instructional supplies, and small LEAs. The House scales back the governor’s plans for Learn and Earn expansion by limiting the $4,000 college tuition grant to eligible students to two years; the governor recommended four years. Funding for the scholarship program, $25 million in 2007-08 and $50 million in 2008-09, comes from the Escheats Fund. Sec. 7.16 in the special provisions sets forth six objectives by which the state board of education is to evaluate charter schools. Sec. 7.31 creates the Joint Legislative Study Committee on Public School Funding Formulas.

*nr = non-recurring

Community college special provisions suspend approval of new multi-campus centers (Sec. 8.6) and limit facility and equipment grants to $1 million with a 1 to 1 matching requirement (Sec. 8.10)

Human Services

The House concurs with the governor’s budget to create a new healthcare plan for the working poor by expanding Medicaid to cover 11,800 children whose family incomes are between 200 percent and 300 percent of federal poverty standards – a special provision exempts counties from participating in the funding of this new program. N.C. Kids’ Care would provide a limited benefit medical assistance program, upon federal approval of Medicaid waivers (Sec. 10.48 outlines program and benefits). Mental health dollars are realigned in keeping with the new cost model. Reductions in the Dix and Umstead hospitals budgets are offset by the opening of the Central Regional Hospital in late Fall 2007.

The House sets aside millions for preventive health care, screening and monitoring – many of these programs provide additional funding to county health departments.

Special provisions call for an inventory of state and local health department activities that address health promotion and disease prevention with an eye to combining these functions into a single funding stream allocation to local health departments (Sec. 10.25). Sec. 10.45 directs the department to study a means-tested cost-sharing requirement for CAP – MR/DD.

Mental health programs and LME administration are covered in numerous special provisions – each looking to build community infrastructure (Sec. 10.49). Sec. 10.49 (d) allows a LME to use up to 1 percent of its substance abuse treatment funds to provide nominal incentives for consumers who achieve treatment benchmarks, while (f) requires LMEs to work with county health departments and sheriffs to provide medical assessments and medication for inmates housed in county jails who are suicidal, hallucinating, or delusional or who are in need of crisis services (p). A designated LME employee is to be responsible for screening the daily jail log (f). Sec. 10.49 (i) requires DHHS to develop a transitional residential treatment service to provide 24-hour residential treatment and rehabilitation. Sec. 10.49 (l) charges LMEs to handle case management for special assistance in-home recipients who have a MH/DD/SAS problem.

When evaluating options for involuntary commitment, LMEs must include at least one option in addition to admission to a state facility (d) and report monthly on remaining gaps in crisis services and reductions in acute admissions to state psychiatric hospitals (o). DHHS must develop a reporting system to provide LMEs information on all visits to community hospital emergency departments by crisis individuals (r). Sec. 10.49 (s) requires the department to set up a pilot program to test whether holding a LME clinically and financially responsible for psychiatric hospital use, coupled with greater resources to build community capacity, will reduce hospital use.

The Mental Health Trust Fund is limited to increasing community-based services and can only be allocated to area programs (w). Finding that counties budget nearly $121 million to LMEs, LMEs must report annually to the Division on all county fund expenditures and collect income data for all individuals receiving services (ff). Sec. 10.49 (y-aa) requires DHHS to designate four additional LMEs to receive all state allocations through a single funding stream.

DHHS must also rework the revised system of allocating state and federal funds to area authorities to better reflect projected needs rather than historical allocation practices and spending patterns (Sec. 10.51 (b)).

Justice and Public Safety

The House concurs with most of the governor’s recommendations to increase court personnel but eliminates almost all implementation funding for the VIPER statewide 800 MHz radio system.

A justice and public safety special provision calls for a study of available prosecutorial resources and the use of those resources, including caseload management, adequacy of space and equipment, geographical equity, criminal prosecution, automation, cost management practices and how current use impacts access to justice, accountability, timely resolution, complexity, and reduction in backlogs (Sec. 14.15).

Natural and Economic Resources

The House redirects some Tobacco Trust monies to fund the Agricultural Development and Farmland Preservation Trust Fund to preserve the state’s farmland and to protect natural resources, wildlife habitat and water resources. The House rejects the governor’s budget proposal to establish an assessment and remedial action program for 700 uncontrolled unlined landfills – known as orphan landfills – and 69 uncontrolled inactive hazardous waste sites, funded by a state $2 per ton landfill tipping fee. The House’s proposal, like the governor’s, contains level funding for the Clean Water Management Trust Fund at $100 million.

The House extends and establishes some economic development activities such as film industry recruitment, viticulture promotion, home furnishing marketing, and the NC Green Business. The One NC Fund – for economic development incentives – would receive $13 million, and $4.8 million is recommended for matching federal program funds for small business development. The Rural Center would receive an additional $19 million to establish and implement the rural economic transition program, a grants program to “carry out transformative economic development and agricultural enhancement projects ... with priority to applicants in tier one areas” (Sec. 13.14).

The House budget allocates an additional $200,000 or $425,000 from each disposal tax program – scrap tire and white goods – to the Department of Revenue for administrative expenses (Secs. 24.1 and 24.2). The “Grassroots Arts Program” distributes 20 percent of the total equally among counties, with the remaining 80 percent allocated based on county population (Sec. 21.1). Section 22.1 directs the NC Housing Finance Agency to continue its development of a pilot “Home Protection” program, directed at residents in counties with greater than 7 percent unemployment. Once a homeowner qualifies under the program, the mortgage holder cannot begin foreclosure or other legal action. Section 6.17 requires OSBM to eliminate all state government positions vacant for more than six months. These freed-up funds were used to increase the state employee salary increase and provided additional county Medicaid relief. Section 27.12 phases out general fund transfers from the Highway Fund and the Highway Trust Fund, 2009 – 2013.

The Senate begins its review of the House’s proposal the week of May 14. Earlier Senate comments suggest a preference to sunset the temporary taxes as currently authorized.