Publisher's note: This post, by Brian Balfour, was originally published in the Budget & Taxes section(s) of Civitas's online edition.
McCrory Focuses on Teacher Pay, Avoids Tax Increases in Budget Adjustments
North Carolina Gov. Pat McCrory yesterday unveiled his recommended budget adjustments for the 2014-15 fiscal year. The governor's plan would make changes to the second year of the two-year state budget plan passed last year.
McCrory's adjustments would result in a reduction of roughly $8.5 million to the state's General Fund spending for FY 2014-15 compared to the total expenditures approved last year. The spending total of $20.99 billion is 1.7 percent (about $360 million) more than the amount budgeted for the current fiscal year.
It is important to note, however, that the General Fund is just one component of total state expenditures. Other appropriations that make up the total state budget include transportation, the spending of federal receipts and other miscellaneous expenditures. Total state spending for FY 2014-15 comes to $51.3 billion.
The most noteworthy budget change McCrory proposes is funding for the governor's plan to increase teacher pay as well as provide a raise to all state employees. On average, state employees would expect a 2 percent salary increase under McCrory's plan, with many non-teachers receiving a $1,000 increase in salary and benefits.
Below is an outline of the most significant budget adjustments in the governor's proposal:
- Increase in total K-12 Spending: McCrory's plan adds another $46 million to K-12 Education spending compared to the appropriation approved last year, and would increase public education spending by $227 million over the current year's allotment.
- Raise teacher pay: Base pay for teachers with up to seven years' experience would be increased from $30,800 to $33,000 annually in the coming year. This refers to state-paid salary and excludes local supplements. For teachers with more than seven years of experience, the budget includes pay increases ranging from 2 to 4.3 percent. This measure is projected to cost $102 million next year. Other school personnel such as principals and administrators will also receive pay raises in the governor's plan. Most personnel would receive a $1,000 increase. The cost for this is estimated at $59 million.
- Career Pathways for Teachers: This budget plan includes a framework for McCrory's "Career Pathways for Teachers" initiative. The initiative includes supplemental pay for teachers teaching high-demand subjects, earning a master's degree in the subject in which they teach, and taking leadership roles in their school. The cost next year of this initiative is estimated at $28 million, with $18.7 million of that devoted to the master's degree salary supplement.
- No Additional Teacher Assistants: School districts receive the same amount of funding for K-3 teacher assistants as they did last year, not allowing for any growth in assistants. According to McCrory, "I believe that giving our current teachers and public school employees a pay increase is a higher priority than hiring additional assistants at this time."
- Management Flexibility Reduction: A 2 percent reduction relative to the UNC system appropriation approved last year is included in McCrory's budget. This amounts to $44 million, and the governor's budget suggests the savings be found through greater efficiencies and reduction of little-used or redundant programs.
- Reduction to centers and institutes: McCrory stated that he has "asked the Board of Governors to reduce spending on centers and institutes that are not essential for the awarding of degrees and the educational mission of the University." The budget recommends a reduction of $13 million in funding to these non-essential centers, a 20 percent reduction.
- Scholarships for Returning Vets: $5 million of state lottery funds is set aside to establish a scholarship fund for out-of-state vets nearing the end of their service and planning to live in NC.
- Closing the "skills gap": $16.8 million in additional funding to the Community College System is directed for higher cost courses and training workers in "high demand fields such as health sciences, engineering, construction, manufacturing, transportation, chemical and biotechnology".
- In-state tuition for vets: In-state tuition will be offered to military veterans hailing from out-of-state.
Natural and Economic Resources
- Energy Exploration and Production: McCrory's budget increases funding for the Oil and Gas Regulatory and Mining and Energy Commission by 35 percent. Presumably, this additional funding has the intent to expedite the rulemaking and approval process for hydraulic fracturing, also known as fracking.
- Coal Ash Clean Up:Funds for an additional 19 positions is provided in this proposal. The new positions would focus on inspection and enforcement of environmental regulations – largely in response to the Duke Energy coal ash spill. McCrory has also drafted a proposal to convert or close coal ash ponds in the state, a proposal that has been introduced as Senate Bill 729 to the legislature.
Health and Human Services
- Medicaid Funding: Proposes a $50 million Medicaid Risk Reserve fund to set aside money in the event Medicaid expenditures once again exceed projections.
- State Savings: McCrory claims to have "aggressively identified $40 million in federal funds and other receipts to finance existing health and human services." Those funds combined with asking hospitals to contribute more to the current assessment program would replace nearly $75 million in state funding for Medicaid, according to the governor's budget document.
- Medicaid Reform: The governor's budget plan would allocate $1 million to begin the implementation of his Medicaid reform initiative. The reform proposal will be submitted in separate legislation and is expected to be focused on the Accountable Care Organization (ACO) model McCrory has publicly supported in recent months.Critics have claimed the ACO model introduces unintended consequences and would not generate any noticeable savings.
- Increase Funding for Pre-K: North Carolina's "NC Pre-K" (formerly More at Four) program would receive an additional $3.6 million.
Division of Motor Vehicles
- Customer Service Upgrades: Proposal includes funding for "substantial technology upgrades" at DMV offices, including self-service kiosks, tablet computers and additional call centers.
- $100 Million to Reserves: The governor's budget would add $50 million each to the Repair & Renovations fund and Savings Reserve Account. These funds are in addition to the $50 million set aside in the Medicaid Risk Reserve mentioned above. Another $100 million is set aside as unappropriated to provide for unknown needs that may arise.