The 2009 General Assembly finally reached agreement on a budget in this year of economic crisis. Final approval came last Wednesday, and the Governor signed it two days later. Legislators wrapped up a few loose ends and adjourned yesterday.

The Budget

First, the big picture:

· The total “adjusted continuation” budget for fiscal year 2009-10 would have been $22 billion. (The adjusted continuation budget is what it would have taken to continue all spending from the previous year’s adopted budget, plus adjusting it for additional spending mandated by law. This includes things such as providing for increased enrollment in public schools and increased numbers of people qualifying for Medicaid.)

· Total estimated revenues from the existing tax structure and other existing sources of funding (fees, etc.) would have been $17.6 billion. You can run the math on that—it would have been a deficit of $4.6 billion.

· The budget adopted last week has $19 billion in General Fund spending. As noted below, this includes almost $1 billion in new tax revenues.

· This total General Fund figure does NOT include federal stimulus money coming to the state, about $1.4 billion for fiscal year 2009-10. While this money helps the state avoid the most serious of cuts, especially in education and health and human services, much of it is being spent on continuing expenses, and the federal stimulus money is available for only two years. When it ends, there will be large holes in the budget.

· The budget eliminates almost 2,200 state jobs, including 700 that are currently filled. These numbers are just for those employed directly by the state and do NOT include other jobs that will be lost as budget cuts filter down (e.g., teachers who are let go as local school systems absorb state cuts, people hired by Local Management Entities—LMEs—to provide services to those with mental illness, etc.).

On the revenue side, the budget includes the following new tax money:

· 1¢ per dollar increase in the sales tax. This one increase accounts for 80% of the new revenue, and the sales tax is one of the most regressive the state has.

· 3% surcharge on corporate income taxes.

· 2% surcharge on individual income taxes for those with more than $100,000 in income (for married filing jointly, and comparable numbers for other tax filing categories) and a 3% surcharge on those with incomes over $250,000. Keep in mind that these are not new brackets. If your tax bill for the year would have been $5,000 and your total income was between $100,000 and $250,000, you would simply owe an additional $100 (2% of $5,000) for the surcharge.

· 10¢ per pack increase in the cigarette tax. Tax on other tobacco products goes up by 2.8% of the price.

· Alcohol tax increases of 8.5¢ per gallon on beer (about 5¢ per six-pack), 5.3¢ per liter on wine (about 4¢ per bottle), and 5% of the price on liquor.

· The only changes to the items subject to sales tax are the addition of on-line “click-through” transactions and the electronic sale of digital property (audio, video, magazines and books, etc.) which would be subject to sales tax if sold in a store.

On the spending side is where it gets nasty. Almost all numbers mentioned below are cuts. The few cases of increases will be specifically noted. These are cuts to the adjusted continuation budget, and this is only a partial list.

Education – total spending of $11.1 billion, or 58% of the state’s budget

Public Schools (K-12)

· $74 million reduction of the continuation budget. This is partially offset by $27 million in mandatory increases because of increased enrollment.

· $380 million from noninstructional support personnel. This will be offset by federal stimulus money.

· $5 million from More at Four.

· $225 million from local school districts, which are prohibited from increasing class size in grades K-3 and encouraged not to increase class size for higher grade levels.

· $13.5 million to eliminate funding for all 200 literacy coaches and their training.

· $2 million from teacher mentoring, which is intended to help retain new teachers.

· $2 million from Limited English Proficiency.

· $160,750 from Communities in Schools.

· An increase of $13 million for dropout prevention grants, given to schools and nonprofits in amounts no greater than $175,000 each.

· No pay raises or ABC bonuses this year.

Community Colleges

· Almost $68 million in reduction of the continuation budget, mostly offset by $58 million to fund enrollment growth.

· $14 million from State Aid. Each community college has discretion in how to absorb this cut, except that it cannot impact retraining of displaced workers.

· Tuition will go up, making students pay an additional $30 million and saving the state that amount.

UNC System

· $172 million to roll back the continuation budget, partially offset by $44 million for enrollment growth.

· An additional $137 million that will be offset completely by federal recovery money.

· Almost $73 million in cuts, with each university determining where to make those cuts. (This can be seen either as letting university leaders, who are closer to day-to-day operations, make these decisions, or as the General Assembly passing the buck on making these hard cuts.)

· Reducing the Legislative Tuition Grant (for NC students attending private colleges in NC) from $1,950 to $1,850 per student, saving the state $3 million.

Health and Human Services – total spending of $3.9 billion, or 20% of the state’s budget

Child Development

· $15 million from child care subsidies, mostly offset for 2009-10 by $12.5 million from federal funds.

· $16 million from Smart Start

Mental Health, Developmental Disabilities, and Substance Abuse Services

· More than $74 million to roll back the continuation budget to 2008-09 budget levels.

· Almost $13 million to eliminate 350 positions in MHDDSAS.

· $3 million from the administrative budget of Local Management Entities (which operate local MHDDSAS programs).

· $16 million from funding for CAP/MR-DD services.

· $6 million from Broughton and Cherry hospitals.

· $40 million from money used by LMEs for services to clients. The LMEs will get to (or have to, depending on your perspective) decide where to make these cuts, but they will certainly mean a reduction in community-based services and in the employment for those providing services.

· Increase of $12 million for crisis services in community hospitals.

Public Health

· $8.6 million to return to 2008-09 levels.

· $2.4 million to eliminate 45 positions in the Division of Public Health.

· $3 million from the AIDS Drug Assistance Program. The budget says this will be made up from the “drug reserve” inventory.

· $2.7 million from the Early Intervention program for infants and toddlers, to be offset by federal recovery funds.

· $500,000 to eliminate funding from the budget for the Tobacco Quit Line. Funding will continue from the Health and Wellness Trust Fund.

· $500,000 from childhood immunizations, with the money to be offset for one year by federal recovery funds.

· $4 million from child and adult immunizations, with the state to seek payments from insurers and clients.

· Increases of

o $247,000 to improve birth outcomes and reduce infant mortality

o $480,000 to prevent neural tube birth defects

o $650,000 for adolescent pregnancy prevention, teen parenting, and school dropout prevention.

o $1 million for an additional 20 school nurses.

o $450,000 for stroke prevention

o $150,000 for pre-K vision screenings

Health Choice

· Added co-payments for emergency room visits for non-emergencies, costing families $217,000.

· Added co-payments for prescription drugs, costing families $450,000.

· Increase of $17 million to add coverage of 9,100 children.

Social Services

· $7 million from Work First cash assistance.

· $5.5 million from state funding for counties to administer public assistance programs.

· Increase of $1 million for food banks.

Medicaid

· $507 million to reduce continuation budget to 2008-09 levels, partially offset by $155 million to cover the increasing number of people qualifying for Medicaid because of the recession.

· $837 million in reduced Medicaid payments, to be offset by federal recovery funds.

· Increase of $252 million to complete the phase-out of the county share of Medicaid (i.e., counties will no longer be putting anything into Medicaid payments)

· $76.4 million in reductions to Medicaid provider rates. While the direct impact of these cuts will be to reduce the amount of money paid to doctors and other providers, the indirect impact is likely to be a reduction in the number of providers who will see Medicaid patients.

· $40 million from personal care services

· $25 million from prescription drug costs. The intent is to save this money by increased use of generic drugs and other similar cost savings.

· $65 million from community support services.

· $16 million from group homes for high-risk children.

· $10 million to reduce reimbursement rates for prescription drugs.

· Increasing the co-payments for Medicaid services by $2, saving the state $3 million, but costing clients that same amount.

· $111 million from case management and savings from case management.

· $6.6 million for a freeze in CAP slots.

· $1.5 million to eliminate therapeutic residential camps for teens with behavioral and substance abuse problems.

· $20 million savings from increased payments by third parties and other cost-containment activities.

Other HHS

· Increase of $5 million for grants to community health centers assisting low-income and uninsured people.

· Authorizes spending $132 million of federal recovery funds for weatherization assistance to low-income people.

Adult and Juvenile Justice

· $8 million to eliminate 187 staff positions in the Department of Correction.

· $10 million to eliminate payments to county jails for housing certain misdemeanants.

· $314,000 from four programs helping women convicted of crimes and their families.

· $8.4 million to close seven prisons. This will also mean the loss of 516 jobs.

· $25,000 from funding for the Center for Death Penalty Litigation.

· $62,000 from funding for Prisoner Legal Services

· $602,000 to eliminate six attorney positions in indigent defense.

· $395,000 from Sentencing Services. Funding beyond 2009-10 is contingent on a review of the program’s work.

· $7.8 million to lower the continuation budget for Juvenile Justice back to 2008-09 levels.

· $481,000 to eliminate state funding for the Center for the Prevention of School Violence, which the General Assembly now says is “not part of the core mission” of Juvenile Justice and Delinquency Prevention.

· $6.6 million to eliminate funding for the Support Our Students program. The budget bill says that there are other sources of funding for after-school programs.

Other Parts of the Budget

· No pay raises for most state employees.

· $170,000 from the Domestic Violence Center Fund. But the fee for marriage licenses will go from $50 to $60, with the additional $10 going to the Domestic Violence Center Fund.

· $50 million from the Clean Water Management Trust Fund.

· $31,000 from Land Loss Prevention

· $112,000 from the Institute of Minority Economic Development

· $44,000 from the state Association of Community Development Corporations

· $140,000 from the Minority Support Center

· $152,000 from the Rural Economic Development Center.

· Delay until July 2011 the implementation of the requirement that the state’s motor vehicle fleet reduce its petroleum use by 20%.

· The House and Senate Finances Committees can meet between sessions to consider reform to the state’s tax structure.

To get the full picture on the new budget, you can see the budget documents. S 202, which contains information about how the dollars will be spent, is found at http://www.ncleg.net/Sessions/2009/Bills/Senate/PDF/S202v8.pdf. The Joint Conference Committee Report contains the numbers—the dollar amount of cuts and increases. It’s at http://www.ncleg.net/sessions/2009/budget/2009/JointConferenceCommitteeReport_SB202_2009_08_03.pdf.

Action taken on other bills being covered in Raleigh Report during the closing weeks of the session include the following:

Bills signed by the Governor:

· S 208, People First.

· S 461, North Carolina Racial Justice Act.

· S 835, Extend Climate Change Commission.

· S 870, Make General Statutes Gender Neutral.

· H 23, Strengthen Child Labor Violation.

· H 115, Joint DV Committee/Recommendations.

Bills which await the Governor’s signature:

· S 464, Prevent Racial Profiling.

· S 810, Affordable Housing/No Discrimination.

· S 1067, Sustainable Local Food Policy Council/Goal. Its membership was increased, with a requirement that two members be organic producers, two be sustainable, and two conventional.

· H 473, Magistrate Can Carry Gun in Courthouse.

· H 512, Incentives for Energy Conservation. As adopted, H 512 would expand the existing tax credit for renewable energy property to include geothermal equipment for heating, cooling, and hot water. There would be an $8,400 ceiling for this geothermal credit on residential property.

· H 908, Election Administration Amendments. This bill, not covered earlier in RR, was amended to require a study of S 417, the National Popular Vote Interstate Compact. It also includes a system to ”pre-register” sixteen-year-olds to vote. It would also require a study of appointing judges instead of electing them.

· H 1387, Solar Collectors on Residential Properties. It was amended to exempt certain multi-story condominium buildings.

Over-wintering bills and other action:

· S 20, Voter-Owned Election for Treasurer, has been passed by the Senate and will over-winter in the House Election Law Committee. It was amended by the Senate to include multiple changes in how the state’s voter-owned elections operate. Perhaps most important of these changes is putting into place a permanent funding stream for the election of Treasurer, Insurance Commissioner, Auditor, and Superintendent of Public Instruction. Funding would come from a $5 surcharge on insurance agents and a 0.8% assessment on business done with the Treasurer, mostly pension fund managers.

· S 140, Amend Domestic Criminal Trespass, was re-referred to House Judiciary I.

· S 836, Recycle Products Containing Mercury. The House took an unrelated Senate bill, gutted it, and added in the contents of H 1287, as the House had passed it and sent it to the Senate. (See RR, April 30.) In this new version, S 836 was sent to the House Environment Comm, where it will stay until next year’s session.

· S 884 has had an interesting month. Originally unrelated to smoking, it was gutted and became a bill to exempt hookah bars from the recently enacted ban on smoking in restaurants and bars (H 2). “Hookah bars,” for those of you of a certain generation—i.e., this editor’s generation, are found mostly near college campuses. A hookah is a water pipe, and students gather to share the smoking of a flavored tobacco. Opponents of the exemption argued that it could open a big loophole in the smoking ban if a restaurant could have one hookah pipe and claim the exemption, and that hookah smoking raises health issues not only because of the tobacco but also the sharing of the pipe. When the exemption was amended to ban those under 21 (to make it like the exemption for cigar bars including in H 2), hookah bar owners dropped their support for an exemption. The bill was eventually gutted again, changed to something else unrelated to hookahs, and passed.

· S 1068, Permitting of Wind Energy Facilities, has been passed by the Senate and is now in the House Energy Comm. A provision regarding wind energy permits for the non-coastal parts of the state, which had been deleted by one Senate committee, was restored by another Senate committee and is in the version sent to the House.

· H 137, Capital Procedure/Severe Mental Disability, has been re-referred to House Judiciary I. It contains an appropriation to be used to inform and train superior court judges regarding the act’s provisions.

· H 589, Insurance and State Health Plan Cover Autism. This bill, which originally required insurance to cover hearing aids, was amended in the Senate to add a requirement that the state employees health plan provide coverage for the diagnosis and treatment of autism spectrum disorders, with no limit on the number of visits a person can make to a provider, but with an annual limit of $75,000 for behavioral therapy. The bill went to a conference committee, which lowered that annual limit to $25,000 and added an annual limit for total coverage. The House delayed final action on the conference report until 2010.

· H 905, Study Renewable Energy Credits, was referred to House Rules and is included in the studies authorized for the interim.

· H 1140, Education Assistance for Minimum Wage Workers, has been passed by the House and is in the Senate Education Comm.

· H 1289, Lottery-No Check Cashing Sites/High School Ads, was defeated on second reading in the Senate by a vote of 20-23. It had been amended to prohibit any lottery advertising at high school sports events. So, just to be clear on this, the Senate decision was that it is OK for check-cashing establishments (where cashing checks is the primary business, places used mostly by people who do not have checking accounts at banks) to also sell lottery tickets and that it is also OK for lottery ads to appear at high school events.

· H 1440, NC Renewable Energy Market Creation, was turned into a study bill, to study “feed-in rates,” payments to be made by electric utilities to those who generate renewable energy and put it on the grid. It is included in the studies authorized for the interim.

A Big Thanks to You

We will publish one more issue of Raleigh Report, after the Governor has dealt with all the bills on her desk. That issue will also include a list of studies authorized by the studies bill. After that, we will publish RR only if specific matters warrant until the General Assembly reconvenes next May.

It has been a long and difficult session, made so mostly by the state’s budget crisis. But, as the session ends, it’s worth a brief look back. There have actually been some pretty remarkable results, and you should give yourself a big pat on the back. Many of these good things have happened because of grass-roots advocates like you. We work with a number of groups on various issues. We can’t claim sole credit for any of these bills. But we can claim credit, along with our friends and allies, for making a real difference.

You will have your own list of critical bills, but let me mention just a few:

· The budget. While the list of new taxes is not what we would have wanted to see, the fact that the budget was brought into balance with $1 billion in new taxes, not just by cuts to programs and services, is a result of the work of many of you. We’d like to have had more progressive tax increases. We would like to have had a much larger increase in the cigarette tax. We would like to have had the closing of corporate tax loopholes and modernization of the sales tax system. But, we also were strongly opposed to the draconian cuts in program and services—bad enough in what finally passed—that would have resulted with $1 billion less in revenue.

· The Racial Justice Act, reducing the chances that a defendant in this state will receive the death penalty because of race.

· The School Violence Prevention Act, which spells out that bullying and harassment in schools will not be tolerated and that kids who are gay or lesbian, or are thought to be by someone, are included in this protection.

· A decision not to push the mandatory e-verify bill, which would have subjected job seekers, whether immigrants or not, to a deeply flawed verification system.

· Smokefree restaurants and bars. Right here in the heart of tobacco country. Remarkable!

· Words do matter, so the processes put in place to remove gender-specific language from the state’s statutes and to use “people first” language (recognizing people with disabilities first by their personhood, not their disability) are significant.

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Action on Other Bills

Action taken on other bills being covered in Raleigh Report during the closing weeks of the session include the following: