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Last week Governor McCrory released his recommended budget adjustments for FY 2014-15.  In odd-numbered years, the North Carolina legislature enacts a two-year budget; each even-numbered year the governor and the legislature pass an adjustment to that budget to address any changes since the budget’s last debate.  This year’s adjustment is necessary in part due to a revenue shortfall estimated to reach $445 million.  That is somewhat offset by approximately $323.7 million in unspent money from last year’s budget.  The governor is proposing reversions or savings in the budget that amount to $290 million, which would leave the state with funds available for new spending items that weren’t included in last year’s enacted budget.

In total, the governor’s General Fund budget this year spends 1.7 percent more than last fiscal year, which amounts to a $359.5 million increase.  Education accounts for 56 percent of the entire General Fund spending plan.  Health and Human Services makes up one-quarter of total spending, of which two-thirds is Medicaid.  Justice and public safety is less than one-eighth of spending, while general government and natural and economic resources combined comprise 1/25th of all spending.  Transportation spending, which is not included in the General Fund figure, decreases by $17.7 million or half of one percent when compared to last fiscal year. 

The governor’s budget director and members of the governor’s budget team at the Office of State Budget and Management presented a detailed explanation of the major items during a senate committee meeting last week.  Below are the highlights from that presentation.


Public Education total spending: $8,092,486,650

  • $162 million for salary increases for teachers and other school employees
    • Starting teacher pay raised by 7.1% to $33,000 and funds for the step increase
  • $9.8 million from the Education Lottery for a Career Pathways pilot program directed at retaining quality teachers who take on increased responsibilities
  • $23 million from the Education Lottery for textbooks
  • $18.7 million to continue master’s degree salary increases for teachers who are taking classes or have completed a degree in their teaching field

Community College total spending: $1,033,354,247

  • $18.6 million to provide $1,000 salary and benefit increases for employees
  • $1.9 million to allow tuition waivers for military veterans who reside or are stationed in NC

UNC System total spending: $2,550,503,612

  • $33.4 million to provide $1,000 salary and benefit increases for employees
  • $5 million for a financial aid program for military veterans
  • $3 million to assist UNC campuses with transitioning laboratory research to the marketplace

Health and Human Services total spending: $5,015,081,715

  • Medicaid total spending: $3,533,677,149
    • $70 million Medicaid shortfall due to backlog of claims and enrollment
    • $1 million to begin Medicaid reform
    • $75 million in savings from additional provider assessments to match federal funds
    • $50 million set aside for a Medicaid Risk Reserve account for potential shortfall next year
  • $42 million in savings from refinancing existing programs within HHS
    • $22 million Federal block grants and Education Lottery proceeds for NC Pre K
    • $15 million Federal block grants for subsidized child care and state administration
    • $3.8 million in drug rebates and federal funding for Aids Drug Assistance Program
  • $28 million in savings through efficiencies and updated budget estimates
  • $6 million for employee pay raises
  • $5 million to support the growing caseload of children in foster care
  • $3.6 million for NC Pre K to enhance school readiness of at risk 4-year-olds
  • $6.1 million in federal funds to improve mental health crisis services and the governor’s Substance Abuse Prevention and Treatment Initiative

General Government total spending: $420,724,043

  • $3.6 million for salary and benefit increases for agency employees
  • $3 million grant for repairs to Battleship North Carolina
  • $10.2 million upgrade of the Tax Information Management System (TIMS)
  • $7 million to establish call center in Guilford County for citizen tax services

Natural and Economic Resources total spending: $381,269,353

  • $3.6 million for salary and benefit increases for all employees paid by the General Fund
  • $1.2 million plus $596,000 one-time spending to monitor coal ash ponds throughout the state
  • $622 million reduction by transferring the Animal Welfare section and the Spay and Neuter Program to the Law Enforcement Division in the Department of Public Safety
  • $1.3 million for statewide aquatic weed control in lakes and waterways
  • $3.5 million for the Noncommercial Leaking Underground Storage Tank Fund Program

Justice and Public Safety total spending: $2,368,539,560

  • $27.2 million for salary and benefit increases for all employees paid by the General Fund
  • $3.5 million one-time spending to allow more timely payments for private assigned attorneys who represent indigent claims
  • $689,000 plus $546,000 one-time spending for an expansion of state crime labs to improve efficiency and turnaround time for law enforcement
  • $229,000 for investigation and response to cyber threats against children

Transportation (Highway and Hwy Trust Fund) total spending: $3,136,150,000

  • $7.5 million for $1,000 salary and benefit increases
  • $43 million for the Highway Maintenance Program
  • $30 million in efficiency savings redirected towards other transportation priorities

General Fund Budget Comparisons in Millions

Spending Category

2013-14
Certified

McCrory
2014-15

Y to Y %
Change

Y to Y $
Change

Public Education

7,866.0

8,092.5

2.88%

226.5

Community Colleges

1,021.3

1,033.4

1.18%

12.1

UNC System

2,583.0

2,550.5

-1.26%

-32.5

Health & Human Services

4,993.8

5,015.1

0.43%

21.3

General Government

424.8

420.7

-0.95%

-4.0

Natural & Economic Resources

371.2

381.3

2.70%

10.0

Justice & Public Safety

2,368.7

2,368.5

-0.01%

-0.1

Total Operating Expenses

19,628.8

19,862.0

1.19%

233.2

Capital Improvements

27.9

23.4

-16.13%

-4.5

Debt Service

709.2

716.0

0.96%

6.8

Reserves

264.9

388.9

46.84%

124.1

General Fund Budget

20,630.8

20,990.3

1.74%

359.5

Transportation

3,153.9

3,136.2

-0.56%

-17.7

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