LIVING INCOME EMAIL UPDATE
Legislative Update of the Justice Center
2005 BUDGET BEST IN FOUR YEARS
Volume 4, Issue 11 * July 23, 2004
The NC Justice and Community Development Center is supported completely by contributions and foundation support. You can contribute directly by mail to NC Justice and Community Development Center, P.O. Box 28068, Raleigh, NC 27611. Check out our web page at: www.ncjustice.org Email us at: sorien@ncjustice.org
In this Living Income Update:
The 2004 Session of the NC General Assembly ended on Sunday, July 18 at 6:14am after a 19 hour marathon of waiting, debating and voting on bills. The 2005 budget, passed during the final day, is the best we have received in four years. Nonetheless, while legislators did what they could to address North Carolinians' needs, those needs have grown so great after three years of budget cutting, population growth, recession and long term job market changes that legislators could barely scratch the surface. This was especially apparent in efforts to deal with child care subsidy waiting lists, low-wealth school system needs, the growing number of uninsured and the well-documented need to fund reforms in the child protection system.
This budget is better because there was more money available and legislators used restraint in cutting taxes. For the first time since 2000 the state saw a moderate budget surplus rather than a budget shortfall. At the start of session, the two Speakers of the House promised no new tax cuts or increases and they mostly stuck to it. (Some smaller tax credits and cuts were passed.) To his credit, Governor Easley apparently agreed to this arrangement as well, in spite of the fact that he had proposed reducing corporate income tax liability. This prevented legislators from giving away some of the limited surplus money and ensured that the money available went mostly to programs and salaries that had been neglected during the previous three years of budget shortfalls. For example, for the first time since the 2000-01 budget, state employees received a permanent raise of $1,000 or 2.5%, whichever is greater. The Justice Center has long advocated for a flat pay increase, which most benefits the state employees at the bottom of the pay scale who are not earning a living wage, and this pay scheme is an excellent nod to this need. While it will not equal the 5% across the board raise for which state employees had lobbied, $1,000 will equal a 5% or greater increase for the lowest paid state workers.
Most of the debate in the Health and Human Services budget focused on where to spend additional money instead of on where and how deeply to cut. Unfortunately for some programs, additional money meant only maintaining the current services available, but there is real expansion of some programs. The limitations of the revenue available in the face of state and local needs also were apparent. For example, in spite of $24m increased funding, the child care subsidy program will not be able to remove any children from the waiting list, but should avoid having to remove children from the program who currently get a subsidy.
Public Education is facing some serious problems in this budget. While $50m new funding is allocated to reduce third grade class size to 1 teacher per 18 students, $27m is cut from local school systems' base budgets. When added to the $44m recurring cut to their base budgets made last year, this amounts to a sizable decrease in operating funds that seems likely to affect classrooms. Schools are given flexibility to choose from where to take these cuts and budget language encourages them to avoid hurting classrooms or programs for at-risk or special needs children, but that may be impossible given the size of the cut. There remains concern that the students and school systems most in need will suffer the greatest. In addition, Judge Manning who presides over the Leandro litigation has ordered the state to provide at least $22m more toward the poorest school systems, but the legislature failed to do this.
Substantial amounts were allocated this session toward corporate incentives and cash grants. Legislators put $20m more into the One North Carolina fund, "known as the governor's walking around money," $4.5m in the JDIG business grant program and $4m toward developing a "test race track" for NASCAR. The rationale for this $28m spending spree is to attract more jobs to the state and keep the NASCAR jobs we have. A bill failed, however, that would allow the state to get these moneys back if the recipient company does not create the jobs for which it gets the grant.
This budget pays only small attention to the workers who are unemployed due to plant closings or who are reemployed in the new low-wage jobs coming into the state. While many legislators say any job is better than no job, they appear unwilling to deal with some of the consequences of low-wage work; Health Choice, the subsidized health insurance program for children of low-wage workers will be frozen on January 1 and no additional children will come off the child care subsidy waiting list that now tops 25,000. Some displaced-worker needs were given a nod with an allocation of more money to community college retraining programs and the start of a pilot program to help prevent home foreclosures in a few counties most affected by plant closings and mass layoffs. Much more must be done for our growing population of low-wage, uninsured workers created by the new economy.
Some legislators left session more cognizant of the need for major tax reform. Our current system has been widely recognized as outdated for years, but now it is also riddled with loopholes that this year came in the form of tax credits and exemptions targeted toward specific industries or groups. Governor Easley has already held a commission and issued a report on modernizing the tax code. In addition, the top tax bracket for couples earning $200,000 or more and one-half cent of the state sales tax are set to sunset at the end of 2005, significantly decreasing revenues for the SFY 2006 budget and perhaps, providing legislators with further motivation to fix the entire tax system.
The bottom line is that, with the notable exception of the cut to local schools, this budget does begin to address needs that have been neglected during the years of economic and revenue downturn. The state’s revenues have not yet recovered to a place that can address all of the needs caused by recession and revenue shortfalls, but this budget is a good start with what was available. While they created several new small tax loopholes, Legislators avoided the pitfall of giving away revenue through untargeted, broad-based tax cuts. For the most part, legislators were reminded and understood that spending on good programs that meet the needs of North Carolinians is good government and they did fairly well to meet that challenge.
Economic Security
1. Job Training for Workers
$4m additional is appropriated to the New and Expanding Industry Training (NEIT) program at the community colleges.
$2m additional is allocated to the Focused Industrial Training (FIT) program at the community colleges. This replaces $1.6m that was previously allotted from the Worker Training Trust Fund and adds $400,000.
¯ Community College tuition was increased 7%.
®Not all programs and employees previously funded with Worker Training Trust Fund money have been provided new sources of revenue.
2. Wages
¯ The wage standard of 110% the average weekly county wage was eliminated as a requirement for a business to receive a state-backed industrial revenue bond. Senate Bill 1063.
3. Temporary Assistance to Needy Families Block Grant – Chart of 2004-05 TANF Block Grant is attached
PRIMARY TANF CHANGES MADE IN 2004: Work First rolls have remained low throughout most of the last year and so TANF dollars going toward cash assistance was reduced by $10m. Legislators took a $3.99m cut in state maintenance of effort funds because of this reduction, but TANF does not work on a matching basis. Whether this cut can be sustained is unclear and will provide a challenge to DSS and HHS controllers. $2m for substance abuse services was cut which means that no TANF funds are being used for mental health or substance abuse services for the first time since TANF began. The money freed up by these reductions went primarily toward child care subsidies, in an effort to prevent the need to cut off children who are currently receiving subsidy. The child protective services automation system NCFAST received an additional $2,087,298 to begin expanding the system statewide. Three new items made the TANF funding list this year: After School Services for AT-Risk Students in Middle School, YWCA of the Central Carolinas Youth Development programs and Maternity Homes. Adolescent Pregnancy Prevention Coalition makes up for its loss of TANF money with a new $150,000 from the Maternal and Child Health Block Grant.
HOUSING
$1,725,000 new money for the Housing Finance Agency to start a home protection and foreclosure assistance program in a few counties that have been hardest hit by plant closure or mass layoff and have seen an increase in foreclosure filings as a result.
PUBLIC EDUCATION
1. Funding for children at-risk of failing, with Limited English Proficiency or at other disadvantage.
¯ No additional funding for at-risk, Limited English Proficient (LEP) or disadvantaged students. The State Board of Education and State Superintendent Mike Ward requested that legislators put $22m toward a new “Disadvantaged Students Fund” that could be used to help the schools with high dropout, poverty and failure rates. The Senate created the new category of funding and put $12m toward it, but it did not make the final budget agreement. The Governor’s and the House’s original budget proposals would have cut at-risk student funding, and the SBE requests did manage to eliminate that cut.
Judge Howard Manning, presiding over the Leandro lawsuit, was angered that $22m was not allocated to the newly proposed disadvantaged student fund, but Governor Easley indicated he will explore options within the executive budget act for him to find the needed money for this program. Judge Manning is to have another hearing in two weeks.
¯ No legislative action to increase accountability of local school systems regarding how they spend the at-risk and LEP money they already receive.
$2.5m more for Small County Supplemental Funding.
$5m more for Low Wealth Supplemental Funding.
2. Dropout Prevention
¯ No new school counselors funded, no new dropout prevention programs implemented.
3. Third Grade Class Size Reduction
$50.5m to Reduce Third Grade Class Size - The Governor worked hard to ensure legislators fully funded his request to reduce third grade class size from 1 teacher to 22 students down to 1 teacher for 18 students. Clearly research indicates that students do much better in classes of a 1 to 15 ratio or smaller, and this is an important step in that direction. Nonetheless, many legislators and members of the education community lamented the large amount of money this item required, especially since additional cuts were made to local school systems’ base budgets.
4. Flexibility Cuts to Local School Systems
¯ $27.7m is cut from Local Education Agencies (LEA’s) across the state. The State Board of Education must let local school system’s know how much they will be cut within the next two weeks. This is on top of a $44.3m recurring cut made to LEAs in last year’s budget. In other words, local school systems are actually being cut a total of $72m this year. There is special provision (budget) language providing school systems with the flexibility to cut these funds as they choose, but that encourages them not to cut in a way that affects classroom instruction, at-risk or LEP students. Nonetheless, with a cut of this magnitude it seems likely that some, if not many, systems will have to cut in these areas. In addition, this potentially compounds the problems at low-wealth and small schools where funding is already inadequate.
5. Vocational Programming
$4.4m for additional Public School vocational education teachers and support
Five new High School Workforce Development Pilot Projects to be created where local school system, community college or university, and local employers work together to ensure that high school and higher education curricula are aligned with the workforce training needs of employers and that students have access to accelerated training opportunities. This is the first part of state-match funding needed to get $10m from the Gates Foundation.
1. NC Health Choice
¯ NC Health Choice, the subsidized health insurance program for children of low-wage working parents, will stop taking new children into the program when it freezes on January 1, 2005. $6.6m more was allocated to the program, but the number of uninsured children is growing so quickly that even more funding is needed to keep the program open beyond this date. Legislators considered, but did not, expand Medicaid to cover all Health Choice children under 5 years old. This would ensure those children receive Medicaid and reduce the current Health Choice rolls by nearly 26,000 kids thereby enabling Health Choice enrollment to continue. It also would have saved the state some money since Medicaid reimbursement rates for health providers is lower than that offered by Health Choice. This seems a no-brainer but has been rejected by the legislature two years in a row after consideration.
2. Medicaid and Health Choice Coverage and Services
No cuts to Medicaid and Health Choice coverage or services were made. Senator Purcell played a critical role in ensuring this.
Children who qualify for EPSDT services in the Medicaid program will now be able to go to a wider variety of health providers. Children must be referred to these providers to get Medicaid coverage. Licensed psychological associates, licensed professional counselors, licensed marriage and family therapists, certified clinical addictions specialists, and certified clinical supervisor can now receive reimbursement.
Adults receiving Medicaid will also be able to receive services from a wider variety of health providers. Medicaid-eligible adults may self-refer to these specialists and receive coverage. Added to the eligible list of providers are licensed or certified psychologists, licensed clinical social workers, certified clinical nurse specialists in psychiatric mental health advanced practice, and nurse practitioners certified as clinical nurse specialists in psychiatric mental health advanced practice, licensed psychological associates, licensed professional counselors, licensed marriage and family therapists, certified clinical addictions specialists and certified clinical supervisors.
3.
Cigarette Tax
The legislature did not even consider the cigarette tax increase, in spite of public support, bi-partisan legislative support, successful press conferences, broad media coverage and a recent increase in the Virginia tax – not to mention the health benefits.
4 Community Health Services
$7m for a grant program for community health services. $5m will be available to federally qualified community health centers and $2m for state designated rural health centers and public health departments.
5 School Health Nurses
$4m in state money plus $3.25m from the Maternal and Child Health Block Grant will provide a total of $7.25m for 145 new school health nurses. They will be distributed to meet the greatest needs in the schools with the least money and the highest nurse student ratios.
6 Hunger and Nutrition – WIC Farmer’s Market Program
$156,630 allocated to reinstate the WIC Farmer’s Market Program. This will again draw down federal money. This program allows WIC recipients to use their vouchers in local farmer’s markets.
7. Aids Drug Assistance Program
$2,765,622 increase in funding for the Aids Drug Assistance Program to meet growing prescription costs. This increase does not change our very low income eligibility requirement of 125% of federal poverty level.
LONG TERM CARE
1. Long-Term Care Criminal Record Checks
The Department of Health and Human Services will serve as a clearinghouse for criminal record checks conducted on individuals seeking employment in long-term care facilities. The North Carolina Department of Justice will return the results of national criminal history record checks for employment positions not covered by federal law to DHHS’s Division of Facility Services. The sum of $200,000 was appropriated to DHHS to implement the background checks system. In addition, the sum of $250,000 in non-recurring funds will be transferred from DHHS to the Department of Justice to be used to upgrade the existing billing system currently used for criminal record checks.
2. Centralize Criminal Record Check Functions
® Directives are given to the Department of Health and Human Services to centralize all activities throughout DHHS relating to the coordination and processing of criminal record checks required by law. The centralization is to be implemented by January 1, 2005. The budget assumes $2m in savings from centralizing these functions.
3. Study Issue Related to Mentally Ill Residents of Long-Term Care Facilities
Directives are given to the Department of Health and Human Services to work with long-term care providers and advocates for the elderly and the mentally ill to study issues concerning the care of mentally ill individuals residing in long-term care facilities. Among the seven categories of issues to be studied are the following: 1. Examining whether current State statues and Departmental rules adequately address the populations served by long-term care facilities. 2. Exploring the development of separate licensure categories within the adult care home and nursing home designations to address the various populations being served. Examining the criteria for admission of mentally ill individuals to long-term care facilities to ensure that the health and safety of all residents are safeguarded. 3. Identifying specific problems that exist due to mixing aging and mentally ill populations, etc.
4. DHHS Study Medical Institutional Bias
® An independent entity will study whether the State’s Medicaid program has a bias that favors support for individuals in institutional settings over support for individuals living at home. The study must include consideration of all in-home services paid under the State's Medicaid program, including CAP/DA, home health, and personal care services. If a bias is found, the study must determine and recommend ways to eliminate the bias.
MENTAL HEALTH/DEVELOPMENTAL DISABILITY/SUBSTANCE ABUSE SERVICES
1. Services
$10m allocated to the Mental Health Trust Fund to help support more community services across the state.
¯ Eliminated - $2m TANF funding for Residential Substance Abuse Services for Women with Children. This is the first year since it’s inception that NO TANF MONEY is spent on substance abuse or mental health services.
2. Funding to Local Management Entities (LMEs)
¯ $2m cut to the LMEs.
EARLY CHILDHOOD EDUCATION
1. Smart Start
® No Cuts and No New Money for Smart Start.
® The Study Bill includes a “Smart Start Funding Study” commission which is charged with examining funding equity among the counties and how to reach full funding.
2. Child
Care Subsidies
®
$20.9m was added to the child care subsidy program ($8m state + 9.6m TANF + 3.3mSSBG
= 20.9) and there is another $4.2m new money in the CCDF block grant as well,
which is carry-forward from the last fiscal year. This should be enough
to avoid cutting off the program any children who currently receive subsidy, but
it is not expected to reduce the waiting list that is now up to 25,000.
3. More-at-Four
$9m more allocated to the More at Four program.
1. Intervention— The results here are mixed. Overall, this is an improvement as a result of very hard work by Rep. Beverly Earle, Rep. Jennifer Weiss, Rep. Verla Insko, and several Senators, including Senator William Purcell. The net results of some of this remain unclear.
®The Study bill SB 1152 includes the option of a study of the child welfare system and whether reforms are improving system “weaknesses.”
$2,717,298 of TANF money was allocated toward NCFAST, the child protection statewide computer system, which is an increase from $630,000 allocated last year. NCFAST will be able to move ahead in its effort to go statewide.
¯ On the down side, legislators reduced welfare automation funding by $5.4m. It is not clear yet what the net impact will be.
An additional $5m ($4m state money and $1m TANF) is allocated for hiring 75-100 additional child protection workers.
® $750,000 is allocated for program support and training for the counties already participating in the Multiple Response System (MRS) Pilot Program. This was not funded to expand statewide as we hoped.
¯CUTS: Child Welfare Contracts are cut $500,000 and funds for the Training Centers are cut $300,000.
2. Foster Care and Adoption
$1m additional TANF money allocated for a total of $3m for the Special Needs Adoption Fund.
$1.6m new allocated to increase the Foster Care and Adoption Assistance rates by $25/month. Representative Jeff Barnhart (R-Cabarrus) sponsored a $50/month increase.
$550,000 allocated to increase Guardian Ad Litem Attorney fees from $35/hour to $45/hour.
Juvenile Justice
1. Youth Development Centers
Modify Youth Facility Debt Authorization – HB 1795 is law and allows the state to obtain $4.46m in debt financing to begin the next stage of planning and design of the proposed new youth development centers.
Finance Vital Projects – HB 1264 is ratified and awaiting the Governor’s signature. There is a chance the Governor could veto this bill. Besides allowing the state to obtain nearly $400m in Certificates of Participation (COPs) debt to build up to 10 health related facilities at 10 different UNC system schools, this bill would allow the state to incur $35m in COPs to finance the construction of up to five of the Youth Development Centers. During negotiations of this bill, the Governor expressed concern that the debt amount allowed is too high and may put the state’s financial status at risk.
2. Juvenile Crime Prevention
Councils
® $500,000 more allocated to the JCPCs, which is better than a sharp stick in the eye, but far short of the millions needed.
® $75,000 cut from Communities in Schools DJJDP funding. This is down from the House proposal to cut $347,500, but is still harmful to the program.
Sorien
K. Schmidt, Legislative Director
North
Carolina Justice
Center
P.O.
Box
28068
Raleigh,
NC
27611
ph 919-856-2151
fax 919-856-2175
sorien@ncjustice.org
www.ncjustice.org
Posted on NC Women United web site with permission of the Justice Center
30-Jul-2004