House Speaker Tim Moore and Senate Leader Phil Berger led a joint press conference yesterday afternoon to announce details of the $21.735 billion budget agreement reached by members of the House and Senate this past weekend.
The compromise plan includes a responsible 3.1 percent spending increase, invests hundreds of millions of additional dollars in public education and other core priorities and shores up the state’s rainy day and repair and renovation funds by $600 million.
The plan increases early-career teacher pay to from $33,000 to $35,000 per year, fulfilling a promise made by state leaders last year. And over two years it preserves funding for driver education and for all teacher assistant positions supported in last year’s budget, requiring school systems to use the funds for those jobs.
The budget also invests an additional $705 million over two years for transportation needs, in part by ending a $216 million transfer from the Highway Fund to the General Fund and ensuring that money is finally spent on building and maintaining safe roads and bridges.
Finally, it contains a comprehensive tax reform package that reduces the tax burden on North Carolina families and small businesses by close to $400 million over the next two years and fully restores the state tax deduction for medical expenses. The plan also extends Historic Preservation Tax Credits.
What follows is a summary of the top-line highlights of the proposed budget agreement and highlights within each area of the budget (Tax Package, Education, Health & Human Services, Transportation, Agriculture & Natural Resources, Salaries & Benefits, Justice & Public Safety, General Government, Statewide Reserves, and other areas).
House Bill 97
2015 Appropriations Act
Conference Committee Overall Highlights
September 14, 2015
- Appropriates $21.734 billion for FY 2015-16, an increase of about $652 million (or 3.1%) from the FY 2014-15 budget
- Increases State-funded positions by a net of 96.60 positions
Adjustments to Availability
- Increases the Savings Reserve Account by $200 million, bringing the total to $851.6 million. Another $250 million is transferred if House Bill 943 [Connect NC Bond Act of 2015] is enacted, increasing the total amount in the Savings Reserve to $1.1 billion;
- Appropriates $150 million to the Repairs and Renovations Account;
- Repeals the statutory transfer of $215.9 million in funds from the Highway Fund to the State’s General Fund;
- Reduces Availability by a net of $74.7 million in FY 2015-16 and $326.5 million in FY 2016-17 for various tax adjustments;
- Earmarks $75 million for FY 2015-16 and another $150 million in FY 2016-17 in non-recurring funds for deposit into the newly established Medicaid Transformation Fund;
- Returns $10 million each year of the biennium to Golden L.E.A.F. from Master Settlement Agreement funds.
Salary and Benefits
- Public Schools:
- Increases starting teacher salary from $3,300 to $3,500/month ($35,000 per year);
- Grants a step increase for eligible educators who gain a year of creditable service;
- Grants a step increase for School-based Administrators (SBAs) (i.e. Principals and Assistant Principals);
- Provides that no teacher or SBAs will receive a drop in pay;
- Provides $202 million for $750 bonuses for all State and State-funded local employees;
- Grants a step increase for Assistant & Deputy Clerks, Magistrates, the Highway Patrol;
- $12.5 million in FY 2015-16 and $25 million in FY 2016-17 to fund the Salary Adjustment Fund for market-based adjustments;
- $10 million in FY 2015-16 and $20 million in FY 2016-17 for salary increases for North Carolina Community College personnel (local Boards have flexibility in allocating the funds);
- $12.8 million in FY 2015-16 and $25.6 million in FY 2016-17 to implement Pay by Custody Level for Correctional Officer;
- $12 million in FY 2016-17 to implement OSHR’s Compensation Update;
- Maintains current benefits and policies in all State retirement systems;
- Increases benefits to members of the National Guard Pension Fund;
- Funds the State Health Plan at the level recommended by the Board of Trustees for FY 2015-16;
- Provides funds for Worker’s Compensation payments to accurately reflect projected spending.
- Funds Teacher Assistant positions at the FY 2014-15 level;
- Funds Driver Education Training over the biennium;
- Provides funds $16.8 million in capital investments such as $5.8 million for Water Resources Development projects and $3.5 million for repairs to the USS North Carolina Battleship;
- Provides $30 million in non-recurring funds to the Film and Entertainment Grant Fund in each year of the biennium;
- Establishes a new Department of Military and Veterans Affairs.
- Cuts Personal Income Tax Rate by 0.26% to 5.499%
- Increases Standard Deduction in 2016 from $15,000 to $15,500, non-taxable;
- Unlimited deduction for both Medical and Charitable;
- Maintains Corporate Income Tax rate reduction trigger (Current forecast has us hitting the trigger in 2016 dropping rate to 3%);
- Phases in Single Sales Factor over 3 years starting next year (study market-based sourcing);
- Expands the sales tax to cover car repairs and appliance installations starting in FY2016-2017. (To view a chart showing a county-by-county distribution of the newly-expanded sales tax revenue in the proposed budget for the entire state, please click here.)
- No extension of the Solar Tax Credit or R&D Tax Credit.
2017 Estimated Average Effective Tax Rate
|Federal Adjusted Gross Income||Current Law||Proposed Law|
|$20,000 to $29,999||2.71%||2.47%|
|$30,000 to $39,999||3.40%||3.15%|
|$40,000 to $49,999||3.79%||3.54%|
|$50,000 to $59,999||3.97%||3.72%|
|$60,000 to $69,999||4.06%||3.82%|
|$70,000 to $79,999||4.10%||3.86%|
(Estimates as produced by the North Carolina BearingPoint Individual Income Tax Model for Tax Year 2017)
K-12 funding: 5.0% ($410 million) increase from base budget
- Maintains Teacher Assistants funding at the FY 2014-15 total by providing an additional $138 million to offset the expiration of $25 million in nonrecurring funding and the elimination of Lottery receipts for this purpose;
- Fully funds 2015-16 K-12 enrollment growth by providing $100 million in FY 2015-16 (NOTE: 2nd year ADM Growth funds of $107 million are placed in Statewide reserves);
- Fully funds Driver Education to help North Carolina train responsible drivers with $24 million in FY 2015-16 General Fund monies. FY 2016-2018 funding is provided by a new dedicated late registration fee allocated through the Civil Fines and Forfeitures Fund;
- Lowers 1st Grade Class Size by providing an additional $27 million in FY 2016-17 for hiring additional teachers;
- Invests $l.5 million over biennium for Transforming Principal Preparation to support innovative programs to dramatically improve the rigor of principal preparation in North Carolina;
- Greatly enhances Textbooks funding by adding over $27 million for that purpose in FY 2015-16 and $37 million in FY 2016-17 and renaming this allocation to include Digital Resources. Total Textbooks and Digital Resources funding would now be $62 million by the end of the biennium. (NOTE: Funding total includes $6 million in appropriations from the Indian Gaming Fund);
- Invest in School Connectivity Initiative to bring broadband access to all K-12 schools by adding over $2 million for that purpose in FY 2015-16 and $12 million in FY 2016-17. These new funds enhance wireless capacity at the classroom level and would, by the end of the biennium, access over $30 million annually in matching Federal e-Rate funding;
- Expands Access to Summer Reading Camps for 1st and 2nd Grade Students by providing $20 million to allow students not demonstrating progress towards reading proficiency to participate in additional summer instructional opportunities;
- Increases Opportunity Scholarships by adding $6.8 million in in FY 2015-16 and $14 million in FY 2016-17. (FY 2016-17 total will be $24.8 million) to award more scholarships to children of low-income and working-class families to attend a private school of their choice;
- $7.5 million to 58 Community Colleges across the State for state-of-the-art equipment to keep up with the changing needs of employers and train future workforce;
- Increase capacity of training for medical residents, with a focus on primary care and general surgery.
- Ensures no decrease in pay for assistant principals who become principals;
- Reduces paperwork by eliminating 5 State Board of Ed/LEA reports deemed no longer necessary;
- Establishes a number of new requirements related to school safety including the development of a statewide School Risk & Response Management System, anonymous tip line, & panic alarm system;
- Continues in modified form the competitive grant program for extended learning time programs that was initiated in the 2014 Budget;
- Modifies the educator preparation program process by adding a minimum GPA requirement for admission into educator preparation programs, and creating formalized requirements for student clinical teaching experiences;
- Creates a new definition for low-performing schools and districts and requires the implementation of school or district improvement plans.;
- Provides the State Board of Education authority to consolidate county school districts that share a border.
North Carolina Community College System
- Provides $10 million in FY 2015-16 and $20 million in FY 2016-17 for salary increases for State-funded local community college employees. The colleges have flexibility in how these funds can be used to provide raises;
- Funds Summer Term FTE for all curriculum courses and provides $16.9 million to support the projected increase in FTE student enrollment;
- Increases tuition beginning in Spring Semester 2016 by $4.00 per credit hour, from $72.00 to $76.00 for residents and $264 to $268 for nonresidents. Tuition for resident students will increase by a maximum of $128 per year, from $2,304 to $2,432;
- Increases funds for instructional equipment and technology by providing an additional $7.5 million in nonrecurring funds in FY 2015-16;
- Funds veterans’ tuition with $2 million recurring to meet costs of complying with federal directives regarding the provision of in-state tuition for eligible non- resident veterans
- Directs the State Board of Community Colleges and the State Board of Education to develop a program for delivering mandatory college developmental math, reading and English classes in high schools in the senior year for students who do not meet certain readiness criteria. The program is to be implemented in the 2016-17 school year.
University of North Carolina
- Fully funds projected enrollment increases at UNC constituent institutions. (NOTE: 2nd year enrollment growth funds of $31 million are placed in Statewide reserves);
- Increases funding for Elizabeth City State University by $3 million in nonrecurring funds for each year of the biennium to help stabilize enrollment;
- Directs a management flexibility reduction of $17.9 million in FY 2015-16 and $46.5 million in FY 2016-17. The total reduction amounts to 1.53% of UNC’s base budget;
- Caps General Fund expenditures on University Advancement Activities at $1 million per institution ($16.4 million reduction beginning in FY 2016-17);
- Provides increased support for East Carolina University’s Medical School ($8 million nonrecurring each year of the biennium);
- Provides funding for medical residencies in the Mountain Area Health Education Center service area with $8 million in recurring funds;
- Funds veterans’ tuition with $9 million recurring to meet costs of complying with federal directives regarding the provision of in-state tuition for eligible non- resident veterans.
- Requires the UNC System and Community College System to coordinate in a study to create a deferred admission program. The program is designed to divert academically at-risk students into the Community College System, with a guaranteed acceptance into a UNC campus upon completion of an associate’s degree. The program is required to be implemented in FY 2016-17.
Heath & Human Services Highlights
- Increased support for community mental health services, examples include:
- 7% increase for three-way psychiatric beds in community hospitals;
- Addition of 66 mental health beds at Central Regional Prison;
- Establishes mental health treatment units at 8 custody prisons;
- Traumatic Brain Injury waiver to provide victims better support;
- Training for Paramedics for Behavior Health diversion.
- Foster Care: Raises age to 21yrs, provides funds for Youth Villages, increases funding by $12 million for increased Foster Care caseload;
- Increases market rates for Child Care Subsidy and includes “Grandparent” fix;
- No changes to Certificate of Need (CON) Laws;
- Does not eliminate Community Care of North Carolina (CCNC);
- Home and Community Care Block Grant: restores cut to services for seniors;
- Provides funds to improve State Medical Examiner system.
- Eliminates the transfer from the Highway Fund to the General Fund;
- $440 million in additional road funding;
- $70 million in for port modernization;
- Increased funding for contract resurfacing and the bridge program, and pavement preservation fund;
- Increased funding for capital construction projects through Strategic Transportation Initiatives (STI).;
- Continued funding for modernization of the Division of Motor Vehicles (DMV);
- Increased funding for state aid to municipalities;
- Reduce taxpayer dollars used for Board of Transportation travel expenses;
- Increases funding for airport development and the UAS program.;
- Eliminates 50 Raleigh-based, non-field positions.
Agriculture & Natural Resources Highlights
- Support for dredging of the coastal inlets to keep our waterways open for business and recreation;
- $1 million for Military buffers through Farmland Preservation. $1 million through the Clean Water Management Trust Fund
- Additional funding to support Oyster Industry;
- $1 million FY1 and $2 million FY2 for Tourism Funding to continue to encourage out-of-state tourism;
- $500,000 for Shale Gas Exploration;
- Funds expansion of AgWRAP (well-drilling initiative for Ag);
- Eliminates $1.5 million for state-wide branding initiative;
- $1.3 million department-wide Department of Environment and Natural Resources (DENR) administrative cut.
Salary & Benefit Highlights
- All teachers and State employees will receive a $750 bonus by the end of Fiscal Year 2015. Legislators do not receive this bonus;
- Teachers will still receive step increase raises based on experience;
- Starting teachers (0-4yrs) will see a salary increase from $33,000/yr to $35,000/yr;
- All Sworn Members of the Highway Patrol will receive a 3% salary increase;
- Starting Highway Patrol salary increase from $35k/yr to $36,050/yr;
- No reductions in the State retirement benefits;
- $38 million in fund for Administration to adjust salaries of employees in hard to recruit areas;
- Increases General Fund appropriation to National Guard Pension Fund.
Justice & Public Safety Highlights
- $2.5 million in grants to local law enforcement agencies for Body-Worn Video Cameras to protect our sworn officers. Optional: does not force Departments to comply;
- Increases salaries for correctional officers: Provides funds to adjust the pay scale of correctional officers based on the custody level of the offenders they supervise: $12 million in the first year; $25 million in the second year;
- Provides remaining funds for cameras in Highway Patrol vehicles to keep our troopers safe ($2.6 million);
- $1.6 million for HERO Grants to combat sex crimes against children;
- Clerks and Magistrates will still receive step increase raises based on experience;
- Additional funds for court modernization;
- Vehicles for State Highway Patrol and the State Bureau of Investigation (SBI): Provides additional funds to purchase State Highway Patrol and SBI vehicles: $9.5 million;
- Addressing mental health needs in the State prison system: Funds 72 additional mental health unit beds at Central Prison: $3.2 million, 66 FTE. The conferees have also agreed to fund mental health behavior treatment units at eight close custody prisons: $5.6 million, 152 FTE;
- Juvenile Residential Beds: Provides funding to expand the bed capacity for adjudicated juveniles in contracted and State-operated facilities: $2 million;
- Juvenile Residential Beds: Provides funding to expand the bed capacity for adjudicated juveniles in contracted and State-operated facilities: $2 million;
- Court Information Technology: Provides $2.3 million in the first year and $1.8 million recurring for court information technology initiatives;
- Funds for Managed Cell Access System to deter the illegal smuggling and use of cell phones by inmates.
General Government Highlights
- New Department of Military and Veterans Affairs;
- New Department of Information Technology;
- New Department of Natural and Cultural Resources to consolidate management of all state attractions;
- Additional funds for Voter Information & Verification Act (VIVA) in FY 2015-2016 to execute voter outreach;
- $17.5 million for Workforce Housing Loan Program, develop low-income housing;
- Align Agency Budgets to Actual Expenditures to track the use of taxpayer dollars;
- Governmental Budgetary Transparency/Expenditures Online to ensure an open, transparent, responsible state government.
Statewide Reserve Highlights
- $600 million to Savings Reserve and theRepairs and Renovations Account;
- $186 million to a Medicaid Contingency Reserve. This reserve is to address any budgetary shortfalls within the Medicaid budget;
- $225 million over the biennium for a Medicaid Transformation Reserve. Will be used for when the State transitions to fee-for-service to capitation under Medicaid reform.
Other Highlighted Highlights
- $3 million for OneNC Small Business Fund;
- $2.5 million annually for Rural Economic Development Grants;
- $30 million for Film Grants;
- $8 million in FY 2016-2017 for Historic Tax Credits;
- Job Maintenance and Capital Development Fund (JMAC) funded on recurring basis; $6.9 million in FY 2015-2016 and $7.5 million in FY 2016-2017.