Governor McCrory’s Recommended 2015-2017 Budget Governor Pat McCrory Lee H. Roberts State Budget Director Office of State Budget and Management March 5, 2015 Fiscal discipline FISCAL DISCIPLINE • NO NEW TAXES • Triple A bond rating from all three major ratings agencies • Budget grows more slowly than inflation and population • Balanced budget, consistent with state constitution 2 2 Most new spending obligated MOST OF GENERAL FUND IS ALREADY OBLIGATED BY STATUTE — More than $3 billion annually to maintain the retirement system and health plan for state employees — 76 % of new spending ($741 million) devoted to education and Medicaid — Medicaid • • $3.8 billion or 18 % in year one $4 billion or greater than 18 % in year two 3 Prudent and Fiscal conservative discipline • Reduced spending • Sought efficiencies • Based on consensus revenue estimate • If we have more revenue, we can revisit 4 4 Not our money • Will collect more than $43.7 billion during the next two years • Must be effective, efficient, accountable • Spend where it matters most 5 Spending where it matters most FY 2015-16 General Fund Appropriations = Natural & Economic Resources 1% Debt Service & Reserves 4% $21.5 billion • Education is 70% K-12, 22% university system, and 8% community colleges • Health & Human Services is more than 2/3 Medicaid • Justice & Public Safety is 73% Public Safety (law enforcement & corrections), 25% Judicial, and 2% Justice • General Government and Natural & Economic Resources combine to comprise nearly 4% of all appropriations Justice & Public Safety $2.4 B 11% Health & Human Services $5.3 B 25% Education $12.1 B 56% General Government 2% 6 Increasing teacher pay • Fulfill our pledge to raise the starting salary for public school teachers to $35,000 • This budget proposes MORE THAN HALF A BILLION DOLLARS in new funding for k12 education 7 Other targeted salary increases • Corrections officers – 10,000 officers – Reflects relative danger of prisons – Last increased in the mid-1980s • State Highway Patrol troopers — Five percent step increase for eligible troopers • Longevity pay – Continues for nearly 40,000 state employees • $82 million salary exception fund – To attract and retain in high-demand fields 8 Critical infrastructure • Targeted, long-term investments • Vital to competitiveness • Pay for assets that will last for 50 years as they are used • Historically low interest rates • Will not jeopardize our credit ratings 9 A helping hand for the disadvantaged • 1.8 million people or 18% of our state population supported by Medicaid – $7.8 billion over two years • Mental health • Pre-K • Other key social services 10 Fiscal discipline Prudence Grows more slowly than inflation and population Remaining well below the statutory cap 11 Fiscal discipline Prudence Strengthening and enhancing reserves in excess of $650 million One of only ten states with a Triple A bond rating from all three major rating agencies Allocates an additional $47 million to the Rainy Day Fund 12 Revenue Collections: FY 2014-15 Forecast reflects modest growth of 2.9% General Fund Revenue: Recent History Forecast Billions of Current-Year Dollars -- Feb 2015 Consensus Forecast $21-23 -0- May 2014 Revised Consensus $21.0 -I- Actual Revenues I \-$271 $20.78 $20.0 $19.0 FY 2011 FY 2012 FY 2013 FY 2014 FY 2015 13 Revenue Forecast for FY 2015-17 Forecast for FY 2015-17 Anticipates Moderate Growth • Consensus General Fund Revenue Forecast with the Fiscal Research Division • FY 2015-16 Base Growth: 3.9% • FY 2016-17 Base Growth: 4.1% 14 Investing in competitiveness Invests over $115 million in job creation and competitiveness Supporting Main Street North Carolina • Historic Preservation Tax Credit • $12.2 million • Film grant program • $20 million Extend Job Preservation Tax Credits • Renewable Energy Credit • $7 million • Non-solar only • Data centers • $7 million • Research and development • $58 million • Motorsports • $1.2 million • Aviation fuel • $7.5 million 15 Investing in education: K- 12 Continuing significant commitment to K-12 funding 8,800,000,000 8,600,000,000 8,400,000,000 8,200,000,000 8,000,000,000 - 7,800,000,000 - 7,600,000,000 - 7,400,000,000 lApprepriatien Expenditures 7,200,000,000 .20151? Recommended Budget 7,000,000,000 - 6,800,000,000 - 6,600,000,000 - (62? <08 (13<2513' <25" *3 Q) I 2 533 ?55? 16 Investing in education: Pre-K-12 TEACHER PAY • $223 million • Increases teacher base pay to $35,000 • Increases on salary schedule REWARDING HIGHLYEFFECTIVE TEACHERS • $15 million • North Carolina Education Endowment Fund ENROLLMENT GROWTH • $207 million • Fully funds enrollment growth 1,400 new teachers INSTRUCTIONAL RESOURCES • $70 million • Classroom resources including textbooks, instructional supplies and equipment TEACHING ASSISTANTS • $128 million • Retains nearly 2,000 teaching assistants PRE-K • Ensures access to NC Pre-K for more than 26,800 atrisk four-year-olds 17 Investing in education: UNC & NCCCS BRODY SCHOOL OF MEDICINE AT ECU ENROLLMENT GROWTH • $16 million • $129.6 million • Stabilizes medical education and maintains community preceptorships • Fully funds projected enrollment growth IN-STATE TUITION FOR VETERANS • $11.3 million • Supports those who defend our freedom by offering in-state tuition to qualifying non-resident veterans LIMIT SUBSIDY TO PRIVATE FUNDRAISING • Saves $18 million each year • No more than $1 million in state funds on private fundraising efforts COMMUNITY COLLEGE YEAR-ROUND CLASSES COMMUNITY COLLEGE TECHNOLOGY • Accelerates the North Carolina talent pipeline by funding classes yearround, including in the summer, just like North Carolina businesses • $10 million • Critical upgrade to the central data system used by all 58 community colleges • $5 million for STEM equipment 18 Investing in education: Innovation to Jobs VENTURE MULTIPLIER FUND NORTH CAROLINA RALLYING INVESTORS AND SKILLED ENTREPRENEURS (NC RISE) UNIVERSITY INNOVATION COMMERCIALIZATION INVESTMENT $30 million $5 million $7.5 million Invests in early stage commercial ventures, along with private sector dollars Leverages existing entrepreneurial talent and recruits world-class investors and skilled entrepreneurs Invests in selecting and developing university technologies to make them attractive to investors 19 UNC Funding: Share of Tax Revenue (Source: SREB) North Carolina spends a greater percentage of tax revenues on higher education than any other state State Appropriation for Higher Education: % of State Taxes 50 states North Carolina Alabama Georgia New Mexico 2011-12 National Rank 9.5 17.5 17.3 16.5 16.0 1 2 3 4 20 UNC Funding: GF Appropriation General Fund Expenditures per Student: 10 Most Populous States, VA and SC $7,920 $5,806 $5,124 $4,969 $4,788 $4,642 $4,417 $4,159 $3,961 $3,792 $3,240 $2,794 $2,497 Sources: NASBO State Expenditure Report, Almanac of Higher Education 2014, Pope Center for Higher Education 21 Rebuilding our infrastructure Dedicates $4.8 billion to lay the foundation for our 25-year transportation vision, which focuses on connecting small towns and economic centers across the state Critical infrastructure Road Maintenance • Increase of $135 million • Increase of $51 million • Strategic investments in critical infrastructure • Road preservation and improvements projects Capital Improvements Congestion • Increase of $36 million • Increase of $10 million • Capital repairs and renovations under the Capital Improvement Plan • Eases congestion, particularly in rural and small urban communities 22 Streamlining state government North Carolina Government Efficiency and Reform (NC GEAR) • • • More than $14 million of savings in year one More than $57 million of savings in year two of the biennium, Savings over ten years conservatively estimated at more than $615 million IN PRESENT VALUE Manage cultural and natural resources together Improve integrity and timing of vital record registry Recover debts through the State Reciprocal Treasury Offset Program Rationalize state vehicles Reduce state employees workers’ compensation expense Leverage buying power for school districts 23 Supporting those who keep us safe Reinforces North Carolina’s reputation as the most military-friendly state in the nation In-state tuition for veterans • $11.3 million • In-state tuition for qualifying nonresident veterans Department of Military and Veterans Affairs • Protect our military mission • Coordinate services for military communities, active duty personnel and veterans Veterans courts • Supports the development of additional veterans’ treatment courts • Helping veterans return to a productive life instead of being locked up for minor offenses related to mental health issues or substance abuse Support veterans and fight crimes against children • $2 million • Awarded to law enforcement agencies to hire staff to locate and rescue children in danger • Priority will be given to veterans who have received special training from the Human Exploitation Rescue Operative (HERO) project 24 Supporting those who keep us safe Recognizes the dedication of our law enforcement and corrections officers CORRECTIONS OFFICERS HIGHWAY PATROL TROOPER STEP INCREASES VEHICLES CRIME LAB • $21 million • $3.7 million • $11 million • $2 million • Compensates and retains our corrections officers who confront the most violent people in our state every day • Funds the full five percent step increase for eligible State Troopers each year • Replaces aging law enforcement vehicles • Improves crime lab operations • Improves safety • Reduces criminal case backlogs • Reduces maintenance costs 25 Supporting those who keep us safe COURT SYSTEM NORTH CAROLINA BUSINESS COURTS • $16 million • Addresses costs associated with jurors, witnesses, interpreters, expert witnesses for prosecutors, equipment maintenance, hardware and software • $1.2 million • Expands existing North Carolina Business Courts, as recommended by the North Carolina Economic Development Board INDIGENT DEFENSE • $9 million • Increases funds for private assigned counsel for indigent defendants 26 Addressing needs for mental health services: DPS Invests nearly $24 million in new funding for mental health services in our prisons Behavior health treatment units Mental health beds • $17 million • $6.7 million • Establishes behavior health treatment units at eight high security prisons across the state • Opens another 72 inpatient mental health beds at the Central Prison Health Care Facility • New positions to improve mental health screening at intake centers 27 Addressing needs for mental health services: DHHS Invests nearly $82 million in new funding for mental health and substance abuse services Community mental health services State mental health facilities • $42 million • $39.4 million • Investments to cover mental health needs in our communities • Start-up funding for the new Broughton Hospital • Treating substance abuse in our communities • Ensuring financial viability of state health facilities by acknowledging acuity and patient mix we serve 28 Lifting up the disadvantaged Provides more than $10.8 billion in Department of Health and Human Services funding to support the well-being of our most vulnerable citizens The Office of Chief Medical Examiner • • Increase of $5.3 million Improves services and replaces equipment for the Office of the Chief Medical Examiner Medicaid • • $287 million in the first year and $461 million in the second Provides health coverage to more than 1.8 million low-income families Adoption and Foster Care • Increase of $15 million • Funding for foster care and adoption services • Ensures all children needing support have access Medicaid Reform • Supports Healthy NC reform plan to put patients first and control costs for taxpayers • Accountable Care Organization delivery model NC FAST and NC TRACKS • Increase of $22.9 million • Replaces legacy IT systems to more efficiently serve citizens and pay providers Medicaid Risk Reserve • $175 million over two years • Provides buffer against inevitable uncertainty in one of our biggest cost drivers 29 Highlights: DHHS DHHS STATE FUNDING Medical Assistance and Mental Health account for 86% of DHHS General Fund appropriations in the recommended budget Medicaid and Health Choice $3,843,280,140 $752.6M 14% $710.2 13% $3.84B 73% Mental Health, Developmental Disabilities, Substance Abuse Services $710,202,991 All Other Programs $752,645,416 2015-16 Recommended State General Fund Appropriation 3030 Questions Electronic version of Governor McCrory’s budget can be located at the Office of State Budget and Management website: osbm.nc.gov 32