Raleigh, N.C. — State Senate budget writers say their $20.58 billion budget proposal is a balanced effort that meets "the fundamental responsibilities of state government" with resources currently available, while covering a big increase in Medicaid costs and providing funding for tax reform efforts.
The budget team met with reporters Monday morning to answer questions about the 413-page document.
Senior chairman Sen. Pete Brunstetter, R-Forsyth, says the plan's top-line numbers are "fairly consistent" with Gov. Pat McCrory's recommended budget, and that no one area was singled out for cuts.
However, the details of the budget include some big changes and targeted cuts.
"We're making hard decisions to divert funding from critical programs, and sometimes that means tough decisions for those left behind," Brunstetter said. "Bottom line, we're doing what we can with resources available to perform fundamental responsibilities state government has."
The area where that realignment is most evident in the Senate plan is in economic development efforts, especially in rural areas. The NC Rural Center would cease to receive state funding, as would a half-dozen targeted regional programs, to be replaced by a new Rural Economic Development Division within the state Commerce Department.
Sen. Harry Brown, R-Onslow, said the new division would offer "one-stop shopping" for rural economic development projects, including a new Rural Infrastructure Authority to manage water and sewer funding assistance.
Budget writers pointed out repeatedly that the plan adds $1.3 billion in overall funding for Medicaid over the next two years. But that increase is required to pay for enrollment growth and federally mandated changes in the entitlement program.
Meantime, the Senate plan also reduces benefits, lowers reimbursement rates for providers, and raises co-pays for those in the program.
Medicaid is an especially difficult area for budget cuts. Because of federal program regulations, states can't simply decide to make big changes in eligibility rules or to cut out a service entirely. Large-scale program changes require federal approval of what's called a "State Plan Amendment." The approval process can take many months.
Instead, Brunstetter said, the Senate budget relies on changes the state can make on its own to try to control program costs.
"We're at a crossroads on Medicaid," he said. "All these things that we talk about that we want to do, they're all running right into the Medicaid juggernaut, and we've just got to get it fixed."
The proposal would freeze or cut reimbursement rates for hospitals, some of which will take additional hits under the Affordable Care Act because the state chose not to accept the federal Medicaid expansion.
Even with the rate decreases, Brunstetter said he believes most hospitals "are going to come out ahead" because of the added money in the system, although he concedes they would have to see more patients and provide more services to do so.
"We think there's room for efficiencies in that system. We think they can do this," he said.
State employee and teacher pay
The Senate plan doesn't include a raise for state employees or teachers in 2013-14, although it sets aside $10.7 million for teacher merit pay in the 2014-15 fiscal year.
McCrory's budget proposed a 1 percent pay increase, but Brunstetter said the $400 million Medicaid shortfall consumed the money to pay for those raises.
"We understand why folks want pay adjustments," he said. "Ultimately, we feel like we're better working on trying to get North Carolina competitive again, get people working again."
That argument doesn't wash with some longtime Wake County teachers.
"It's certainly indicative of the ethos that people who do the work in our schools are not valued and education is not valued," said Lee Quinn, who teachers U.S. history at Broughton High School in Raleigh.
"I think we just want a little pat on the back, saying, 'You're doing a good job. We value what you do in school,'" said Dave Corsetti, a physics teacher at Broughton High.
The budget does include $1 million for a salary study of state employees, requested by the McCrory administration.
Teachers also question the Senate proposal to end tenure for veteran teachers. Lawmakers want to replace the so-called "career status," which gave teachers with at least three years of experience some due process rights before they could be terminated, with one- to three-year contracts for teachers.
"We're not going to be able to attract good people if they feel like they can be fired or dismissed a little prematurely," Corsetti said.
"We need to give these young teachers, with our help and with our assistance, we need to give them a chance, and one year is too short for the chance to be given," said Carol Allen, who teaches English at Broughton High.
The Senate also wants to implement merit pay for teachers in 2014-15, but teachers said that system is too subjective and discourages collaboration among teachers. They said they would like to see merit-pay funding redirected for professional development and recruiting new teachers.
Contrary to McCrory's proposal to add new seats in NC Pre-K, the Senate plan cuts 2,500 seats ($12.4 million) in 2013-14 and 5,000 ($24.8 million) the following fiscal year. The funding for those seats is moved to the state's child-care subsidy program.
Brunstetter said the move was made because child care subsidies can serve more children than Pre-K can. "It was just a desire to get more bang for the buck," he said.
The Senate plan also doesn't include funding for payments to the state's surviving victims of its eugenics program. The restitution program is a priority for McCrory and House Speaker Thom Tillis, but it's found little support in the Senate.
"I think we're very sympathetic with the situation [the victims] find themselves in. It was a terrible time in our state's history," Brunstetter said. "But we've got $1.2 billion in Medicaid issues that we're dealing with."
Electric/hybrid car fees
Under the Senate plan, owners of electric vehicles would be assessed an additional $100 yearly license fee. Hybrid owners would owe an extra $50 a year.
Sen. Neal Hunt, R-Wake, said that's because the state's highways are maintained through the gas tax. Hybrids and EVs, he said, "pay less or no gas tax" and are "using the roads for free."
"We're trying to have them pay their fair share," Hunt said.