H200 Budget Bill Highlights

This is a summary of the NC House Budget (H200), approved last week.

The $19.3 billion budget is $600 million under the amount recommended by the governor and lets expire the 1 percent sales tax and the income tax surcharge.  Five Democrats voted with the Republican  majority, making it a veto proof vote count.  Senate action has begun, with the Senate Republican Caucus meeting all day Thursday to review House spending recommendations. Senate action is anticipated this week.

The estimated $2.4 billion spending gap is achieved with cuts, state agency consolidation, and fee increases.  The House set aside $230 million in tax relief, including a $130 million reduction in the corporate income tax, for a finance package to be adopted separately. The House fully funds the statutory set asides for the Rainy Day and Repairs and Renovations Reserves at $201.5 million apiece.

In good news for Lee County, the House increased the governor’s proposed lottery appropriation for school construction by $43.5 million, providing $98.7 million for county school construction expenses.  House members recognized the commitment to school debt service that many counties have made with their lottery funds.  All county lottery monies are distributed on a per capita basis, setting aside the statutory formula that recognizes
effective property tax rates above the statewide average.  A special provision similar to that authorized in this year’s budget allows counties to permit their local school administrative units to use all or part of the county school construction lottery funds for classroom teachers.  (This author doubts Lee County Commissioners will take that approach, though, with the county needing to handle around $1.6M more in debt service than in years past.)

Like Governor Perdue’s budget, the House chose to discontinue the corporate tax set aside for school construction, which will cost counties about $72 million for each year of the biennium.  (Author’s note– this was anticipated.)   The House plan, however, only eliminates the fund for the duration of the 2011-13 biennium, whereas Governor Perdue’s proposal eliminated the set aside permanently.

The highlights for each area of interest in the House budget proposal:

Public education and community colleges

  • Rejects shift of school workers’ compensation costs, school bus replacements and tort claim costs
  • Fully funds school enrollment, low wealth and small schools
  • Increases the school flexibility cut by $42 million to $347 million
  • Eliminates teacher assistants in grades 2 and 3 for a $255 million reduction
  • Eliminates dropout prevention grants, the handheld student diagnostic pilot, the teacher mentoring program, general fund support for school technology, and staff
  • Largely reduces individual allotments, including a 46% cut in instructional supplies, a 12% cut in at risk services, a 15% cut in non-instructional personnel, a 9% reduction in gifted students, a 10% cut in central office admin, a 17% cut in assistant principals, and a 10% cut in transportation
  • Reduces on a non-recurring basis school bus replacements by $20 million, leaving intact sufficient funds for 1/2 of replacements needed
  • Reduces More at Four by 20% and transfers program to NC-DHHS
  • Calls for a comprehensive review of state educational programs to examine teacher pay and tenure, class size, dropout strategies, and transition from k-12 to work or higher ed.
  • Requires that 65% of state school operating funds be used for classroom instruction
  • Fully funds community college enrollment growth
  • Increases community college management flexibility cut by $44 million to $73.1 million
  • Increases community college tuition, revamps high-cost funding formulas, and reduces basic skills funding and institution support

Health and Human Services

  • Begins implementation of LME consolidation and statewide waiver coverage– county liability issue is addressed in substantive legislation (H916).
  • Reduces community mental health funding by $20 million non-recurring and requires LMEs to replace another $25 million cut by spending down fund balances, again on a non-recurring basis
  • Directs NC-DHHS to develop a set of standardized covered benefits and implement a co-pay for mental health services
  • Maintains current funding for local psych bed purchases
  • Reduces Smart Start by 20%
  • Reduces county daycare admin from 5 to 4%, but higher than the governor’s
    recommendation at 3%
  • Transfers division of environmental health to NC-DHHS
  • Reduces Medicaid by $356 million through provider rate reductions, provider
    assessments, pharmacy services cuts, CCNC savings, and eliminating inflationary
  • School nurse funds are maintained at current levels but a special provision requires a utilization review to investigate how to maximize nurse resources, including consideration of using LPNs. Another provision limits school nurse activities to exclude instructional support.
  • The $5.5 million in state aid to county DSS admin costs is eliminated, but the
    governor’s proposal to reduce state aid to county health departments was rejected.

Natural and Economic Resources

  • Repeals $100 million in statutory appropriations for the Clean Water Trust Funds and appropriates $10 million instead
  • Eliminates and restructures DENR programs, including wastewater discharge, on-site quality assurance, tick control, vector control and the private well program. Also subjects DENR regional offices to continuation review, thereby removing their ongoing appropriation.
  • Places 4 Ag research stations under continuation review.
  • Provides state matching funds for federal clean water and drinking water funds


  • Provides $10 million in One NC funds and $6 million in JMAC funds
  • Continues diversion of the small grant funds for scrap tire and white goods programs. County receipts of up to 70% of total proceeds continue.
  • Diverts $8.4 million from the Parks and Recreation Trust Fund and $8 million from the Natural Heritage Trust Fund.
  • Directs Commerce to develop a public database that enumerates all businesses receiving state or local economic development incentives and their compliance with performance measures such as job creation
  • Transfers Employment Security Commission to Department of Commerce

Justice and Public Safety

  • Proposes shifting state misdemeanants with sentences less than 180 days to county jails, and increases several judicial fees to help offset cost shift, contingent on passage of Justice Reinvestment (H 642)
  • Implements nearly 200 court positions via a voluntary reduction in force
  • Eliminates dispute resolution and sentencing services funding
  • Moves drug treatment and family court to continuation reviews
  • Eliminates 61 magistrate positions over the biennium
  • Eliminates community work crews and reports that no local government has paid the $150 crew per day fee; does direct Corrections to work with locals to access inmate labor
  • Closes Cabarrus, Durham, and Haywood correctional centers
  • Consolidates 3 JPS agencies into the Dept. of Public Safety

General Government

  • Reduces state aid to libraries by 15%
  • Shifts local government commission staff and DoR local government staff to receipts support from local sales taxes


  • Reduces funding for secondary roads
  • Moves urban loop program into Mobility Fund

Other Policy Changes

  • Authorizes the Senate and House Appropriations committees to meet monthly outside of session to review state agency operations and compliance with budget law and intent.
  • Studies agency consolidation of administrative functions
  • Eliminates the Health and Wellness and Tobacco Trust funds
  • Diverts Golden Leaf Funds for the biennium to the general fund
  • Calls for a comprehensive review of state, university, and school compensation plans
  • Transfers to the State Ethics Commission the Lobbyist Registration and Campaign Reporting from the Secretary of State and the Campaign Reporting Division from the State Board of Elections
  • Prohibits state funding of Planned Parenthood organizations
  • Prohibits state funding for abortions or to support the administration of any governmental health plan offering abortions

About James Madison

I was the fourth president of these United States. My wife Dolley and I are greatly disturbed with the erosion of your liberties and the encroachment of the present federal, state, and local governments. I was an original member of the Democratic-Republican Party in this country and I would welcome a return to the conservative values that united Democrats and Republicans in my day. Let's start with putting God back in our lives and our government so He will richly bless our endeavors in Lee County. Let's force our elected officials be more transparent and accountable to the electorate in fiscal and social matters. I look forward to hearing your ideas about these matters and others that are on your hearts and minds. Thank You for participating!
This entry was posted in Budget, Capital Improvements, Crime & Public Safety, Economic Development, Education, Taxes & Fees. Bookmark the permalink.

1 Response to H200 Budget Bill Highlights

  1. Randall Lee Yow says:

    So, as a state we are going to cut 90% of the money out of the N.C. Clean Water Management Trust Fund. Even though there have already been requests for 157 million dollars in grants from local governments and non-profits for the 2011 calender year, but we are only going to give them 10 million. Then here in Lee County we are going full speed ahead with “Fracking”, and as a state we are discussing drilling for energy reserves in the inner and outer banks (also know as the graveyard of the Atlantic). I guess we do not need a fund in case anything should go wrong. I mean what could possibly go wrong.


    I am not against exploring for energy options, but is it not a good idea to have a fund to cover us if something goes wrong. Hope for the best, plan for the worst was always something my Grandmother said. I have taken it as pretty good advice.

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