Highlights, fiscal and budgetary actions

              OVERVIEW:
FISCAL AND BUDGETARY ACTIONS
NORTH CAROLINA GENERAL ASSEMBLY
2001 SESSION
PREPAREDBY
THE FISCAL RESEARCH DIVISION
OF THE NORTH CAROLINA GENERAL ASSEMBLY
RALEIGH, NORTH CAROLINA
Rm. 619, Legislative Office Building
Raleigh, North Carolina 27603-5925
Telephone: (919) 733-4910
Fax: (919) 715-3589
Budget Development
Appropriations Bill Coordination
Governmental Operations
Capital Budgeting/Planning
State LandsiBuilding
Salaries and Benefits
General Government
Administration
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General Assembly
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Lieutenant Governor
OBce of Administrative H&gs
Revenue
Secrehy of State
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State Budget and Management
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Jnstice and Public Safety
Cmection
Crime Control BE F'ublic Safety
Judicial
Justice
Andy Willis - Senate
MonaMm-Senate
L p Mucbmore - House
Sam Byrd
Stanley Moore
Mark Trogdon
MarilynChism
Michele Nelson
Jim Mills
Elisa Wolper
Denise Thomas
Health and Human Services
Department of Health and Human Services
Nataral and Economic Resowce~/Information
Technology
Department of Agriculture
Department of Commerce
Department of En-ent, Health,
and Natural Resources
Department of Labor
Office of Infoxmation Technology Savices
Transportation
Education
Department of Public Instruction
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Revenue Estimates
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Revenue Laws Study Committee
Economic Issues
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Support Staff
WOrdProcessing
Graphics, Databases,
Spread Sheet Prepamtion
Karen Hammonds-Blanks
Carol Shaw
Lisa Hollowell
Susan Morgan
J d e r Ho-
Adam Levinson
Kelly Huffstetla
Dwayne Pinkney
Evan Rodewald
Bob Weiss
Jim Newlin
Philip Price
Charlotte Todd
Leggett
Richard Bostic
David Crotts
LindaMiUsaps
Maahawalston
Agnes p w
Faydeau Robinson
Bormie Trivette
Debora Bridgua
INTRODUCTION ...................................................................................................................................I.. .
GLOSSARY ........................................................................................................................................... A.l
TOTAL STATE BUDGET . Budget Reform Statement (General Fund Availability) .................................................................... 5 1 Summary Total State Budget ........................................................................................................... 5 2 Total State Budget by Agency ..........................................................................................................5 3
ECONOMY AND REVENUES
Economic Outlook and General Fund Revenues ............................................................................G. I
Economic indicators (State Fiscal Year Basis) Annual Rates of Change ........................................
General Fund Revenue Forecast ....................................................................................................G. 7
Highway Fund Revenue .................................................................................................................G I2 Highway Trust Fund Revenue ........................................................................................................3
FEDERAL BLOCK GRANTS 8 SUMMARY OF MEDICAID CHANGES Federal Block Grant Programs. ........................................................................................................ D-1
Changes to Ule Medicaid Pmgram ................................................................................................... D-4
SUMMARY: GENERAL FUND APPROPRIATIONS
General Fund Appmpriations 2001-2003 Flscal Biennium. 2001 Session ....................................... E-1
EDUCATION
Community Colleges .......................................................................................................................F. -1
Public Education. ..............................................................................................................................F -7 University of North Camlina System .............................................................................................F. -23
HEALTH 8 HUMAN SERVICES ..................................................................................................... G-1
NATURAL AND ECONOMIC RESOURCES Agriculture and Consumer Services ................................................................................................. H-1
Commerce ....................................................................................................................................... H-6
Commerce - State Aid ................................................................................................................... H-12 Environment and Nahtral Resources ............................................................................................. H-I4
Environment and Natural Resources - Clean Water Management T ~ sFtun d ............................ H-24
Housing Finance Agency ............................................................................................................... H-26 Labor ......................................................................................................................................:.. .... H-28
N.C. Biotechnology Center ............................................................................................................. H-31
Rural Economic Development Center ............................................................................................H -33
JUSTICE AND PUBLIC SAFETY
Correction ......................................................................................................................................... 1-1
Crime Control and Public Safety ................................................................................................. I-I2
Judicial ........................................................................................................................................... 1-17
Judicial .In digent Defense ............................................................................................................ 1-24
Justice ............................................................................................................................................ 1-27
Juvenile Justice and Delinquency Prevention ................................................................................. 1-32
GENERAL GOVERNMENT
Administratlon. ...............................................................................................................................J..- 1
.......
Cultural Resources. .......................................................................................................................J. -10
Cultural Resources . Roanoke Island Commisslon ................................................................... 5-16
General Assembly ...................................................................................................................... J-18
Governor ....................................................................................................................................... 5-20
Insurance ..................................................................................... ........................................... 5-24
Insurance .Vo lunteer Safety Workers' Compensation Fund ...................................................... 5-26 Lieutenant Governor. ...................................................................................................................... 5-30
Office of Administrative Hearings ................................................................................................... 5-32 Revenue ........................................................................................................................................ J-34
Rules Review Commission ..................................................................................................... J-41
Secretary of State ........................................................................................................................ 5-43 State Board of Elections. ................................................................................................................. J47 State Budget, Planning and Management. ..................................................................................... 5-49
State Budget, Piannirlg and Management - Flood Mapplng & Surveying ...................................... 5-53
State Budget, Planning and Management - Special Appropriations ............................................. J-56
State Controller ........................................................................................................................ J-58 Treasurer. .....................................................................................................................................J. -60 Treasurer - Retirement for Fke and Rescue Squad Workers ....................................................... 5-62
LEGISLATIVE ACTIONS: HIGHWAY FUND APPROPRIATIONS
Transportation .................................................................................................................................. K-I
INFORMATION TECHNOLOGY: INTERNAL SERVICE FUND
Office of Information Technology Services ...................................................................................... L-1
RESERVES. DEBT SERVICE AND ADJUSTMENTS .......................................................................... M-1
CAPITAL .............................................................................................................................................. N-I
ADDITIONAL LEGISLATION CONTAINING APPROPRIATIONS ....................................................... 0-1
SALARIES AND BENEFITS Salary Changes for Employees Supported by the State ...................................................................P -I Retirement and Pension Changes for State and Local Personnel. .................................................. P-9 Benefit Changes for State and Local Personnel ............................................................................ P-13 State Employes Health Benefit Changas ....................................................................................... P-14
REVENUEIFEE BILLS Bills Affecting General Fund Revenue ............................................................................................ 0-1 Bills Affecting Highway Fund Revenue. ......................................................................................... Q-23 Bills Affecting Special Revenue Funds. ......................................................................................... a-27 Bllls Affecting All Local Governments ........................................................................................... Q-28 Local Government Tax Aid .Hi storical Data ................................................................................ Q-40
APPENDIX Total State Budget by Source of Funds .................. ....1....-.............
Total General Fund Authorizations as Adjusted
to Determine Total Current Operations .......................................................................................... R-2
Savings Reserve at Year Ending June 30 ........................................................................................ R-4
Earmarking of the Credit Balance by Flsoal Year ............................................................................. R-5
Tax Revenues by Major Schedules (Actual) .................................................................................... R-6
APPENDU (CONTINUED)
Authorized and Actual Revenue Collections by Flscai Year ($ in Thousands) ................................ R-7
North Carolina General Fund Operating Appropriations .................................................................. R-8
Capital Improvement Authorizations .............................................................................................. R-I 2
General Obligation Bond Acts Since 1971 ....................................................................................-. 3
Total North Carolina Budget for Debt Service .............................................................................. 4 North Carolina Bond Indebtedness ................................................................................................ R-16
Across-ThsBoard Salary Cost for Each 7% Increase (Millions) .................................................. 1 8
Leglslathre Increases .................................................................................................................. 1 9
Average Salary of Employees Subject to the Personnel Act .......................................................... R-21
INTRODUCTION
This document is divided into sections as follows:
Section A - Glossary
Section B - Total State Budget summarins the composition of General Fund Availability (i.e.
Budget Reform Statement) and the total state budget including federal funds and receipts.
S&on C - Economy and Revenues desmies the economic and iinaucial backdrop against
which the actions detailed in subsequent sections are conducted. Includes infonnation on General
Fund, Highway Fund and Highway Trust Fund revenues.
Section D - Federal Block Grants and Summary of Medicaid Changes gives a brief history of
federal block grant programs and allocations for the fiscal year. Also provides a summay of
recent Medicaid funding and program changes.
Section E.- Slunmary: Genera1 Fund Appropriations ammmim actions taken by the GeneraI
Assembly to adjust the continuation or base budget recommended by the Governor (applies to the
Overview of budgetary actions taken in the long session) or to adjust the budget previously
approved for the second year of the biennium (applies to the Overview of budgetary actions taken
in the shoa session).
Sections F through L - Budget adjustments (i.e. reductions and expansion) by state agency are
outlined in detail and organized by appropriations subcommittee. Also smmmizes special
provisions in the Appropriations Act governing state agencies.
Section M -Reserves, Debt Service and Adj~mtments lists actions with statewide impact (i.e.
affecting all state agencies). Also includes a summary of general provisions included in the
Appropriations Act.
Section N - Capital provides a list of agencies receiving appmpriations for capital improvement
projects. Also includes a summary of apical related special provisions.
Section 0 - Additional Legislation Containing Appropriations summarizes several bills
e-nacted after the passage of the Appropriations Act that include additional Genera] Fund
appropriations and govern other budgetary matters.
Section P - Salaries and Benefits identifies salary increases, as approved, together with changes
in retirement and pension plans, health irmnmce programs, and other benefit program.
Section Q - Revenue/Fee Bib provides a summary of bills authorizing various tax changes and
fee increases.
Section R - Appendix provides historical data relating to &te revenues and expenditures, capital
improvements, reversions, indebtedness, debt service and salaries.
GLOSSARY
Adjusted Appropriation: An appropriation altered to reflect the distriintion of reserves or other
transfers authorized by the General Assembly.
Appropriation: An action by the General ~skmblyau thorizing withdrawal of funds h m t he
state treasury pursuant to Article V, Section 7 of the North Carolina Constitution.
BeghnhglEnding Balance or Credit B'alance: The funds available at the beghhg or end of
the fiscal year based upon revenue collections and expenditures.
Capital Improvements: One-time appropriations for new co-on, renovations, repairs and
land p u r c b .
Carryforward: Funds *ated, but unspent in the k t fiscal year of a biennium that are
brought forward for expenditure in the second fiscal year of the same biennium.
Certified Appropriation: An e a t i o n as officially rewrded by the Office of State Budget,
Planniug, and Management.
Contingency and Emergency Fund: A special resave required by G.S. 143-12 which the
Director of the Budget may expend for emergencies or other unanticipated needs with approval by
the Council of State.
Continuation B u m The part of the State budget necewq to continue the current level of
services when adjusted for inflation, mandated rate increases such as social security, mannualizaton
of programs and operation of new Mties.
Current Operations: Cost associated with the daily activity of progams supported by the State,
such as salaries, utilities, and travel.
Departmental Receipts: Monies received by State agencies and institutions as federal &raats,
charges for services performed, transfas hm other governmental units, license fees, gifts and
donations, or similin sources.
Disproportionate Share Fnnds: Share (DSH) funds are Medicaid payments made to health care
providers who deliver services to large numbers of lminsured patients.
Page A-1
GLOSSARY (Continued)
Entitlements: Payment or benefit granted by law to individuals or political subdivisions.
Expansion Budget: The part of the State budget which provides for new programs, expansion of
existing programs, and salary and benefit increases.
Federal Revenue Sharing: Program instituted by the federal government in 1972-73 and
discontinued in 1982-83 to assist statdocal govemments.
General Fond: The fund to which rev- are deposited that are not designated for special
purposes and are therefore available to support the general opaations of State government.
Highway Fund: The special fund to which revenues are deposited that are designated for
transportaton-related operations and capital improvements.
Highway Trust Fond: A fund established in 1989 for the completion of certain sp&d
highway construction projects.
Lapsed Salaries: Unexpended appropriations that accrue because funds have been budgeted for
positions that are t w y =t.
Negative Reserve: A method by which a budget reduction is imposed without detailing the
specific lines of expenditure to be decreased.
-
N o n r e c e A tam applied to revenues or expenditures that are not repeated in future years.
Reversion: The portion of an appmpriation that is not expended and is returned to the fund h
which the -on is made when the appmpriation either expires or is caucelled.
Savings Reserve: An amount dlished in G.S. 143-15.3 to reserve Gend Fund monies as a
s a f d against economic fluctuations or major fiscal exigencies. Commonly r e f d to as the
"Rainy Day Fund."
Special Fonds: Accounts to which revenues are deposited that are designated for a specific
purpose and remain in the account until expended for that purpose.
Tax Reimbarsements: State revenues disbursed to local govermnents as reimbments due to
State-mandated tax relief measures which have a local finaucial impact on locals.
Total General Fund Avaflabm The sum of the beginning General Fund credit balance and
Gend Fund revenues for a fiscal Hod.
Page A-2
Total State Budget
1 BUDGET REFORM STATEMENT 3
FY 200142
($ mllllon)
FY 200203
($ mllllon)
1. Composition of the FY 200102 beginning availability:
a. Unappmpriatsd balance
b. Revenue mllactions in FY 200041 In excess of authorized estimates
c. Unexpended appropriations durlng 2000-01 (Reversions)
Beginning Unreserved Credit Balance
2. Revenues Based on Existing Tax Structure
3. Non Tax Revenues:
Investment lnmme
Judicial Fees
Dispmportionate Share
Insurance
Other Non-Tax Revenues
Hlghway Trust Fund Transfer
Highway Fund Transfer
Subtotal
4. Other Adjustments
IRC Conformity Adjustment (included in House Bill 232)
North Camlina Railroad General Fund Repaymant
Senate Bill 353 Enhance DeperhTlent of Revenue Collections
EducationRluman SenrlceslMental HealthlRevenue Initiatives
House Bill 11 57 lmplementatlon - Closure of Tax Loopholes
House 8111 232 ImplernenEation - Budget Revenue Pmvlsions (Accelerations)
increase in Nontax Revenues -Patients' Bill of Rights (Senate BllllQ9)
TransferlAdjustment of Cash from Spedal, Trust, Internal Senrlce, and ~eserbeF
Court Fee Funds to State Bar
Credit to the Savings Resenre Account
Subtotal
TOTAL GENERAL FUND AVAlLABlUTY 14,530.0
Legislation Enacted Affecting Availability
After the Passage of the Appropriations Act of 2001
5. Additional Adjustments
Senate Bill 823 Pmmote Grape 8 Wine Indusby (ABC Permits)
House Bill 571 Slmplffy Sales Tax on Communications
House Bill 1388 Remove Sunset on Porb Tax Credn
Senate Bill 748 - Blll Lee Act Changes
House Bill 338, Section 122 Technical Corrections - Amend Blli Lee Act
House Blll 888 Turfgrass Research
Credit to the ~avlngsR esewe Account
subtotal
REVISED TOTAL GENERAL FUND AVAILABILITY 14,531?
Page El
General Fund
Current Operations
Summary of Total State Budget
by Source of Funds
2001-2003 Fiscal Biennium
FY 2001-02 FY 2002-03
($ millions) ($ millions)
Capital lm~rovernentdRepairs& Renovations 157.9
Subtotal General Fund Budget 1-4-, 530. .3 14,782.6
Highway FundRlighway Trust Fund 2,121.1 2,133.6
Federal Funds 7,066.3 7,404.0
Departmental Receipts 2,243.2 2,264.5
Total State Budget - All Sources $25,960.9 $26,584.7
Source: OfRce of State Budget and Menagement
Page 5 2
Page 5 5
I Summary of Total State Budget by Agency and Appropriations Subcommittee I
(Indudes all funding sourcea)
2002-03 Fkcal Year
I I I I I I
I w e d I ~ W B ~ T W
I ~ m d I m y ~ ~ n d
-mt Rate Adjusmmt I (243267.7~))l ( 1 ~20)3! 0 0-
1nfonnati011~ e chn~ ~Roagtey ~ 4mtumt (4,000,000) 1 o i o o
0 0 m.795
- . . General Government: Admumdon I I 61,563,497 1 0
Anditor ' 11,864,673 1 0
culowl ~ e s ~ ~ r ~ a 59,427,419 1 o
Cdowl Resollrses - Roanoke island I
I I
I
Other I Federal Total
I
5,3i2,541 / 8,480,877 1 75,4169l5
50
WO.n6
0 1 11,864,723
4,788385 ; aa,466,no
I
ECONOMY
AND
REVENUES
ECONOMIC OUTLOOK AND GENERAL FUND REVENUES I
2000-01 EXPERIENCE
Last fiscal year was marked by the largest revenue shortfall since the 1990-91
recession. The shortFal1 of $702.1 million, or 4.8% of the budgeted forecast, can be
broken down into two parts:
One-Time Special Factors ($206.5 million - 29.4% of Total)
(1) Tax Refund Canvover ($121.8 million)
The Department of Revenue has indicated that $101.8 million of personal Income
tax refunds and $20.0 million of corporate refunds were carried forward from the
1999-2000 fiscal year to July and August of 2000. The refunds are considered as
part of the nonrecurring shortfall because they were not known at the time the
2000-01 budget was adopted during the last couple of days of June 2000.
In most years, a reasonably accurate forecast of income tax refunds can be made in
early May based on the known withholding tax collections for the prior year and
refunds through April 30. However, during the Spring of 2000, major processing
delays and technology problems at the Department of Revenue made it impossible
to develop a reliable estlmate of the 'Inventoff of remaining refunds. These Issues
were highlighted in the State Auditor's performance audit of the Department.
In addition, the impact of the court ruling ("Bailey Case") that allowed an income tax
exclusion for state and local oenslons rendered the 1998 and 1999 refund
-experience useless for projectin$ Spring, 2001 refunds as it was impossible to
determine how much of the relief came through refunds (versus lower tax payments)
(2) LMaation Pavouts ($63.2 mlllion~
In September 2000 the N.C. Supreme Court ruled against the state in a license tax
case involving the financing arm of Ford and Chrysler. This meant that the State
was required to pay out $58.5 million of refunds plus interest going back a number of
years. In addition, the State was required to pay $6.0 million of refunds and Interest
in a case involving the intangibles tax on beneficial interests In foreign trusts, with
$4.7 rnillion of the payments being paid out of General Fund revenues.
NOTE: The analysis and outlook contained on these pages was developed
prior to the events of September 11".
Page C-1
(3) Cornorate Refund Acceleration A21 million)
- One of the responses of the Deparbnent of Revenue to the adverse publicity
surrounding the carryover refunds from June 2000 was an lnltiative to accelerate the
working down of a backlog of corporate tax refunds. It is estimated that $21 mllllon
of these refunds sent out during 200041 would not have been sent out until a later
year. This had a negative cash-flow impact on 2000-01.
Factors Related to Economy and Financial Markets ($495.6 million - 70.6% of
total)
(1) Rise in Enemv Prices
The production quotas adopted by OPEC began showing up In higher fuel prices
during the summer of 1999. This was one factor that led to the downward shift in
state and local sales tax receipts at about the same time as Hurricanes Floyd and
Dennis. In fact, the storms masked the effect of higher pump prices until it became
clear that the impact of the natural disasters was limited to counties with only 18% of
the retail sales base. ,
The U.S. economy has been hammered by many oil price spikes In the past The
unique feature of this cycle was that OPEC members were able to hold the line
against potential price cuts.
(2) Monetarv Policy _I
The Federal Reserve began pushing up interest rates in June 1999 to slow an
overheating economy and spewlathre stock market. During the next year, shoit-term
interest rates rose from 4 %% to 8 %%. Monetary policy ahvays works with a
time lag of at least nine months and sometimes takes a year or more to have an
Impact This meant that the real effect on the overall economy did not begin until
around the Spring of 2001. The problem is that once the economy began to change
directions, the downward slide became very steep, particulariy in the manufacturing
sector.
(3) Tech Stock Crash
A unique feature of the current slowdown is the role of the technology sector.
Capital investment in technology was one of the driving forces that led to the
unusually strong economic performance of the 1990's. Thls investment In
computers, telecommunications equipment, and technology was fueled by the
explosive rise in tech stock prices. This created an environment in which it was felt I
that the demand of new products was unlimited. This led businesses to believe that
NOTE: The analysis and outlook contained on these pages was developed
prior to the events of September 11".
. I
Page G2 ,
a high return from additional capital investments was guaranteed. Just llke
speculative real estate "bubblesn in prior recessions, this unbridled optimism sowed
the seeds for a crash once consumer demand dried up and producers were caught
with excess capacity on their hands. The market collapse finally came In March
2000. As tech stocks crashed, companies scaled back their capital plans. A few
months later they began to shed jobs. For a while severance pay packages and the
cashing in of stock options kept the economy afloat. Eventually, though, the
damage spread to the overall economy.
(4) Strona Auto Sales
This seemingly favorable trend has actually had a negattve impact on sales tax
receipts in North Carolina because taxes on vehicles are earmarked for highway
programs in lieu of the General Fund. As consumers continued to buy new cars,
spending on items subject to the sales tax was "crowded out".
ECONOMIC OUTLOOK FOR 2001-02 FISCAL YEAR
The outlook among economists for the current calendar year and the flrst part of
2002 has been worsening since last Fall. For example, in August 2000 a leading
bank in North Carolina was forecasting that the real (inflation-adjusted) growth for
the nation's economy for 2001 would be a healthy 4.2%. The expectation had fallen
to 3.1% in the December 2000 update and by April the projection had dropped to
1.7%.
This pattern is very typical of what goes on during a normal recession: the bad news
snowballs and expectations decline as if there is no end in sight However, just as
the seeds of the recession are always sowed well in advance, so Is the stimulus for
the recovery.
Once the economic indicators began imploding around the holidays, the Federal
Reserve undertook a stimulus package that was unprecedented in terms of timing
and magnitude. From January to August of 2001, short-term interest rates fell from
6W% to 3W%. The expectation in late August was that the Fed would cut rates a
quarter point one more time. In addition, the Congress had adopted a major tax cut
package that began with an Immediate $600 tax rebate.
The combination of lower borrowing rates and the tax cut stimulus is a major factor
behind the mainstream forecast that the economy will begin to recover during the
Fall of 2001 and real growth rates will be over 3% by the flrst quarter of 2002. In
addition, in past recoveries the State's economy has grown much faster than the
U.S. experience as the key-manufacturing sector turns around.
NOTE: The analysis and outlook contained on these pages was developed
prior to the events of September 11".
Page G3
There are a number of problems with this "mainstream" view of the typical business
cycle recovery. First, excess capacity In the computer and telecommunications
areas may require a couple of years to be worked down due to the magnitude of the
inventory overhang.
Another issue facing North Carolina is the loss of manufacturing jobs to Mexlco and
overseas locations. This trend, beginning during the 1995-96 economic slowdown,
has accelerated in recent years. For example, the annual drop in textile and apparel
employment has accelerated from the 740% range to 12-14% during the last 12
months. These impacts have been devastating to small towns In rural areas and the
1-85 corridor. A concern is that it is not reasonable to expect all of the shuttered
plants to be reopened when the national economy eventually improves.
Manufacturing is not the only sector of the State's economy undergoing change in
recent years. Starting in mid-1999, job growth in the financial services area (finance,
insurance, real estate) and in healthcare began slowing dramatically. The most
likely explanation has to do with mergerlacquisltion activity. When these
consolidations take place, jobs are eliminated to enhance the benefits of the
combination. It may take a while for this pattern to change.
Energy prices represent a continued straln on the economy, even though costs have
declined in recent months. The danger Is that there are signs that OPEC is
concerned enough about the decline to consider further production cuts to maintain
prices. If this occurs, consumers will not receive the hoped for relief.
A final risk has to do wlth the fact that many Wail Street analysts feel that stocks are
still richly valued. If this is the case, the rise in asset prices resulting from lower
interest rates and improved corporate profits could be limited. This would have a
dampening effect on consumer confidence and retail sales.
ECONOMIC OUTLOOK FOR 2001-2002 FISCAL YEAR
The economic outlook for the 2001-03 biennium Is based on a review of a number of
different forecasts and analyses available to the Fiscal Research DMsion:
(1) DRlMlEFA national and state outlook (subscribed to by State Budget Office).
(2) First UnionMlachovia national forecast.
(3) Specific estimates on state personal income growth by a panel of economists
representing First UnionMlachovia, N.C. State Unhrersity, and Wake Forest
University.
NOTE: The analysis and outlook contained on these pages was developed
prior to the events of September 11".
Page G4
(4) National and state-level economic forecasts of other states (posted on Internet).
The concerns over the uncertain economic outlook led to the use of official estimates
for 2001-02 that were more conservative than the outlook of most economists. The
specifics of the forecast are shown on page C-6.
200091 REVENUE ESTIMATE METHODOLOGY
The projection of General Fund revenues for the budget year Involved a three-step
process. First, the economic factors shown on page C6 were used to forecast
baseline revenues based on long-term historical r&iationships. These estimates are
shown on page G7. Some of the key revenue growth rates are on page G10.
The next step was to adjust the baseline estimates to take into account the impact of
1995-2001 session tax law changes, lawsuit payouts, delayed tax collections and
refunds, and other technical factors. These adjustments, shown on page C-8, are
included in the detailed numbers on the adjoining pages.
Finally, a judgment had to be made about the financial markets and capital gains tax
reporting. In recent years a substantial portion of the General Fund revenue
surpluses has been due to the Impact of the financial markets. The additional
receipts come in primarily through increased quarterly estimated tax payments by
high-income individuals and 'final" income tax payments due April 15. For this
analysis, it was assumed that 2001 tax year capital gains would drop 23.2% and that
the wage and salary portion of the Income tax would rise only 4.2% (compared to
7-9% growth in recent years).
The actual General Fund forecast numbers by source are shown on page G9.
These numbers reflect the actual experience for prior years and the official budget
estirnates for 2001-02 and 2002-03, as stated earlier, the baseline estimates In
Table G7 tie closely to the economic outlook because they are adjusted for tax law
changes and other special factors.
NOTE: The analysis and outlook contained on these pages was developed
prior to the events of September 1 I*.
Page C-5
ECONOMIC INDICATORS (STATE FISCAL YEAR BASIS)
ANNUAL RATES OF CHANGE I
U.S. INDICATORS
Real Economic Growth'
Nonfarm Employment
Personal Income
Industrial Production
Corporate Profits (Pre-Tax)
Short-Term Interest Rates
(Actual Rate)
Mortgage Rates (Actual Rate)
Inflation (CPI)
200091 2001-02
Actual Projected
200293
Projected
NORTH CAROLINA INDICATORS
Personal Income 5.2% 5.4% 4.3% 5.5%
Nonfarm Employment 2.1% I.7 % 5% 2.2%
Unemployment Rate (Actual Rate) 3.2% 4.3% 5.5% 5.4%
Average Hourly Earnings
(Manufacturing) 4.0% 3.8% 3.3% 3.6%
Retail Sales 5.8% 2.6% 3.6% 4.7%
Housing Starts -3.0% -8.0% -1.7% 2.2%
Auto Sales 7.5% 5.5% -3.6% 4.6%
*Adjusted for inflation.
NOTE: The analysis and outlook contained on these pages was developed ~ ,
prior to the events of September 11".
GENERAL FUND REVENUE FORECAST ($MILL)
TABLE 1: BASELINE FORECAST PRIOR TO RRlENUE LAW CHANGESIOTHER SPECIAL FACTOR*
Tax Revenue
Personal Income
Sales & Use
Corporate Incomeu
Franchise
insurance
Alcoholic Beverage
Intangibles Tax
Inheritance
Soft Drink
PrMlege Ucense
Tobacco Products
Piped Natural Gas
Glft
Other
Total-Tax Revenue
Nontax Revenue
Investment Income
Judicial Fees
Disproportionate Share
Other
Insurance Dept
Total-Nontax Revenue
Total: Tax & Nontax Revenue
Transfers:
Highway Trust Fund
Highway Fund
Total-Transfers
TotaI-General Fund Revenue
'Actual collections have been adjusted for tax law changes, lltlgation payouts, processing delays, and other special factors
Page C-7
GENERAL FUND REVENUE FORECAST ($MILL)
TABLE 2: IMPACT OF 199S-2001 REVENUE LAW CHANGESIOTHER SPECIAL FACTORS ($MILL)
Tax Revenue
Personal lncome
Sales & Use
Corporate Income
Franchise
Insurance
Alcoholic Beverage
Intangibles Tax
lnheritence
Soft Drink
PrMlege Ucense
Tobacco Products
Piped Natural Gas
Glfl
Other
Total-Tax Revenue
Nontax Revenue
investment Income
Judicial Fees
Disproportionate Share
Other
Insurance Dept
Total-Nontax Revenue
Total: Tax & Nontax Revenue
Transfers:
Highway Trust Fund
Highway Fund
Total-Transfers
Total-General Fund Revenue
, ,
Page C-8
. - - I- ~ ! . - . -~- -- - - ~- TABLE 3: ACTUAL FORECAST INCLUDING IMPACT OF REVENUE LAW CHANGESIOTHER SPECIAL FACTORS ($MILL.)
Tax Revenue:
Personal income
Sales & Use
Corporate Income
Franchise
Insurance
Alcoholic Beverage
Intangibles Tax
Inheritance
Sofi Drink
PrMlege License
Tobacco Products
Gifi
Piped Natural Gas ,
Other
Totai-Tax Revenue
Nontax Revenue
Investment Income
Judicial Fees
Disproportionate Share
Other
insurance Dept
Total-Nontax Revenue
Total: Tax 8 Nontax Revenue
Transfers:
Highway Trust Fund
Highway Fund
Total-Transfers
Total-General Fund Revenue
Page C-9
SOURCES OF INCOME ON FEDERAL TAX RETURNS FOR NORTH CAROLINA RESDENTS ($BILLION)*
Wage9 & Salaries 64.60 69.20 73.00 77.46 82.76 87.50 94.08 100.85 107.19 114.26 119.17 125.37 131.26
%Change 7.1% 5.5% 6.1% 6.8% 5.7% 7.5% 7.2% 6.3% 6.6% 4.3% 5.2% 4.7%
Capital Oams 201 2.38 2.73 291 3.41 5.1 1 7.06 8.45 938 950 7.30 7.95 6.68
%Change 18.4% 14.7% 6.6% 17.2% 49.9% 38.2% 19.7% 11.0% 1.3% -23.2% 9.0% -16.0%
% Chwgo S f d Value 105% 8.6% 2.0% 17.7% 23.9% 30.1% 24.2% 221% 7.6% -1 1.7% 10.9% 122%
IRA Distnions 0.50 0.64 0.65 0.80 0.91 1.13 1.37 1.90 2.27 2.61 3.13 3.76 4.51
%change 28.0% 1.6% 23.1% 13.8% 24.2% 21.2% 38.PA 195% 15.0% 20.0% 20.0% 20.0%
Unemployment Bendits 0.44 0.48 0.42 0.30 03 I 030 025 025 0.31 0.33 0.40 0.38 036
%Change 9.1% -125% -28.6% 3.3% -3.2% 16.7% 0.0% 24.0% 6.5% 21.2% -5.0% -5.3%
A m m a t e Taxable Inoome 82.3 1 87.90 92.16 98.02 105.81 114.38 125.03 135.35 144.65 154.06 158.64 168.10 175.82
%Change 6.8% 4.% 6.4% 7.9% 8.1% 93% 8.3% 6.9% 6.5% 3.1% 5.8% 4.6%
Esthnated Tax Liability lnc~sse 9.8% 6.8% 9.2% 10.2% 11.9% 13.5% 103% 6.9% 7.8% 3.8% 7.3% 5.5%
*Tabtllatm srcl& social in- sinm it is not subject to N d Ca rolina tax. Thus, the tabulation shown is a closa wxbnatim of taxableimpme for sbte tnx pupms.
Page C-1 1
I HIGHWAY FUND REVENUE I
The Highway Fund is supported from three primary revenue sources: threefourths of the
motor fuels tax; license and fee revenues c4ecte.d by the Division of Motor Vehicles;
and interest earned hm investment of fund balances by the State Treasurer.
FY 2000-01 REVENUES
Highway Fund collections totaled $1.259 billion in N 2000-01, a 6.6% increase over FY
1999-00. Motor fuels tax collections increased by 9.4% as a result of higher fuel prices.
Highway Fund revenues are projected to grow by $44.2 million, or 3.5% in FY 200142.
HIGHWAY FUND REVEWE
(MELIONS)
Page G12
I HIGHWAY TRUST FUND REVENUE
The 1989 Session of the General Assembly established the Highway Trust Fund for the
purpose of funding highway comction. The 2001 General Assembly permitted the use
of $680 million of Trust Fund cash balances over the next three ikd years for additional
purposes: primary mute pavement preservation, certain preikaimq engineering costs,
computgized trafEc sigaal systems and signal optimization projects, and public
transportaton The Trust Fund's primary revenue sourcm are one-fourth of the motor fuel
tax; a 3% Highway Use Tax levied when a motor vehicle title is transferre title fees and
various registration fees collected by the Division of Motor Vehicles; and inkrest earned
from investment by the State Treasurer of the Trust Fund's cash balance. In addition, the
law has required that $170 million be transferred each year from the Highway Trust Fund
to the General Fund. As a result of a chan-ee in the law the transfer in N 2001-02 will be
$1 71.7 million and will grow ova time.
FY 2000-01 REVENUES
Highway Trust Fund revenues for N 2000-01 (net of the transfer to the General Fund)
totaled $794.8, an increase of 4.4% over the previous year. Highway Use Tax collecti011s
were flaf but motor fuel tax collections were up as a result of higher fuel prices.
FY 2001-02 FORECAST
Highway Trust Fund revenues (net of the transfer to the General Fund) are expected to ,
increase by 2.8% in N 2001-02, reflehg the slower economy.
HIGHWAY TRUST FUND REVENUE
(MIL.LI0NS)
Page GI3
FEDERAL BLOCK
GRANTS
AND
SUMMARY
OF
MEDICAID CHANGES
FEDERAL BLOCK GRANT PROGRAMS
In 1981, the Reagan Administration reammended and Congress adopted the Omrubus Budget
Reconciliation Act which created a number of new "block grants" to be dishiiuted to state
govanments in lieu of nume.rous traditional "categorical" funds. This approach to state aid
reflected the President's philosophy of shifting more fiscal decision making to the states. In
addition, it allowed the A-tion to significantly cut the federal budget.
In previous years, Congress had appropriated money to the States for small- narrow-purpose
programs, such as those for disabled children, migrant health, family plwmh& and
dons. These fimds were accoqmied by numerous "strings" and substantial pape~~ork
xquimnents. The new block grants consolidated for many of these programs into
large, general purpose grants which had fewer "strings" and allowed more flexibility in the use of
the funds.
BRIEF DESCRIPTION OF THE BLOCK GRANTS
S O W SERVICES BLOCK GR4NT
The Social Services Block Graut is intended to provide federal funds to help people achieve or
maintain a ereater desree of economic self-support or self-mfhiency, to prevent abuse or
exploitation i f childregand adults who are d i e to protect their own jut&, and to p e n t
jnammkk W a n a l care or to secure m r i a t e W o n a l cace when other f o m of arre - A are not appropriate. The primary providersf t h e s enices are the 100 coun st&-y of
social servica. Examples of services funded include child and adult day care and in-home
savices for the elderly.
SUBSTANCE ABUSE PREVENTION AND TREATMENT BLOCK GRANT
The ADAMHA Reorganization Act of 1992 (PL. 102-321) split the Alcohol, Dug, and M d
Health Services Block Graut (ADMBG), thereby creating the new Substance Abuse Revention
and Treatment Block Grant (SAPTBG). The SAPTBG provides federal financial assiPtanoe to
states for the provision of prevention and treatment of alcohol and drug abuse.
MENTAL HEALTH SERVICES BLOCK GRANT
The MHBG provides federal financial assistance to states for the provision of communily based
services for the mentally ill. Services provided through the use of the block grant must be those
descrii in the state's Plan in accmbce with Federal PL. 102-321. These services include
outpatient, day treatment, psychosocial rehabilitation, emergency services, residential services,
etc.
Page D - 1
FEDERAL BLOCK GRANT PROGRAMS (Conthed)
MATERNAL AND CHILD HEALTH BLOCK GRANT
This block grant funds health services for m o t h and children to reduce infant mortality and the
incidence of preventable diseases and handicappiug conditions among children It also provides
for rehabilitative services for blind and disabled individuals under the age of 16 and for treatment
and care of children with developmental disabilities.
PREVENTIVE HEALTH SERVICES BLOCK GRANT
This block grant provides health services to low-income persons in orda to reduce the risk of
preventable illness and early death and to improve the quality of life through bet@ health.
LOW-INCOME ENERGY ASSISTANCE BLOCK GRANT
The purpose of this block grant is to provide funds to assist low-income families with their
heating fuel costs, to provide some emergency assis$nce and home weatherization or energy-related
home repairs.
COMMUNITY SERVICES BLOCK GRANT
This is a federally funded program that provides a nmge of services and activities designed to
eliminate the causes of povaty among the elderly, poor, and handicapped.
COMMUNITY DEVELOPMENT BLOCK GRANT
This block grant provides funds to assist local goyemments with community and economic
development proj- that primarily bene6t low and rncxkme-W persons.
CHILD CARE AND DEVELOPMENT FUND (CCDF) BLOCK GRANT
The Pasonal R q o d i t y and Work Oppodties Reumciliation Act of 1996 eliminated any
entitlement to child care subsidies and consolidated all federal child care program into the CCDF
block grant. The purpose of the CCDF block grant is to improve the aEodabWy, avaWBy,
and quality of child care for W e s . Most of the block grant funding must be used to provide
child care subsidies to families d v h g public assistance, making the tmmition off of public
assistance, or at risk of becoming dependent on public assistanoe. In addition, 4% of the total
all~onmustbespentonqualityandavailabilityhitiatives. CCDFrequksallproviders
caring for children who receive subsidies to meet minimum health and safety standards.
TEMPORARY ASSISTANCE FOR NEEDY FAMILIES
In August 1996, Congress passed and the Clinton -on enacted the P d
R e s p m i i t , and Work W t i e s Reconciliation Act of 1996 (PRWORA). Better knob
as federal Welike Reform, passage of PRWORA ended decades of the Aid to Families of
Dependest Children (AFDC) entitlement program and replaced it with the Temporary Assistance
for Needy Families (TANF) Blook Granl This action gave states unprecedented flexibility to
create their own welfare programs that emphasize self-dciency and work.
DEPARTMENT OF COMMERCE
Community Development Block Grant - 2002 Program Year $45,000,000
DEPARTMENT OF HEALTH AND HlTMAN SERVICES
Division of Mental Health, Developmental Disabilities and Substance Abase Services
Social Services Block Grant $8,984,601
Mental Health Services Block Grant 9,855,277
Substance Abuse Revention and Treatment Block Grant 36,455,601
Temporary Assistance for Needy Families Block Grant 9,182,280
Division of Sodal Services
Low Income Enwgy Block Grant
Social Services Block Grant
Temporary Assistance for Needy Families
Division of Facility Services
Social Services Block Grant
Division of Child Development
Social Services Block Grant
Child Care and Development Fund Block Grant
Temporary Assistance for Needy Families
Division of Vocational Rehabilitation
Social Services Block Grant
Division of Services for the BHnd
Social Services Block Grant
Office of the Secretary (Office of Economic Opporldty)
Social Services Block Grant
Community Services Block Grant
Division of Aging
Social Services Block Grant
Division of Public Health
Social ServicesBlockGrant
Temporary Asistmce for Needy Families
Preventive Health Services Block Grant
Maternal and Child Health Block Grant
Note. The fiigares listed above for the Department of Health and Human Services
do not reflect the total amount of the Block Grants. due to various transfen
to other Departments.
Page D - 3
CHANGES TO THE MEDICAID PROGRAM
STATE
During its 2001 Regular Session, the N.C. General Assembly enacted a $6.3 Billion
budget for the Medicaid Program for SFY 2001-02 and a $6.9 Billion budget for SFY
2002-03. State funding for the Medicaid Program totals $1.98 Billion for S N 2001-02
and $2.22 Billion for SFY 2002-03.
During its dehiaations on the proposed budget, the 2001 General Assembly reduced the
General Fund appropiations for the Medicaid Program by $44.4 million for SFY 2001-
02 and $99 million for SFY 2002-03. The reductions include implementation of a
prescription drug utilization management program, reduction of the dispensing fee for
brand name prescription drugs, increasing recipient co-payment for braud name drugs to
$3, limiting personal care services to 3.5 hours per day, reducing physician rates to 95%
of Medicare rates, limiting Medicare crossover claim payments to 95% of Medicare rates,
and modifjring the asset policy for receiving Medicaid
The 2001 General Assembly also made the following policy changes to the Medicaid
Program and increased the budget for the program to support these changes:
Increased General Fund appropriations by $35 million for SFY 2001-02
and $79 million for SFY 2002-03 to cover the d m in th e federal
6naucial participation rate.
Provided Medicaid coverage for uninsured women under age 65 with
breastorcavical~~~.cer.
Incmsed funding for the Community Alternatives Programs for Children
Increased funding for the Community Alternatives Program for the
Mentally R ~ e v e l o p m e n t a l lDy i sabled.
Provided funding to increase access to dental services for children and
adults.
The 2001 General Assembly also enacted other Medicaid policy changes:
Exempted medical coverage policy h m APA rule-making and adopted a
separate and quicker process for the implementation of medical coverage
policy under Medicaid.
Required the Department of Health and Human Service% to develop and
implement a plan to reduce growth in the Medicaid program for SFY
2002-03 to 8% or less of the total expenditures for SFY 2001-02.
Required the Division of Medical Assistance to prepare a five-year fiscal
analysis documenting the increased costs on implementing any change in
medical policy and submit it for Departmental review.
Required the Department of Health and Human Services to consider
implementation of the findings and recommendations in the "North
Carolina Medicaid Benefits Study."
FEDERAL
No significant federal changes occurred in 2001.
DISPROPORTIONATE SHARE FUNDS
Disproportionate Share @SH) Funds are Medicaid payments made to health care
providers who deliver services to large numbers of uninsured patients. DSH payments to
health care providers are made in addition to reimbursements for savicea provided to
Medicaid eligiile patients. Congress originally authorized the payments as a funding
mechanisn to offbet the cost of uncompemated m e for' health care providers,
particularly hospitals, in an effort to improve access to health care for the uninsured.
Prior to the enactment of The Balanced Budget Act of 1997, federal law permitted states
to draw federal funds up to a maximum allotment established by the federal Health Care
Financing Agency (HCFA). .The law allowed states to match federal fuuds for DSH
payments with direct appropriations or with funds appropriated to a governmental unit for
the delivery of health &re to the mimud. States were required to obtain approval of
their State Medicaid Plan for drawing DSH payments from HCFA.
Under the amended federal law (effective October 1997), DSH allocations are set forth in
law on a state-by-state basis. The law provides for gradual reductions in DSH allocations
to states beginning 1999 through the yem 2002.
North Carolina uses state appro&ations to the five state hospitals (UNC Memorial,
Dorothea Dix, Broughton, Cheny and John Umstead) as the non-federal match with
which the State draws disproportionate share payments. The 2001-03 b i d st ate
budgets anticipate $107 million each fiscal year in DSH payments to the State Treasmz.
Section 21.23 of Chapter 424 of the 2001 Session Laws stipulates that appropriations to
the Medicaid program that become available due to federal -onate Share
receipts will be deposited as nontax revenues. The St.a te. Treasurer will reserve my DSH payments in excess of $1 07 million for futrne Qpropn&on.
Page D - 5
SUMMARY:
GENERAL FUND
APPROPRIATIONS
2001-2003
FISCAL BIENNIUM
Page E-I
Page E-3
Page E-5
EDUCATION
Overview: 2001 Session Fiscal and Budgetary Actions
Community Colleges
Recammended Budget $&,021,974 $w8,021,S74
A Community Wage Syatam ORloe
1 Operating Efflclencles
E l i mi nate the library orderi ng and receiving services and two
library clerk p s i tions totaling $59,543. Col leges w i l l be
responsible for ordering and receiving library materials.
El i minate a vacant educational consultant position and
operating funds totaling $64,432. El iminate a vacant
position i n the Office of the President totaling $23,396.
8. stete Aid - Community College lnatltutiom
2 Compensatory Education
Reduce the appropriation for Compensatory Education from
$1,150,537 to $l,c00,OM).
3 Worker's Compensation
Reduce the appropriation for Worker's Compensation from
$976.629 to $703,702 to reflect actual expenditures.
4 Unemployment Compensation
Reduce the appropriation for Unemployment Compensation from
$521,766 to $440,751 to reflect actual expenditures.
5 Reduce Llablllty Insurance
Reduce the appropriation for Liabi li ty Insurance fmm 853.m
to $33.000 to match actual expenditures.
6 Eliminate Prlority Programs
Eliminate Priority Programs since this item was intended to
support federal funds that are no longer avai lable.
7 Reduce Human Resource Development Funds
Reduce the appropriation for Human Resource Development from
$6,951,895 to &I,OOO,OM). The program wi l l be reorganized
and the classes w i I I be offered as Occupational Continuing
Education classes. (SB 1005, Section 30.3).
8 Reduce Special Allotments
Reduce the Special Allotment line item from 32,244,332 to
$1,683,249.
Community Colleges
h=
Overview: 2001 Sesslon Flscal and Budgetary Adions FY 200192 FY 200293 =
g Community Setvice Block Grant Adjustment ($317,738) R ($317,738) R
Reduce the funds allocated for hobby/leisure courses from
$1,817,738 to $1,50O,OO. Col leges wi l I make every effort to
ensure that this reduction does not result i n a lessening of
senior services.
10 Eliminate the State Subsidy to Prlvate Diploma Nursing ($200,000) R ($200,000) R
Programs
El iminate the recurring State subsidy to private diploma $200,000 NR
nursing programs. Provide non-recurring funds for the prcgram
i n the f i r s t year of the biennium.
1 1 Adjustment for Over-realbed Receipts ($l,OOO,OOO) R ($1,OOO,OW) R
lncrease the budgeted amount of tuition and registration fees
to more accurate1 y reflect anticipated receipts.
12 Eliminate Trustees Association Education Fund ($25,000) R ($25,000) R
Eliminate the appropriation for educational materials for the
Trustees Association.
13 Enrollment Adjustment $10,000,000 R $10,000,000 R
Provide funds for cclamuni ty col lege enrol lment growth i n
accordame with the enrol lment funding formula.
14 Faculty and Professional Staff Salary Enhancements
Provide the Conmwnity Col lege System with an additional 1.25X
for faculty and professional staff salary increases. This
increase of $6.9 million i n recurring funds i s located i n the
Compensation Reserves section of the budget.
I6 Other Cost Adjustment
Provide a 2% inflationary increase to the 'Other Costn part
of the funding formula. lncrease amount al located per FTE
for 'Other Cost' from $175 to $178.50.
18 Maintenance of Plant
Increase the Mai ntenance of Plant appropriation from $513,668
to $787.877. The purpose of this increase i s to hold
harmless those colleges that had been receiving Maintenance
of Plant funds when additional schools became eligible. (SB
1005, Section 30.13).
17 Fayettevliie Tech Botanical Lab Funds
A nonrecurring grant-in-aid to Fayettevi l l e Tech to develop a
regional botanical laboratory i n partnership with the Cape
Fear Botanical Gardens.
Community Colleges
Overview 2001 Session nscal and Budgetary Actions PI 2001-02 FY 2002-03
18 Crhnlnal Justice Reorganhation ($350,OM)) R ($350,000) R
Reorganize the Criminal Justice Regional Planning and
Training Program into three regions to be determined by the 3.00 -3.00
System Office. Reduce the appropriation for the Criminal
Justice program from $689.896 to $339,896.
D. REWVW and Other Funds
18 Reduce State Board Rese~ve ($350,000) R ($350,000) R
Reduce the approptiation for the State Board Reserve from
$1,150,000 to 8800.WO.
20 Increase Need-Based Financial Aid $1,062,806 R $1,062,806
increase the Need-Based Financial Aid fund from $5,000,000 to
$6,062,806.
D. Tuffion and Fees
21 Increase Curriculum Tultlon Charge ($10,162,806) R ($10,162,806) R
Increase the in-state tuition charge per semester hour by
$3.50 from $27.50 to $31.00. Increase the out-of-state
tuition charge per semester hour by $3.M from $169.75 to
$173.25. It i s anticipated that for most students, this
increase w i I I be off-set by federal and state financial
assistance prcgrams.
Total Legislative Changes
Total Position Changes
Revised Budget
Community Colleges Page F 3 1
Special Provisions
2001 Session: SB 1005
Department: Community Colleges
Section 30.1
me: Community College Funding FldbUity
Summary BoUerplate language allowing community colleges to establish their budgets according to their
local missions. Umits the transfer of funds fmm faculty salaries to 2% systemwide.
Section 301
Pennr Transfers of FMds to the New and Expanding Industry Tralning Proarm
Summary Allows the Governor to transfer funds to New and Expanding Industty Tralning from other
agencies or programs funded fmm the General Fund.
Section 30.3
me: Reorganioation of the Human Resources Development Program
Summary Allows the colleges to offer Human Resources Development Courses as Occupational Continuing
Education Courses and earn budgeted for those courses. Rovides for fee wahrers for
certain eligible populations and requires the State Board of Community Colleges to report to
Education OversigM on the reorganhation by January 1,2003.
Section 30.4
Summary Prevents unexpended MIS funds from reverting so that they may be paid out in accordance with
the contract perkxi for the development of the system. '
Community Colleges
Section 30.5
Title: Employment SaourIty Cornrnlsslon Funds
Summary Appropriates $20,054,298 from the Employment Searrlty Commission Tralnlng and Employment
Account for:
Equipment - $1 9,154,290
Regional and CcopmUve lnfflathres - $400,000
Focused IndusMal Training - $1,500,000 .
New and Expanding Industry- $7,000,000
Of the $1.5 million appropriated for FIT, $250,000 shall be allocated to Catawba Valley CC for the
oparation of the Hosiery Center and $250,000 shall be allocated to Gullford Technical CC for the
operation of the Pledmont Triad Center for Advanced Manufacturing.
Appmpriates $7,013,574 from the TBE Account to ESC for administratbe msts for the account
and for other reemployment services.
Directs that any additional funds MI be spM benveen the mmmunity colleges and ESC 80120.
Changes the Trainlng and Employment Account triggers. If the Unemployment Insurance Fund
balance is below $900,000,000 on August I, or C at any tlme in the twelve months preceding
August 1 the state unemployment rate rises above 4.3%, the Training and Employment Account
does not apply in the following calendar year.
Changes the Trainlng and Employment Account sunset to January 1,2000.
Keeps the unemployment tax rate revenue n e W for employers. For axample, If the TBE
~c&unt applles, then the base rate will be 1.0% plus a 02% surcharge. The employer pays
12%. If the TBE Account does not apply, the base rate will be 120. The employer pays 12%.
Section 30.6
Mod[fy Tenn of Community Wege Faculty Contrao$
Summary Diracts the State Board to raqulre that all full-time community college faculty contracts be
converted to ninemonth contracts for the fall and spring semesters. Faculty who are hired to
teach in the summer term shall have supplemental contracts for the summer. No changes in the
salary of any faculty member shall result from these modifications. The purpose of this proviaion
is to provide the Ganeral Assembly with the data necessary to make informed declslons regarding
faculty salaries and funding for the summer term.
Section 30.7
TWe: . Realignment of Accounts for ImrtlMloltal and AdmfnEBbatlve Support
Summary Combines four stateaid accounts in the community college budget to better reflect actual pnctice.
Section 30.8
me: study M Dkqmndes in Faoulty Waries
Summary Authorizes the Joint LeglslaUve Education Oversight Comrntttee to study faculty salaries at
various colleges to determine why so much variance exists among the colleges' aversge faculty
salaries.
Community Colleges paseF8
SectiDn 30.9
Title: State Board R e a m Anooatiorrs
Summary Dire& the State Board of Community Colleges to use $100,OW) from the State Board Reserve
for the 2000-01 fiscal year to assist small, rural, low-wealth community colleges wlth operation
and maintenance of plant costs Cthey need to assist new or expanding industries in their service
delivery areas.
Section 30.10
Title: Coltsolldate end Coordinate Worldbm Development Pr-8
Summary Transfers the Bureau of Training lnitlatives and the Apprenticeship Program from the Department
of Labor to the Community College System. Requires the State Board of Community Colleges to
report to Edumtion OverslgM 30 days prior to mak1n.g any changes to the programs. No changes
to the programs, other than the intial transfer, may be made before January I , 2002. Transfsr of
the Bureau of Training lnitiathres is efktive July 1,2001. T d e r of the Apprenticeship program
becomes effectbe when the U.S. Department of Labor approves the transfer.
Section 30.11
me: ~ m o f ~ e s h w a n 0 8 9
Summary Transfers the remaining cash balance from a now defunct communky college scholarship fund
into the Need-Based Financial Aid fund.
Section 30.12
Tie: ~ ~ B u n m mTbaheIc al Community College Fun& Do Not Revert
Summary Extends the reversion date for funds appropriated for the Small Business Center at Ashevtlla
Buncombe Technical Community College until the end of the 2002-2003fiscal year. Allows the
funds to be used for capital and operating expenses.
Section 30.13
Tie: Malntananoe of Plant Operatiom,
Summary Changes G.S. 115D-31.2 to allow colleges which quallfyto receive a pro rata share of funds
appropriated by the General Assembly for maintenance of plant
Section 30.15
Summary Allows the State Board to use up to 8100,000 of the funds appropriated for FIT to pay reglstretion
fees and material costs for safely wumes.
Tlfle: Community College TmteeMrravel Rebnbrrreement
Summary Umlts the use of state funds for Local Eloards of Trustees' travel to in-state travel. Local Boards
must use I d fun ds for wt4-state travel.
Saction 6 of House Bill 231, Appropriations Modlflcetions and Other Changes, SL 2001-513,
repeals this provision.
Community Colleges
Overviw. 2001 Session Fiscal and Budgetary Actions
Public Education
I I
( - F j jzzq
Recommended Budget $5,923,802,924 $6,021,031,149
Legislathre Changes
A More Accurate Pmjectlon of Budget Requirements
22 Additional Adjustments In Average Salary Projections ($8,497,668) R ($8,497,668) R
In addition to the annual Continuation Budget adjustment for
average budgeted salary of certified personnel, a more recent
review of certified personnel salaries f ram updated salary
data, identified an additional reduction i n projected salary
needs for N 2001-02.
23 School Bus Purchases
Reduce funding for PI 2001 -02 based on a revised school bus ($23,915,692) NR
replacement schedule.
24 Payments for Teacher Unused Vacation Days ($4,000,000) R ($4,000,000) R
Adjust funding to reflect recent expenditure experience.
25 Mentor Pay ($3,000,000) R ($3,000.000) R
Reduce funding to reflect recent expenditure experience.
26 Transportation Adjustment: Bus Driver Physicals ($535,000) R ($535,000) R
The Division of Motor Vehicles i s delaying the implementation
of the requirement that bus drivers must have a physical
e m i nati on every two years. Twenty-f i ve thousand ($25,000)
w i l I remain i n the budget for pi lot projects.
27 Transportation AdJustrnent: Diesel Fuel Cost ($2,990,000) R ($3,048,8Qo) R
The economic forecast models project a 10.5% decline i n
diesel fw l cost from the current year's average. The
current average cost i s $0.92 per gal Ion and the Conti nuation
Budget was based on an estimated cost of $1.05 per gal Ion.
This adjustment budgets diesel fuel at $0.92 which i s the
current level. AI l school buses uti lize diesel fuel.
28 Transportation Adjustment: Inventory Adjustment
June 30, 2002 fnventory levels (oil, tires, and parts) were ($4,000,000) NR
approximately 6s of annual needs. This one-time reduction
i s to reduce current inventory levels to a more optimum level.
Public Education m F 7
Overview: 2001 Sesslon flscal and Budgetary Actions
28 Revised ProJectlon of Average Daily Membership
To eliminate the possibility of duplicating the inclusion of
some students i n projecting a local school administrative
units average daily membership and to project a more
realistic estimate of future student populations.
30 Classroom Materials/lnstruotion SupplleeiEqulpment
Adjust the increase for inflation to a 3 growth (in line
with the Consumer Price Index) from the 5% growth used i n the
Continuation Budget.
31 School Bulldlng Administration
Estimated new pub1 i c schools opening i n N 2001 -02 has been
revised to 35 (from 70).
32 At-RIsk Student SenridAItemathre Schools
Each high schml receives funding to employ a school safety
officer. The estimate of new high schools scheduled to open
i n FY 2m1-02 has been reduced to 10 (from 20).
33 C M e r School Resenre
Funds i n the category are used to distribute the applicable
State funding to charter schools for students attending a
charter school who were not previously i n a public school
(private or home schooled). Since the number of charter
schools has reached the maxim legislated number of 100, the
reserve can be reduced to 82 mi 1 lion i n FY 2COl-02 and $1
million i n FY 2002-03.
34 Driver Education
To reflect reductions to the Highway Fund for revised Average
Daily Membership Projections and an adjustment based on
average annual reversions.
Reduction to Receipts: ($1,630,739)
B. Redudion of Admlntsbetion Cost
35 Safety Assfstanca Teame
El i mi nates funding used for Statewide consultants .
36 Regional Education Senrioe Alliances
Reduce State funding distributed to local school
administrative units that could be used to support the
Regional Education Service A1 liences to $3 mi i t ion (a 55.4%
reduction).
37 Central ORice Admlnlstratlon
A 1.97% reduction from N M00-01 al locations for each local
school administrative unit. The State Board i s directed to
develop a revised formu la for N 2002-03 that eliminates any
permanent hold harmless i n the formula.
Public Education Page F 8 Overview: 2001 Sessbn Fiscal and Budgetary Actions
38 Uniform Education and Reporting System (UERS)
Based on the current NC WISE implementation schedule, a one-year
reduction i n funding i s possible. FY 2001-02 funding
level w i l l be $12,518,927.
38 Depattment of Public Instruction
The Department of Public Instruction w i l l eliminate at least
25 positions and w i l l reduce other costs. $533,730 can be
transferred f ran the UERS budget i n FY 2001 -02 and additional
$466.270 i n FY 2002-03 to DPI to reduce contractual costs by
internal i zing work to support the Uniform Education and
Reporting Systems (UERS) . This transfer i s to al low
currently contracted services to be converted to positions.
25 I denti fied Posi ti ons ($ 942,344)
Contracted Services ($1.502.269)
Ce l l u 1 ar Phones ($1 1,505)
Equipment ($194,251
Elimination of Stds Board ($175,041)
Contracted Personal Services ($41,775)
Travel ($195.503)
Other Aid ($73,Cm)
Printing ($24,506)
Postage (323,876)
Dues and Subs ($15.930)
C. other Budget AdJusbn~nta
40 Vocational Education - Tach Prep
Eliminates State funding for Tech Prep. Federal funds i n
excess of $3 mi I l ion support this program.
41 Appmpdations to Non-Publlc School Agencies
Eliminate funding for AVID pi lot program. Reduce funding to
the fol lowing Agencies by 5U% and make non-recurring: A+
Schools, ExplorNet, TRE. Gecgraphic A l l iance. Cued Speech
Center, Global Curriculum. Reduce funding to Schools
Attuned, Public School Forum, Ci ties/Camrmni ties i n Schools.
NC Network, and Teacher Cadet programs by 10%.
D. lmprovhg Student Performance
42 Targeted Class Ske Reduction and lnstructlon
a. In schools with 80% or more of the students eligible for
free or reduced lunch and with 4.5% or more of students
performing below grade level, lower class size i n grades K-3
to 1 : 15. Require teachers al lotted for these grades to be
assigned to teach i n these grades.
Public Education
Overview: 2001 Session Flscal and Budgetary Actlons
43 Targeted Class Size Reductlon and lnstructlon
b. Extend the contract for a l l teachers i n these targeted
schools for five days (5) i n 2001 -02 and ten days (1 0) i n
Mm-03. The f i r s t year days wi l l be for staff development i n
methods to individualize instruction i n smaller classes. The
second year wi I I add 5 instructional days.
44 Targeted Class Size Reductlon and Instruction
c. Provide one additional instructional support position for
each of these targeted schools.
45 Targeted Class Size Reductlon and lnstructlon
d. Eliminate regular do1 lar allotment for teacher assistants
i n grades K-3 i n these targeted schools due to significantly
lower class size.
46 Targeted Class Size Reductlon and Instruction
e. Provide funding for outside evaluation of targeted class
size reduction initiatives.
47 Targeted Class Size Reductlon and Instruction: Kindergarten
Lower class size ratio i n kindergarten to one teacher for
every 19 students i n 2001-02 and to one teacher for every 18
students i n 2002-03.
48 Class Size Reduction/ lnstructlon: Continually Low-
Perfonnlng Schools
a. Reduce class-size i n schools identified by the State Board
of Education as continual ly low-performing i n grades K-3 to
1 :15 and i n grades 4-5 to 1 :17.
40 CIass She Reduction/ lnstructlon: Continually Low-
Perfonnlng Schools
b. Reduce class-size a1 lotment i n middle schools (Grades 6-8)
to 1 :17 and i n high schools to 1 :20 for continually low-performing
schools.
50 Class She Reductlonl Instruction: Continually Low-
Perfonnlng Schools
c. Extend the contracts for additional teachers i n elementary
schools and for a l l teachers i n middle and high schools by 5
Qys i n 21101 -02 for staff developrent and add an additional 5
days of instruction for middle and high schools i n u#);1-03.
These apply for schools identified as continually low-performing.
51 Teacher Recruitment lnltiatlvea
a. Have the Education Oversight Colmmittee study methods to
provide benefits to part-time teachers to attract more
certified teachers back into the classroom.
Public Education
Overview: 2001 Session Fiscal and Budgetary Actions
52 Teacher Recruitment lnitlathres
b. Teacher Assistant Scholarships
Additional scholarship funds for teacher assistants taking
courses at community colleges that are prerequisites for
teacher certification programs. (Major initiatives i n the UNC
budget wi I I improve avai labi li ty of teacher education
programs for teacher assistants).
53 Teacher Recruitment lnltiathrea
c. To attract teachers in the shortage fields of mathematics,
science and special education and to entice teachers i n these
specialties to teach i n schools with large numbers of at-risk
students. In middle schools and high schools with 80% or more
of the students eligible for free or reduced lunch or with
50% or more of students performing below grade level, provide
an annual bonus of $1,800 (paid monthly with matching
benefits). Teachers must be certified i n and teaching i n
these fields and wi II remain eligible for the bonus as long
as they continue to teach i n eligible schools.
64 ABC Bonus&
Provide funding for ABC bonuses for schools meting or
exceeding expected growth i n 2000-01.
65 ABC Bonuses: Pilot Districts
Provide funding for school personnel i n five (5) pi lot school
districts for additional bonuses earned under the
disaggregated performance pi lot project directed by the
General Assembly i n 1999 (Sec. 8.36. SL 1999-237: HB 168).
If a school achieves the pi lot program goals, a l l certified
personnel assigned to the school wi I I receive up to $750 and
teacher assistants up to $325 (these awards are i n addition
to standard ABC bonuses). LEAS not eligible for low wealth
or small county supplemental funding must contribute 2% of
the total cost of the bonuses.
58 Character Education
Funding for expansion of character education program.
67 Children with Special Needs
Increase funding per student for chi ldren with special
needs. The appropriation per funded headcount increases
$37.98 to $2.650.28 (before increases for salary increases) .
SB Impmvlng Student AEcountablllty
Increase funding for additional instruction for students
performing below grade level.
Public Edumtion
Overview: 2001 Sesslon Fiscal and Budgetary Wons
69 Umited Engilsh PIoRciency
Appropriate additional funds to serve students with limited
proficiency i n English. This brings the total funding for
this purpose to $23,037,655 for M 2W1-02 (prior to
adjustments for any legislated salary increase).
60 Low-Wealth Funding
Increase funding for school districts i n counties with less
abi li ty to generate local resources for pub1 ic schools.
81 Small County Funding
Increase formula funding to counties with fewer than 3,239
students (or 4,080 i f property tax base per student i s lower
than state average). This wi I I increase base allotment to
each eligible LEA by $74,074.
62 InstrudIonal Supplles
Expand funding for instructional supplies. Language w i l l
direct that each LEA to al locate a minimum of $100 to each
teacher for purchase of supplies.
63 School Accountability Report Cards
Funds for the Education Cabinet to develop, publish, and
distribute school accountabi l i ty report cards. The cards
should be designed to supply parents information on school
characteristics and performance.
64 Average Dally Membership Contingency Reserve
Provides additional funds to the State Board of Education to
address transitional year funding for local school
administrative units with new charter schools and for f i r s t
month al lotment adjustments to local school administrative
units with higher than expected enrol lment growth.
RS NCWISE OWL'S On-Una Subsgtptlons
NCWISE OWL i s operated by the North Carolina Department of
Public Instruction and offers on-line resources (periodicals.
encyclopedia, etc.) for K-12 teachers and students. Federal
resources that have been discontinued have covered the
subscription cost. The Department of Public Instruction wi I I
work col laboratively with the Department of Cultural
Resources and report to the Joint Information Technology
Appropriations Subcornmi ttee by March 15. 2002 as to the
feasibility of merging NCWISE OWL with NCLIVE (which also
offers owl ine subscription services).
Public Education Page F 12
Overvi~2~0:0 1 Session Fiscal and Budgetary Actions
Total Leglslalue Changes ($117,333,543) ($98.842603) R
$73,170,983 NR $0 NR
TotalPosYtlonChanges . 287.50 680.00 Revised Budad 65,879,640364 85,922,188,546
Public Education
Special Provisions
2001 Session: SB 1005
Department Public Education
Section 28.1
Me: Utigation Reserve Funds Do Not Revert
Summary Allows funds set aside for lawsuits to carryover and allows up to $500.000, from funds
appropriated to the State Board, to be added to the reserve.
Section 282
Me: Chlldren With DlsabllItiaa
Summary Specifies the number of students funded (158,825a)n d the appmprlatlon per funded student
($2,650.28)w, hich will be adjusted for legislated salarylbenefit changes. The fundlng per student
is an increase of $37.98 from FY 2000-01 (beforaed justment for salarylbenefit changes).
.
Section 28.3
me: Funds For Academically Studenta
Summary Specifies that 4% of average dany membership (ADM) shall receive funding (52,042)a nd the
appropriation amount ($878.10) per funded ADM, which wlll be adjusted for legislated
salaryibenefit changes
Section 28.4
me: At-Rtsk Studant S e r v I o e s lAl ~Sc hools
Summary Allows the North Camilna Deparbnent of Public insbudon to use $200,000 from funds
appropriated to studyheport on alternative schools as outlined in (115G12(24)).
Section 28.5
me: Uniform Education and RepDlting System (UERS)
Summary Nows unexpended funds as of June 30,2001 and June 30,2002 to carryover for use in the next
fiscal year. Funding is used to develophmpiement the new student Information system NC WISE.
Section 28.6
we: Supplemental Funding In LowWaalth Counties
Summary W t e s the description of the formula used to distribute funding to eligible school systems (no
change from prevlous yeam).
Adds a report from lo& school adminlstratfve unlts on how the funds were used for teacher
' rec~itmentc, losing the achievement gap, improving student accountability, at-risk students, and
kee~lnasc hools safe.
Aliokiocal school systems to use these funds to pay for contractual services (not to exceed
$10,000) from the Department of Public instructJon for help wlth plant operations as an additional
Public Education Page F 14
Title: Small SehDol System Supplemental Funding
Summary Restates the description of the formula used to distribute funding to eligible county school
systems. Minimum average daily membership was increased from 3,150 to 3,175. Increases
the base funding for instructional supplies and equipment to $540,074 (the amount was
$466,000). This is a funding increase of $74,074 per eligible school system.
Adds a report from local school adminlstrattve units on how the funds were used for teacher
recruitment, dosing the achievement gap, improving student accountability, at-risk students, and
keeping schools safe.
Section 28.8
Title: Funds To Implement The A6Cs Of Public Education ProQram
Summary Authorizes the State Board of Education to utilize funds appropriated for FY 200102 to assure
that inmntlve awards earned In FY 200041 are paid.
Section 28.9
Tie:. Students With Limited EnglEsh Pmficienoy
Summary Restates the formula which includes an expansion of $1 million. Section 28.9(b) requirea a
headcount by December I and clarifies when students are removed fmm the headcount
Section 28.10
Title: ExpmdMres for Driver Education Cgrtificatea
Summary Allows the use of funds already appmpriated for Driver Education to be used for driving eligible
certificates (normally amund $35,000).
Section 28.11
Tide: T bSalar y Schedules
Summary Outlines teacher salary schedules for FY 2001-02. Average teacher salary increase is 2.86%.
Range of raises is from 1 % for teachers wlth 29+ years of experience to 6.92% for fourth-year
teachers.
Section 28.13
Tie: Wmol A d m i M r Salary Schedules
Summary Outlines salary schedules for principals and assistant principals. The average salary increase for
principals and assistant principals is the same as for teachers and instructional support
personnel.
The 1% salary increase for safe schools and the 1% salary increase for meetinglexcmding ABCs
expectations are discontlnued; however, any additional percentage increase awarded since 1907-
98 shall continue. The 1% bonus for safe schools and the 1% bonus for mwtlnglexoeeding
ABCs expectations are discontlnued after h u a e s are paid for FY 200041 performance.
Section 28.14
Summary Directs the transfer of funds for a $625 annual salary hcreese for central office adminisWrs.
Local Boards can determine the amount of raises to give employees in this category.
Public Education paeeF15
L Section 28.15 r
Summary Directs the transfer of funds for a $825 annual salary increase for noncertiRed personnel
(includes: teacher assistants, clerical, custodians, and bus drivers). A full-time employee that
works for the employment term of the local school administrative unit for that employee (10,11, or
12 months) will receive the $625 salary increase. Employees employed less than 100% Mi
receive a porbion of the $625 based on thelr percent of employment
Section 28.16
me: Hlgh School Exlt Exams
Summary Allows the State Board of Education to use up to $3 million fcr the continued development of the
High School Exit Exam. Funds can also be u dto purchase test scoring equipment and
revisions to the reading and writing assessments.
Section 28.17
Summary A Principal's decision on promotion Mi not be solely b a a on test scores; test scores used in
such a decision must be validated.
Local board policies must Include opportunities for parents to discuss decisions to retain a child In
the same grade.
State Board of Education must study costs and benefits of providing parents with a copy of
standardhed tests.
A personal education plan for focused intervention must be in place for all students performing
below gmde level on end of grade tests. Students must be identitied as at-risk for academic
failureas early as possible.
Umb the number offleld tests at a school to a maxlmum of two per grade level. NOTE: Section
116 of House Bill 338,2M)lTechnlcal Corrections, SL 2001487 modified this language to allow
the SWe Board of Education to waive this llmit U it is determined that without the W e r the
reliability and validity of a s p d c test is wmpmmised
Outllnes policies that must k In place for testing children with dlsabtities.
A complete review ofthe State's testing program is also required before the next lagislathre
session.
Section 28.18
me: PDot amgram Authorldng The Use Of Mentar Funds For FuIl-Tbne Mentom 1
Summary Pilot p min Me cklenburg, Wake and Forsyth Counties. These three school systems are 1
authoiaed to employ full-time mentors who can SEN8 up to a total of 15 Rrst andlor second year
teachers. The State mentor funds ofS1OO per month (maximum of $1,100 per year per teacher
mentored) can be used to help pay for these full-time mentors. I
Requires annual report on rjfktiveness on retention of teachers. I
Public Education
4
i
Public Education
Section 28.19
TMe: Study of pmgmms for lnftlaay CeiMad Teaohm
Summary Requlres State Board of Education to study performancebased limnsure, use of mentors and
other strategies to improve retention of newly cerWied teachers. Report due Feb~ar1y, 2002 to
Education Oversight Committee
Allows initially cettified teachers to take up to 3 days of paid leave during second year of
employment to work on performance based licensure requirements. Allows simllar leave in third
year if licensure requirements have not been completed. Leave is allowable only wlth supenrisor's
approval.
Section 28.20
me : Phase In ADM ReduEtiom Due to ~harhvS chools
Summary Limits fiscal impact on local school administrative units to a maximum loss of 5% of their average
daily membership (ADM) a year due to opening of new charter school in a local district
Phases out hold-harmless funding for counties previously covered beginning in 200203.
Section 28.21
Title: Medlcaid Outmat%
Summary Spells out methods of repayment In case of audit exceptions in reimbursement of federal funds to
local school administrative units for Medicaid outreach.
Section 28.22
me: Funds for NontnatfuEtional Support Personnel h4ay be Used for Staf Dewlopent
Summary Allows transfer of up to 3% of this allotment for staff development purposes.
W o n 28.24
me: Study Textbook MstribYtlon System
Summary Requlres the State Board of Education to contract wlth a private consultant to determine the most
effectbe and efficient method for providing textbmks to local schools. Report due to Education
Oversight Committea by April I, 2002.
Section 28.25
Title: Abolish the North Camlina Skmdards Board for PuMIc School Adm-n
Summary Eliminates this Board and transfers essential functions to the State Board of Education. This
reduction is a part of the $3.2 mnllon reduction to the Deparbnent of Public Instruction.
W o n 28.26
TMe: Quldeanes for Charter School, Emollment
Summary Clarifies language related to when the State Board of Education is required to approve the gmwth
in a charter school's enrollment by more than fO% In one year. No requirement for review if
Increase is no more than 10% of previous year's enrollment or is in accord with growth plan in
charter application.
Section 28.27
Summary Continues authority for State Board of Education to use up to $50,000 annually for a charter
school advisory commlt&ee and evaluation of charter schools.
Summary Requires NC Teacher Academy to include sMf development programs focused on teachlng in at-risk
schools. Reaulres that 10% of Teacher academy budget for 2001-02 be used to ~rovlde
training for elementary teachers assigned to small&class-sbss.
Section 28.29
Title: Mod@ Law Regarding ChIldren wlth DlsabIlitles
Summary Restructures the advfsory group Ccuncn on Educational Services for Exceptional Chldren to
comply with federal requirements in the IndMduals with Disabilffles Education Act (IDEA).
Requires Joint Legislathre Education Oversght Committee to review any changes needed to bring
State laws dealing with special education and services to chfldren with dbablities into compliance
w.. i. t- h . I.-D -EA .
Adds requirement for State Board of Education to adopt rules on educational prcgrams for
pregnant students to enable them to successfully complete publlc school.
Section 28.30
Title: Closblg tb Achievementoapevelent Gap
Summary Subsections a. 8 b. require State Board of Education to Include a "closing the gap" component in
its school level measurement of student performance and to report to the Joint Education
Oversight Commktee data by subgroups of students.
Subsection c. requires school improvement plans to indude plan to prepare all students to read
by the time they enter the second grade. Teachers must noWy parents if children are not reading
at grade level.
Subsection d. enmurages State Board of Education to consider If standards or other criteria fmm
grades K-2 should be Included in a school's performance assessment
e, Requires State Board of Education to adopt model guidelines for establishment of local task
forces on closing the achievement gap. Local boards of education have discretion over
establishment of such a local task force.
f. Reauires State Board of Education to remrt to the Joint Education Overslaht Committee and to
the sbdy Commission disaggregated data on dropouts, suspensions, expulhlons and placement
in alternative programs, and to make the data available to the public.
Subsections g., h. and I. reauthorize the Commlsslon on Improving the Academic Achievement of
Minor& and At-Risk Students for two years. Requires Commission to study need for addfflonal
resour& to close the achlevement gap.
Section 28.31
me: Clarily Law RegardIng Mentors for Sacond-Year Teachera Summary hovides mentors to second-year teachers whose flrst year of teaching was in a private school,
charter school. or another state.
Public Education p a s a ~18
Section 28.32
me: Funds for the Testing and Implementetion of the New Student lnformatlon System
Summary Allows use of up to $1 million from appropriations for the new student information system to be
used forpurchase or lease of equipment by the Department of Public Instruction for
implementation of system.
Section 28.33
Title: Expanditure of Funds to Improve Student Acmuntabfllty
Summary Directs allocation of funds based on students below grade level in grades 3-6.
Requires funds to be used to impmve academic performance of students performing below grade
level.
Requires allotment of funds to i d school adminisirative units wlthln 30 days of passage of
a.~.~ ro. oriationbsill . and allows funds to be available thmu-n h Aug- ust 31 of subsequent years for
summer programs.
Section 28.34
me: Study the Salaries of Sohool Fmd Servlw Workers and Custfxlh
Summary Requires Joint Legislative Education Oversight Committee to study the salaries of these persons
employed by NC public schools. and to report to the 2002 Session.
Section 28.36
Title: Character Mucatlon
Summary Directs State Board of Education to develop a model character education wniwlum; allows
Board to contract for assistance.
Section 28.37
Title: study of way DiffmntWs for instructional Support P818onnal
Summary Directs Joint EducaUon OversigM Committee to study salary diirentials of instructional support
personnel based on degrees and credentialing.
A study of the impact on student performance of teacher salary differentials based on degrees
and credentialing.
Section 28.38
-Me: fledbnity to Implement Base Budget ~eductlon
Summary Allows Deparbnent of Public instruction to shiit personnel in cmyfng out staff reductions requlred
in this budget Requires conversion of contractual senricea to state employees withln existing
number ofstat8f;nded personnel.
S d o n 28.38
Title: Funds lbr lnstntcmna~S upplies
Summary Directs that school teachers be able to purchase up to $100 in classroom supplies. L dsch ool
administrative units must report on implementatJon by February 15,2002, wlth a summary repOfi
to legislative committees b y ~ ~ r i2ldl0,2 .
Public Education paeeF18
Section 28.40
Summary Directs Deparbnent of Public instmction to continue subscriptio~on this Web she for 2001-02 .-
fiscal year (previously funded with federal resources). DPI and Cultural Rasources shall
collaborate on most efficient use of funds to access the NC WISEOWL subscriptions through the
NC L M program by 200203.
Report due to Information Technolcgy Appropriations Subcommittee by 3/15/02.
Section 20.7
Tftle: AIlocatlon of Federal Funds for Prior@ M s
Summary Requires State Board of Education to cwrdlnate use of federal and State funds to avold overlap
of efforts and to expand avaflabnity of smaller class s&es to as many at-risk students as possible.
W o n 28.42
Tie: Overtime for Schd Employee6
Summary Clarifies wage and hour la& requirements on overtime pay for employees W n g as both a
teacher assistant and a bus driver.
Section 28.43
Tftle: Funds for Teaoher Recrurtmeni Wtlativas
Summary Allows State Board of education to use up to $200,000 In public schools funds to allow NBPTS
cerWied teachers or other teachers who have received special recognition to advfse the State
Board on teacher recruitment
Section 28.44
Summary Requires local schml districts to use class-size reduction positions for kindergarten only for
kinderaarten teachers. Requires maximum class sirs limits set by State Board of Education to be
r e d u d by one student in 2001-02 and by two students in 200243. Allotments are based on one
teacher for every 19 students in 200102 and one teacher for every 18 &dents in 2002-03.
W o n 28.45
Mle: ~ ~ ~ ~ o r ~ e t ~ u d t
Summary Requires State Auditor to audit ExpiorNet, a non-profit recaMng state funds. Pmhlbits dktrlbution
of funds to ExplorNet until wrtfficatlon offinandal cormds and procedures by Auditor and OfRw
of State Budget NOTE W o n 114.6. of House Bnl 338,2001 Technlcal Carreotlons, SL 2M1-
487 modified-this language to allow the Stab Board of Education to distribute grant6 to local
school adminlsWe units if the State Audbr has not completed the audt on ExplorNet by March
Requb.es 80% of State funds appropriated to be dlstrlbuted in the form of grants to local school
admlnlsWe units.
Publlc Education
Section 28.46
me: WWealth Tramition Funds
Summary M d e s one year supplemental funding to low-wealth counties losing more than $1 mlllion in low-wealth
funds in 2001-02. Allows State Board to hold these counties harmless for up to 60% of
funding lost, using funds from the Average Daily Membarship Contingency Reserve Fund or other
sources.
Section 28.47
me: SubstiMe Schnol P~nnaVUnemploymenDt cdfnitlon
Summary Clarifies that substitute teachers who are not fulltime employees are not eligible for
unemployment compensation when not called to work.
Section 28.48
Title: Qdrocl BZ18 Replacement
Summary States that if State funds replace a school bus in one of two smallest school systems that school
system may retain the replaced bus for use as an activity bus.
Section 29.1
Title: Immediate Assistance b the Highest Prlority Elementary Schools
Summary Lowers dass size in grades K-3 to 1 to 15 in 37 schools with 80% of children eligible for free or
reduced price lunch and 45% or more of students are parformlng blow grade level.
Allomtes funds for additional teachers, additional days of staff development and instruction, and
additional instructional support personnel for high priority schools. Eliminates allotment of teacher
assistant dollars for these schools, but does not prohlbt use of teacher assistants at t h a e
schools.
If the local school system applies for and receives a wdiver from hnplementation for FY 2001-02
hom the SWe Board of Education, the teacher assistant allocation is restated and the teacher
alocation removed.
Title: [mmediate Adiona to Address Teaoher Shortage
Summary Provides $1 million for teacher assistant scholarships to take prerequisb courses (at Community
Colleges or Universities) needed for entry into teacher preparation programs.
Provlde $1,800 bonuses to teachers ceMed In and teaching in the fields of mathematics,
science, or special education, Cthey are teaching In middle schools or high schools with 80% of
chndren digible for free or reduced price lunch or 50% or more of students are performing below
grade level in Algebra I and Biology. Bonuses are to be paid monthly. Teachers remain eligible as
long as they continue to teach at a school that was eligible for the bonus program when the
teacher first received the bonus.
Joint Education Oversight Committee shall study the eRectiveness of atbacting certified teachers
back into teaching by providfng bberwff$ to part-time teachers.
Joint Education Oversight Commlttae shall study the effectiveness of athading students Into
teachlng by expanding the Teaching Fellows Program.
Public Education psge F 21
Summary Defines Continually Low-Performing Schools as those identified as low-performing in 2 of 3
comewtive years. Requires State Board of Education to adopt a series of progressive
intervention strategies for such schools. Requires State Board to adopt and implement actions
for schooi identified as iowpsrformingfor three or more years.
Section 29.4
Title: Additions to the W Sup&tendent's Plan to Improve a Werfonning
Summary Requires local superintendent to specify how central office admlnisbators wtli work with and
monitor progress of iowperforrning schools.
Section 29.5
Title: Appmprlatlorn, for Cofiually L D w P ~ l n Sgc hools
Summary Funds to reduce class size in grades 4-5 In continually lowperforming schools to 1 to 17. This is
in addition to the 1 to 15 class size funding in grades K-3.
Provides funds to Mend teachers' contracts in these schools by 5 days for staff development in
200102 and 10 days, including 5 additional days of instruction, in 2002-03.
The State Board of Educatlon has discretion on whlch strategies to implement and which schools
to targat for the 2001-02 school year.
Section 29.6
me: hralwtion ofi nmativm to ~ ~ ~Hi1ghs Plttori ty SohDols
Summary Requires high priority schools identified in Sec. 29.1 to meet growth exp&ations and reach high
growth in two of three years to remain eliglble for additional resources. All resources remaln
&able until 2004-05 as a minimum.
Requires teaching positions allotted for high priority schools and continually low-performhg
schools to be assigned to and teaching in those schools and those gradas. Department of Public
Instruction required to monitor class sires in these schools each month of school year (starting in
January 2002). Mows schoois until January 2002 to implement class size restrictions. Allows
local boards to seek wa[vera from the State Board of Education for 2001-02 school year only If the
local board cannot implement hlgh-priority schools class size changes during 2001-02 school year.
Provides $500,000 per year for evaluation of class size inWes, use of bonuses, and other
efforts to assist high priority schools.
Public Education
Overview: 2001 Session Fiscal and Budgetary Actions
UNC System / GENERALFUND I
fbornmended Budget $1,804,923,800 $1,812,208,855
Campus Reductim
66 Temporary Wages and Membarship Dues ($2,500,000) R ($2,500,000) R
Reduce the funding for temporary wages and membership dues at
the 16 UNC constituent institutions.
67 Community S8 ~ l ~ e s lG~nA~cardaelm ic Support ($1,500,000) R ($1,5M),OOO) R
Reduce aomunt appropriated for Community Services/General
Academic Support for the 16 constituent i nstitutions.
68 Reduction in SPA Positions ($10,694,131) R ($10,694,131) R
Reduce SPA positions at the 16 constituent institutions by
2.8%.
69 Reductions in EPA Non-Teaching Staff Positions ($5,902497) R ($5,802,497) R
Reduce EPA non-teachi ng positions at the 16 constituent
institutions by 2 . a . The position reductions in Cooperative -9520 -9S20
Extension and Agricultural Research shal l be made only in non-teaching
positions.
70 Reductions in Various Modifled Zero-Based Budget Items ($5,726,311) R ($5,726,311) R
An average 5% reduction is made in the budgets of the 16
constituent institutions for the fol lowing modified zero
b e d budget i terns: miscel lanews contractual services,
rental /lease of equi pfuent, trave I, ce l lular phones, furniture
and equipment, and other aids and grants.
71 Prhrate Funding for Selected Summer Research In Ueu of ($1,000,000) R ($1,000,000) R
State Appropriation
Substitute same private funding for a portion of state
appropriations for select faculty to do summer research. This
will be selected at the campus level.
72 Continuing Education Receipts ($378,775) R ($378,775) R
Increase by 10% the receipts generated through continuing
education programs at UNC-CH Health Affairs.
73 Center for Alcohol Studies Endowment
Reduces the appropriation to the Center for Alcohol Studies ($250,OW) NR
Endomoent for one year.
UNC System page F P
Overview 2001 Sesslon Flscal and Budgetary Actions
74 InstiMe of Southern Politics, Medla 8 PubUc Ute
Eliminates the specific funding for this program, but allows
UNC-CH to use other state or other sources of funds to
continue this prcgram.
76 indtute for Outdoor Drama
Eliminates funds for the newly-establ ished p s i tion of
Director of Comunications at the Institute for Outdoor Drama
at UNC-CH.
76 Additional Adminkbatlve EfFiclencles
The University System shal l find additional administrative
efficiencies.
TI Reduction In Travel
The University System shall make additional reductions i n i t s
travel expenses.
UNC G a d AdmihtWon
78 Reductions In ModiRed Zero Based Budget Items for UNC-GA
A 10% reduction i s made i n the budget of UNC-General
Administration for the fol lowing modified zero based budget
i terns: mi sce l l aneous contractual services, rental / lease of
equi p n t , travel, cel lular phones, furniture and equipment,
and other aids and grants.
78 Reduce EDP Equipment
Reduce Electronic Data Processing equipment infrastructure
replacement efforts at UNC-GA.
80 Board of Governors' Meetings
The Board of Governors recently voted to reduce the number of
times it w i II meet during the year to eight. This i s the
corresponding budget reduction for meeting costs.
81 MCNC Contract
Reduce the state funds paid to MCNC by UNC-Ceneral
Administration for the use of the MCNC Supercomputing Center
and move to a fee for service.
82 Litigation Contract
Eliminate funding for the litigation contract with the
Department of Justice. UNC-GA i s s t i l l required to maintain
the contract and reimburse the Department of Justice for
legal services.
83 UNC General Admfnbtmtion SPA Position Reductions
Reduces the SPA positions in UNC General Administration by 5%.
UNC System
Ovenrim 2001 Sesslon Fiscal and Budgetary Actions M 2001-02 FY 2002-03
84 UNC General Adminlstratlon EPA Non-Teaching Staff ($541,925) R ($547,925) R
Position Reductions
Reduces the WA non-teaching staff posi tions i n UNC General
Administration by 5%. -52% -525
85 Administratbe Overhead Reduction ($168,791) R ($166,791) R
Eliminate the administrative overhead f rm General Fund
appropriations i n the Center for School Leadership -1.80 -1.60
Development's central office.
88 Reduce Teacher Academy
Reduces the funding for the Teacher Academy.
87 Reallocate Funds fram the Model Teacher Educatfon ($822,082) R ($822082) R
Consortium
Real locate a portion of the Model Teacher Education
Consortium funds to a more comprehensive method of delivering 3.60 -250
program goals.
88 Ofiice Consolidation Savings ($100.000) R ($100.000) R
Savings froa the consol idation of offices for the programs
under the Center for School Leadership Development.
88 Redudon In All Center for School Leadership Development ($833,315) R ($833,315) R
pm-
Reduces a l l programs under the Center for School Leadership
Development. These programs shal l not be subject to the
mross-the-board personnel reductions taken for UNC-EA or the
csmpuses. The Joint Legislative Commission on Education
Oversight w i l l study these programs for reconrmended savings.
(SB 1005. Section 31.4)
90 Matching Incentive Funds ($m,000) I3 ($350,000) R
Reduce Matching Incentive Funds for staff development i n K-16
programs.
01 Lighthouse Schools ($2W),OOO) R ($280,000) R
Eliminate funding for Lighthouse Schools under the Center for -
School Leadership Deve lopment.
92 Strategic Initlathre Reserve
Reduce the UNC System President's Strategic l n i t i a t i v e ($1,000,000) NR
Reserve that i s used to fund special projects. The current
reserve i s funded at $3,OM),O(Xl per year. UNC-GA shal l
provide a detai led report to the Joint Legislative Coarpission
on Education Oversight prior to March 1 annual l y on how these
funds are spent. $1 mi l lion of the remaining funds shal l be
used to provide transition funding to temporari l y offset the
effects of permanent position cuts at the historically black
and minority and smal ler campuses.
UNC System Paee~=
Overview 2001 Sesslon Rscal and Budgetary Actions
Univedly Expanelon Funds
$3 Regular Term Enrollment Increase
Fully funds the UNC Board of Governors' regular term
enrol lment increase, i ncluding the 'hold-harmless' for those
campuses losing enrol lment. This funds an additional 2,435
ful I-time equivalent students.
84 Distanw Education Enrollment Increase
Ful ly funds the UNC Board of Governors' distance education
enrol lment increase requests. This funds 1,085 additional FfE
students.
85 Faculty ProductMty
lncrease faculty prcductivi ty by using existing tenure-stream
faculty who teach an average of fewer than 15 credit hwn a
year to help with the projected enrollment growth. This
reduction is for faculty paid from the code '1310 EPA
Teaching Faculty' line.
88 Tuitlon Increase
There is a 9% across-the-board tuition increase for al l
students for the 2001-02 academic year. In addition, the
Board of Governors' differentials for graduate and
professional schools shal l remain in effect. Also, the campus-initiated
increases shall remain in effect.
07 Need-Based Student Financial Ald
Adds additional funds to the existing need-based student
financial aid program. The current direct appropriation for
this program is $6.3 mi I lion.
68 Ald to Students Attending Prhfate Colleges
Provides funds to cover the projected enrol lmnt increases in
the funds for students attending private colleges. $2,346,210
is to cover the 1 ,192 additional students anticipated to
receive the Legislative Tuition Grant (LTG). The State
Contractual Scholarship (SCSF) p m g m will increase by
$880,000 to cover an additional 600 FTE students. The current
appropriation for the LTG program and the SCSF is $75.7
million. (SB 1005, Section 31.1)
88 Education CablnetlResearch Councll Funds
This restores half of the non-recurri ng appropriation made
during the lest fiscal year for the Education Cabinet and the
Education Research Counci I .
100 Scholarships for Teacher Assistants Pursuing Teaching
Das-
Funds are appropriated to provide scholarships for teacher
assistants. (SB 1005, Section 31.5)
UNC System
Overview: 2001 Session Fiscal and Budgetary Actions
101 InstlMe of Government-Center for Technology Support
To support Center's efforts to provide technical assistance
to local governments.
102 Teacher Preparation Programs through Distance Educatfon
Provides additional funds for a1 1 UNC teacher education
programs across the state provided through distance education
that do not have an on-campus residency requirement. Funds
shal l be a1 located based on their student credit hour
enrollment. (SB 1005, Section 31.7)
103 Genomlcs, Biolnfomatlcs, Optoelecbonlcs, and Photonics
Research
Provides funds for the new genomics, bioinfoaratics,
opt- lectroni cs, and photonics research programs.
104 Eliminate Room and Board Charges at the North Carollna
School of them
Eliminate room and board charges for in-state high school
students at the North Carolina School of the Arts.
105 NC A&T State Unhrerslty Matching Funds
Provides funds to match federal funds for NC AaT State
University's agricultural programs.
108 ECU Doctoral Status Funds
Funds the last phase of the transition of ECU to Doctoral I
status.
107 Progress Board
Provides recurring funds for the Progress Board which is
funded through the university system. (SB 1005, Section 31.12)
108 Closing the Achievement Gap
Provides funds to support the Historical l y Minority Col lege
and University Consortium initiative to close the achievement
.gap. Funds shal 1 be al located to UNC-General Administration
for distribution to the consortium.
109 Focused Growth 1natituUonsSpeclal Needs
To provide funds as requested by the UNC Board of Governors
to fund the special needs for the Focused Growth Institutions
in the UNC system.
I10 TEACCH Program Fun&
Additional funds for the TEACCH program to enable them to
apply for a National Institute of Health grant and other
grant funds.
UNC System Page F n
Overview: 2001 Session Fiscal and Budgetary Actions FY 200192 FY 2002-03 Total Legislattve Changes
Total Posltlon Chmm
Revised Budget
UNC System
Special Provisions
2001 Session: SB 1005
Department: UNC System
Section 31.1
Title: Ald to Private Conages
Summary Codffies the standard language for distributing the money to students attending private colleges.
In addition, adds a section that reduces the Legislathre Tuition Grant by 25% for those students
who have completed 140 semester credii hours.
Section 312
Title: Academic Common Market Pilot Pmgfm
Summary Allows the UNC Board of Governors to select certain graduate programs to be a part of a pilot
program for tuition reciprocity with other SREB states in its "Academic Common Market".
Section 31.3
Title: Ald to Private Medid SehoolslFundIng Formula
Summary Codffies the standard language for the prccedures distributing the aid to private medical school
money.
Saction 31.4
Title: Sule ~ I o n eDalye lopment Programs for PuMo School Plofessbnals
Summary Clarifies the General Assembly's intent for information to be included in pmf88sional development
reports. in addition, directs Education Oversight to study these programs and develop
r&mmendations for efflciencles and improvements.
Section 31.5
me: TsadrerAsslsbnt Wmlershlp Fund
Summary Pmvfslon follows the money decision to establish a new scholarship program for teacher
assistants pursing teaching degrees.
Section 31.6
Title:. UNC Budget Re*bWl~usHt onor Budget Reducthe
Summary Directs the university system to follow the General Assembly's decisions with regard to budget
reductions. Otherwise, UNCs budget flexibility remains.
Summary Expresses the Intent ofthe General Assembly to make teacher education programs amliable
through distance education statewide. Funds are distributed to all teacher education pmgrams
that offer these programs through distance education and do not have an oncampus rssldency
requirement
UNC System page F 28
Section 31.8
me: UNC surplus property ~uiuldeltnes
Summary Dbects UNC Board of Governors and the Department of Admlnlstratlon to jolntly develop
guldelines for the disposal of unhrerslty surplus properly and to report to the General Assembly.
Ssction 31.9
Title: SubstiMion of UNCCH Bond Pro@&
Summary Allows UNCCH to make a change in one of its bond projects.
Section 31.10
Tile: Maeter Ed. Adrntnistratlon at ABT Stab, NCCU, UNGP/Sludy P058lbIe Pharmacy School at
ECSU
Summary Authorizes three addltlonal Masters of School Administration pmgrams and directs the Board of
Governors to establish them at ABT State, NCCU and UNCP. Also asks the Board of Governors
to study the feasibflily of creating a Pharmacy School at ECSU, a school of Engineering at ECU,
UNGA, and WCU and a School of Dentistry at ECU.
Section 31.11
Tie: UNC Board of f3ovemors May Authorhe CarEatn Management RePdbUity for Spedal
ResponslbUity Constituent InstMons
Summary Allows the Board of Governors to grant the campuses ofthe UNC system the authority to have
flexibility in the area of setting tuition and fees for campus-initiated tuition, Rxing compensation of
senior personnel and tenured faculty and information technology dsclsions. Directed Education
Overslght to study the issue of expanding flexibnii to the areas of personnel, purchasing and
Property.
Section 31.12
Tie: ~ogreesB&
Summary Makes staMory changes to the Progress Board which is funded in the UNC system. ingeases
the she of the Board, increases arm of study and changes the appointment of the Executive
Director and budgetary location of the Beard. (Note: Section 6 of House BUI 231. Appropriations
Modfficatlons and Other Changes, SL 2001-513 repealed subsection (d) ofthls provision which
had earmarked money from the Strategic inltlatlve Reserve for the Pmgmsa Board.)
Section 31.13
me: Transfer Chinqua-Penn Plantation Funds
Summary Transfers all Endowment funds ralsed to support Chinqua-Penn and gifI shop funds from NCSU
to Chlnqua-Penn Foundation.
Section 31.14
me: UNC Board of Govamonr Report on Overhead Raoelpb
Summary Requires the UNC Board of Govemors to report annually to the Joint Legislative Education
Overslght Committee on the amount and expenditures of overhead receipts.
UNC System
HEALTH
&
HUMAN SERVICES
Overview: 2001 Session Fiscal and Budgetary Actions
Health and Human Services
I I
1- 1-
Recommended Budget $3,471,730,643 S3,725,304459
( 1.O ) W o n o f Mentd Health
1 Admlnistation In Area Programs ($1,500,000) R ($1,500,000) R
Reduces state appropriations to area mental health programs
and directs DHHS to develop and implement guidelines to bring
administrative costs at area programs into a more reasonable
range. (SB 1005, Section 21.65)
2 Various Contracts
Eliminates the fol lowing contracts:
UNC-CH C t r for the Study of Development
and Learning
Life Plan Trust, Inc.
Duke University
Reduces the following:
UNC-CH DD Training lnsti tute 100,000
NC State Center of Urban Affairs 265,227
Governor's I nsti tute on Alcohol and
Substance Abuse, I nc. 100,OM)
Counci I on the Accreditation of Services
for Fami lies and Chi l dren 247.1 82
3 State Appropriations to State MR Centem ($2,800,000) R ($2,800,000) R
Reduces state appropriations to the five (5) state mental
retardation centers i n accordance with the State's 4%
Downsizing Plan. (SB 1005. Section 21.62)
4 bledlcal Services Director Contract ($134,695) R ($134,695) R
Eliminates a contract with UNC-CH for the services of a
medical director for the Division.
5 Positlon Elimlnatlons
(SB l a , Section 21.64)
6 Neurobehavioral Treatment Unit ($571,526) R ($571,526) R
Eliminates funding for the creation of a new neurobehavioral
treatment unit for individuals with traumatic brain injury 61.00 -51.00
(to be located at the state's Black Mountain Center).
Health and Human Services . Paee 01
Overvlew 2001 Session Rscal and Budgetary Actions
7 Improved Efffclencies for Hospital Operations
Transfers responsibi l i ty for Cherry Hospital laundry
operations to the Department of Corrections Enterprise
Industries.
8 MedicaVSurgicai Unit at Dbt Hospital
Reduces appropriations for a medical /surgical unit located at
Dix Hospital which was closed i n October ulW.
Medical/surgical services w i l l be provided via contract.
0 Oakview Program
Eliminates state appropriations for an apartment program for
adolescents which i s no longer i n use.
10 Medicaid Recelpts on ChildlAdoleecent Beds
Reduces state appropriations i n anticipation of receipts for
the chi Id and adolescent beds i n state psychiatric hospitals.
I I Medicaid Receipts for EATP at Wilson
Reduces state appropriations i n anticipation of Medicaid
receipts for the adolescent beds i n the state's Eastern
Adolescent Treatment Program located i n W i Ison.
12 Varlous CoptmEts
Eliminates the following:
Work Central Cal l Support C t r
Reduces the fol lowing:
Appalachian State University
Tier, Inc.
NC DSS Director's Association
13 Positlon Elhnlnatlons
(SB l a , Section 21.49)
14 Familtes for Klds Funding
Reduces State funds for Fami lies for Kids initiative.
16 Family Resource Centem
Reduces state funds for Family Resource Centers and directs
DHHS to al locate the remaining funds based on program
performance. (SB 1005, Section 21.48)
Health and Human Services Page 0 2
Overview 2M)l Session Fml and Budgetary Actions
16 Excess State/County Special Asststance
Reduces excess state appropriations i n the State/County
Special Assistance program.
17 County Pmgram Integrity Worker Funding
Eliminates a grant-in-aid to a l l counties for program
integrity activities.
I8 CaroItna ACCESS County Positions
El i mi nates Carol i na ACCESS county positions located in county
departments of social services.
10 Regional MAce Positions
Eliminates 7 regional office clerical positions. Other
personnel w i I I absorb associated job duties.
20 Work First Transfer to General Assembly
Eliminates the transfer of funds to offset the cost of the
Joint Legislative Public Assistance Commission which i s being
repealed. (SB 1005, Section 21.13)
21 ICFIAAR Rate Adjustment
Adjusts rates for private Intermediate Care Facilities for
the Mental l y Retarded to reflect actual costs and eliminate
profit.
22 New Inflatlonay increases
Eliminates new inflationary increases for SW 2Mn-20D3.
23 Dnrg Utflhation Management
Implements various drug uti l ization measures to contain the
cost of prescription drugs as recamended by the 'North
Carolina Medicaid Benefit Study'. (SB 1005. Section 21.26(b))
24 ACCESS Mdlcal Director Contract
Eliminates the contract for the medical director for the
Carol i na ACCESS program as recommended by the 'North Carolina
Benefit Study'.
25 Dispensing Fee for Dm@
Reduces the dispensing fee for prescription drugs from $5.60
to $4.00 per brand name prescription. The dispensing fee for
generic drugs i s $5.60.
(SB 1005, Section 21.19(a)(5))
28 Generic Dmgs
Implements increased uti lization of generic drugs. (SB 1005,
Section 21.19(h))
Health and Human Services
Overview: 2001 Sesslon Fiscal and Budgetary Actlons
27 Daily Personal Care Services Umit
Limits Personal Care Services to 3.5 hours per day whi le
maintaining the 80 hour per month l i m i t .
28 Asset Pollcy Changes
Apply federal transfer of asset polices to real property
excluded as "income producing' under Title XIX. (SB 1005,
Section 21.19(y))
28 Medlcare Crossover Claims Payments
Limit Medicare Crossover claims payments to 95% of Medicare
rates.
30 Position Elfminations
31 Optlonai Services
Eliminates optional c i rcmision procedures except i n cases
of medical necessity .
(Note: Section 19 of House Bi l l 231. Appropriations
Modifications and Other Changes, SL 2001-513 reinstated this
reduction.)
32 Physician Rates to 95% of Medlcare Rates
Reduces rates paid to physicians to 95% of the physician
rates paid by Medicare as reconwended by the 'North Carolina
Medicaid Benefit Study'.
33 Co-payments for Prescription Drugs
Increases co-payments for brand name prescription drugs from
$1 to $3 per prescription. Co-payments for generic
prescriptions remain at $1 per prescription.
( 4.0) Office of the Secretary
34 Welfare Automation Fund
Reduces state appropriations to the fund which supports
automation enhancement i n the Work First Program.
36 Community Adon Agency Funds
Eliminates state appropriations to Conrmuni ty Action Agencies
i n lieu of increased federal grant funds.
38 Posmon Eliminations
(Note: Section 1. (h) of House Bi I I 231, Appropriations
Modifications and Other Changes, SL 2001-513 amended this
item to reflect a final position elimination of 44 FTE's.1
Health and Human Services
Overvim 2001 Session Fiscal and Budgetaly Actions
37 contract
Eliminates a contract for personal services i n support of a
Medicaid waiver proposal, activities w i I I be absorbed by
existing staff.
( 6.0) DMslon of Chnd Development
38 Smart Start Evaluation
Reduces state funds for evaluation activities for Smart Start
and directs DHHS to contract for a mre focused review of
Smart Start activities directly related to kindergarten
readiness.
39 Early Head Start
Eliminates state appropriations i n lieu of increased federal
Early Head Start funds.
40 Position Elhninations
(SB 1005, Section 21.74)
41 Various Contracts
Eliminates contracts for the following:
Personal Services contrect for chi Id abuse
curriculum development 315.000
Chi Id Care Services Ass~iation, Inc. 25,O@JJ
42 Smart Start
($48.500,MX))
Reduces the Governor's proposed increase i n Smart Start
continuation funding - funds not yet received by local
partnerships.
(310,500,000)
Reduces state appropriations to the North Carol i na
Partnership for Chi Idren, state administration and local
partnership operations. This reduction i s minimized by pol icy
changes i n how funds are utilized for quality improvements
and a prohibition on the use of funds for capibl/equipnoent
projects. (SB 1W)5, Section 21.75)
( 6.0) W o n of Vocational Rehabmtetlon
43 Position Eliminations
( 7.0) DMslon of Publlc Health
44 Poshton ReduotIons
Health and Human Senllces Page 0 5
Ove~iew2: 001 Session Rscal and Budgetary Actions
45 Various Contracts
Reduces the Heal thy Start Foundation contract by 5150,MB).
Eliminates the fol lowing contracts: Association of NC Boards
of Health - SlWJ.000, Mecklenburg County Mental Health
Authority - $86,144, NC Fair Share - $10,000, Pennsylvania
State University - W,355, UNC (Hypertension Data
Analysis) - $10,000, UNC Family Services Network - $223,561,
UNC School of Public Health - $225.000, and UNC School of
Public Health - $127,494
48 Vital Record Recelpts
Adjusts the budget to accurately reflect the amount of
receipts to be col lected for the sale of vital records.
47 Newborn Screening Progm
Reduces state appropriations i n anticipation of increased
Medicaid Receipts.
48 HeaIth Promotton ActhMes
Reduces state appropriations for Health Promotion activities.
49 Sickle Cell Prog. Ed. Counselors
Reduces state appropriations i n anticipation of increased
Medicaid receipts.
aoo aoo 51 AIDS Drug Assistance Program
Reduces state appropriations on a non-recurring basis due to
excess ADAP funds. (SB 1005, Section 21.90)
62 Nurse Midwifery Program
Eliminates funding for the Nurse Midwifery Program which
funds start-up midwifery practices.
63 Position T d r s
Transfers the following positions from Division of Early
Intervention and Education into Division of Public Health,
Women's and Children's Health Section: Audiologists: 4425-
1231 -1 21 1-921 , 4429-1 536-1 21 1-020: Speech and Language
Pathologist: 4429-1526-121 1-027; Language/Cmunication
Specialist: 4429-151 6-1251 -004; Saial Workers: 4425-1231-
121 1-920, 4429-1 526-121 1-026, and 4429-1536-121 1-01 9 (SB
1005. Section 21.80)
Page 0 8
I
Health and Human Services I
Overview: 2001 Session Fiscal and Budgetary Actions
61 R U ~oIb stetrics Incenth. program
Eliminates Rural Obstetrics Incentive Program which pays a
portion of the mal-practice insurance for doctors in rural
areas to encourage them to treat Medicaid patients.
55 Contracts to LEAS
Eliminates the contracts with Local Education Agencies that
were set-up to supplement educating heari ng-impai red chi ldren
transitioning out of the Central North Carolina School for
the Deaf.
68 Various Contracts
Reduces the contract to Beginnings by $2CO,WlO, and personal
services for audiological management by $87,240.
57 Stateoperated Deaf Preschools
Reduces appropriations to the state-operated preschool
centers and transitions the chi ldren from these centers to
other preschool sites and services.
(SB 1N6, Section 21.83)
68 Position Eliminations
Eliminates 23 teacher and teacher assistant positions in the
stateaperated deaf preschools, as a result of transi tioning
chi ldren to other preschool sites and services. (SB 1005,
Section 21.83)
58 Position Eliminations
60 Developmental Eval. Centers
Reduces state appropriations i n anticipation of increased
Medicaid receipts.
61 ReorganhationlChanges
Eliminates state appropriations in the areas of
administration and other recent budget revisions that reduced
the budget of the Central North Carolina School for the Deaf
to enhance the Division's central office.
(SB 1W5, Section 21 .SO)
82 Central School for the Deaf
Savings from the Department of Health and Human Service's
closure of the Central North Carolina Schcol for the Deaf.
(SB 1005, Section 21.81 )
Health and Human Services
Overview: 2001 Sasslon Rscal and Budgetary Actions
( 9.0) Mvisbn of Aging
83 Position Elhinations
Eliminates 1 position.
64 Area Agency on Aging (AAA) Adminlstratlon Funds
Reduces 8200,CiUD i n administrative funding for 17 Area
Agencies on Aging. The Division wi I I implement strategies to
reduce overal I administrative costs.
(SB 1005, Section 21 3 2 )
85 UNC CARES Contract
Eliminates State funding for a contract with UNC-Chapel H i l l
for planning and evaluation services. The Division wi I I
assume the duties of the contract.
68 Medical Eye Care Program
Reduces excess funding i n the Medical Eye Care Program.
67 Position Elhinations
68 Flre Protection Revolving Loan Fund
Eliminates appropriations i n the Fire Protection Revolving
Loan Fund.
68 EMS Regional Grants
Eliminates Emergency Medical Services Regional Grants.
71 Receipts for Mental Health Uwnsure
Increases receipts from Medicaid to support Mental Health
Li censure.
72 Gmnt for Association of Rescue and EMS
Eliminates the grant-in-aid for the NC Association of Rescue
and EMS
Health and Human Services
OveNlew: 2001 Session Fiscal and Budgetary Actions
(12.0) Mvlslon of Mental Health
n security Staff
Increases appropriations and staff due to a transfer of
security responsi bi li ties from the Juveni le Evaluation Center
to the Jul ian F. Keith ADATC and the Black Mwntain Center.
(SB 1005. Section 24.10)
74 Housing Support for the Mentally ill
Provides funds to support the expansion of housing support
and placements for the mental l y i I I.
76 Autism Funds
Provides $450,000 for administrative, operational, and direct
services funds to the Autism Society of North Carolina. Also
provides $326,000 to continue operational support to the
Residential Services. Inc. during FY01/02 in order al low the
program to develop and implement the necessary processes to
draw down Medicaid funds to continue residential services to
autistic chi ldren.
76 Community Programs
Provides funds for area mental health programs as follows:
Assertive Comuni ty Treatment Teams
for non-Medicaid clients 200,000
Fami l y Support Activities 300.oOO
Substance Abuse Services to Special
Populations 1 .000.000
Expand Capacity for Detoxi fiiation,
Residential and Outpatient Services 2,OM).WO
77 Funds for At-Risk Children
Provides recurring funds for direct services to seriously
disturbed children (funds were appropriated as non-recurring
since FY98/99). (SB 1005, Section 21.60)
78 Chlld Support Backlog
Provides funding for chi Id support caseload backlogs in urban
counties. (SB 1005, Section 21 .MA)
78 Food Banks
Provides funds to be equally distributed to the regional
network of food banks in North Carolina.
80 Chlld Support Receipt Shortlall
Increases state appmpriations in chi Id support operations
due to an ongoing receipt shortfal I.
Health and Human Services Page O B
Overview: 2001 Session Fiscal and Budgetary Actions
81 Community Alternathres Program for Children
Provides additional slots for the Comnuni ty Alternatives
Program for Chi Idren.
82 CAP-MRIDD Program
Provides funding for the Community Alternative Program for
the Mental l y Retarded&velopenteI l y Disabled.
83 Federal Financial Participation Rate
Provides increased funding for the Medicaid Prcgram due to a
decrease i n the federal financial participation rate.
84 Breast and Cenrical Cancer Coverage
Provides funding for Medicaid coverage for uninsured women
under age 65 with breast or cervical cancer. Includes state
costs for administration.
Bii Health Chofce
Provides funding for increasing the enrollment for NC Health
Choice to 82,000 chi ldren. (SB 1KS. Section 21 22)
88 Access to Dental Services
Provides funding to increase access to dental sewices for
chi ldren and adults. (SB 1005, Section 21.98)
87 Healthy Start Foundation
Provides funds for Healthy Start Foundation to improve access
to prenatal care and reduce poor hi rth outcomes for fami lies
i n North Carolina.
88 Varlcella Vaalne
Provides funding for varicel la vacd nations for approximately
20.000 chi ldren.
89 Asthma EducaUon Program
Provides funding to support asthma management, control.
suwei I lance, and education.
90 Alice Aycock Poe Center for Health Education
Provides grant-in-aid to the Alice Aycock Poe Center for
health education.
81 Osteoporosis Task Force
Provides funding to continue activities of the Osteoporosis
Task Force.
Health and Human Services
Overview 2001 Session Fiscal and Budgetary Actions
92 Birth Defects Monitoring Program
Provides funding for the continuation of the birth defects
registry.
03 Healthy Carollnlans
Provides funding for Healthy Carolinians task forces
throughout the state.
94 Office of Minority Health
Funds Office of Minority Health activities to reduce health
disparities.
Q5 Prevention of Bltth Defeds
Provides funding for education and awareness activities on
the importance of fol ic acid consumption preceding pregnancy,
to effectively prevent neural tube birth defects.
QE Heart Disease and Stroke Prevention
Funds Heart Disease and Stroke Prevention Task Force
activities. (SB 1005, Section 21.95)
97 Arthritis Prevention Project
Provides grant-in-aid for a private, local project i n
Mecklenburg County.
88 Medical Day Care Pilot Project
Provides funding for a start-up medical daycare center. (SB
1005. Section 5.1 (j))
88 Prescription Drug Aeoesa Projwt
Provides funding to support a centralized system for
accessing free and low cost drugs through pharmaceutical
companies. (SB 1 0 5 , Section 21.6)
100 AIDS Drug Assistance Program
Increases funding for the AIDS Drug Assistance Program that
pays for prescription drugs for qualified HIV and AIDS
patients. (SB 1K5, Section 21.90)
101 North Carolina Counoll on the Holocaust
Provides funds for the Holocaust education i n the public
schools.
102 Adult Care Home Rate Methodology
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