Highlights, fiscal and budgetary actions

              OVERVIEW:
_________________________________
FISCAL AND BUDGETARY ACTIONS
NORTH CAROLINA GENERAL ASSEMBLY
2002 SESSION
PREPARED BY
THE FISCAL RESEARCH DIVISION
OF THE NORTH CAROLINA GENERAL ASSEMBLY
RALEIGH, NORTH CAROLINA
Departments/Coverage Analysts
Budget Development
Appropriations Bill Coordination Andy Willis - Senate
Governmental Operations Mona Moon - Senate
Capital Budgeting/Planning Lynn Muchmore - House
State Lands/Building Karen Hammonds-Blanks - House
Salaries and Benefits Sam Byrd
Stanley Moore
Mark Trogdon
General Government
Administration Michele Nelson
Administrative Rules Review Commission Marilyn Chism
Board of Elections
Cultural Resources
General Assembly
Governor’s Office
Insurance
Licensing Boards
Lieutenant Governor
Office of Administrative Hearings
Revenue
Secretary of State
State Auditor
State Budget and Management
State Treasurer
Office of Information Technology Services Doug Holbrook
Justice and Public Safety
Correction Jim Mills
Crime Control & Public Safety Denise Thomas
FISCAL RESEARCH DIVISION
JAMES D. JOHNSON, DIRECTOR
Rm. 619, Legislative Office Building
Raleigh, North Carolina 27603-5925
Telephone: (919) 733-4910
Fax: (919) 715-3589
Judicial Elisa Wolper
Justice Chloe Gossage
Departments/Coverage Analysts
Health and Human Services
Department of Health and Human Services Carol Shaw
Lisa Hollowell
Susan Morgan
Jim Klingler
Natural and Economic Resources
Department of Environment, Health,
and Natural Resources Jennifer Hoffman
Department of Agriculture Kelly Huffstetler
Department of Commerce Adam Levinson
Department of Labor
Transportation Evan Rodewald
Bob Weiss
Education
Department of Public Instruction Jim Newlin
Philip Price
UNC-Board of Governors Charlotte Todd
Community Colleges Kristine Leggett
Higher Ed Bond Oversight Reyna Walters
Economy and Taxation
Revenue Estimates
Finance Committees Richard Bostic
Revenue Laws Study Committee David Crotts
Economic Issues Linda Millsaps
State Bond Proposals Martha Walston
Fiscal Trends Commission
Support Staff
Word Processing Agnes Perry
Graphics, Databases, Bonnie Trivette
Spread Sheet Preparation Debora Bridgers
Page
INTRODUCTION............................................................................................................................ i
GLOSSARY.................................................................................................................................A-1
TOTAL STATE BUDGET
Budget Reform Statement (General Fund Availability) .................................................................B-1
Summary Total State Budget....................................................................................................B-2
Total State Budget by Agency ..................................................................................................B-3
Budgeted Position Summary……………………………………………………………………................B-6
ECONOMY AND REVENUES
Economic Outlook and General Fund Revenues .........................................................................C-1
Economic Outlook Comparison.................................................................................................C-7
Growth Rates for Major Revenue Sources ..................................................................................C-9
General Fund Revenue Forecast .............................................................................................C-11
Highway Fund Revenue..........................................................................................................C-13
Highway Trust Fund Revenue..................................................................................................C-14
FEDERAL BLOCK GRANTS & SUMMARY OF MEDICAID CHANGES
Federal Block Grant Programs..................................................................................................D-1
Changes to the Medicaid Program ............................................................................................D-4
SUMMARY: GENERAL FUND APPROPRIATIONS
General Fund Appropriations 2002-2003 Fiscal Year, 2002 Session .............................................E-1
EDUCATION
Community Colleges................................................................................................................F-1
Public Education .....................................................................................................................F-6
University of North Carolina System ........................................................................................ F-20
HEALTH & HUMAN SERVICES..................................................................................................... G-1
NATURAL AND ECONOMIC RESOURCES
Agriculture and Consumer Services ...........................................................................................H-1
Commerce...........................................................................................................................H-10
Commerce – State Aid...........................................................................................................H-16
Environment and Natural Resources ........................................................................................H-19
Environment and Natural Resources – Clean Water Management Trust Fund..............................H-32
Housing Finance Agency .......................................................................................................H-34
Labor...................................................................................................................................H-36
N.C. Biotechnology Center .....................................................................................................H-40
Rural Economic Development Center.......................................................................................H-42
JUSTICE AND PUBLIC SAFETY
Correction............................................................................................................................... I-1
Crime Control and Public Safety .............................................................................................. I-15
Judicial................................................................................................................................. I-20
Judicial – Indigent Defense...................................................................................................... I-26
Justice ................................................................................................................................. I-29
Juvenile Justice and Delinquency Prevention ............................................................................. I-32
TABLE OF CONTENTS
Page
GENERAL GOVERNMENT
Administration........................................................................................................................ J-1
Auditor .................................................................................................................................J-10
Cultural Resources .................................................................................................................J-12
Cultural Resources – Roanoke Island Commission ....................................................................J-21
General Assembly..................................................................................................................J-23
Governor...............................................................................................................................J-27
Insurance..............................................................................................................................J-29
Insurance – Volunteer Safety Workers’ Compensation Fund.......................................................J-33
Lieutenant Governor................................................................................................................J-35
Office of Administrative Hearings ..............................................................................................J-37
Revenue ...............................................................................................................................J-39
Rules Review Commission ......................................................................................................J-44
Secretary of State ..................................................................................................................J-46
State Board of Elections .........................................................................................................J-49
State Budget and Management................................................................................................J-51
State Budget and Management – Special Appropriations ...........................................................J-53
State Controller ......................................................................................................................J-55
Treasurer ...............................................................................................................................J-58
Treasurer – Retirement for Fire and Rescue Squad Workers .......................................................J-61
TRANSPORTATION
Transportation – General Fund..................................................................................................K-1
Transportation – Highway Fund.................................................................................................K-3
INFORMATION TECHNOLOGY: INTERNAL SERVICE FUND
Office of Information Technology Services .................................................................................. L-1
RESERVES, DEBT SERVICE AND ADJUSTMENTS/GENERAL PROVISIONS .................................M-1
CAPITAL.....................................................................................................................................N-1
SALARIES AND BENEFITS
Salary Changes for Employees Supported by the State ............................................................. O-1
Retirement and Pension Changes for State and Local Personnel ................................................ O-6
Benefit Changes for State and Local Personnel ........................................................................O-11
State Employee Health Benefit Changes .................................................................................O-12
REVENUE/FEE BILLS
Bills Affecting General Fund Revenue ........................................................................................P-1
Bills Affecting Highway Fund Revenue .....................................................................................P-25
Bills Affecting Special Revenue Funds .....................................................................................P-28
Bills Affecting All Local Governments ......................................................................................P-31
APPENDIX
Total State Budget by Source of Funds .................................................................................... Q-1
Total General Fund Authorizations as Adjusted
to Determine Total Current Operations .................................................................................... Q-2
Earmarking of the Credit Balance by Fiscal Year....................................................................... Q-4
Savings Reserve at Year Ending June 30 .................................................................................. Q-5
Tax Revenues by Major Schedules (Actual) .............................................................................. Q-6
Page
APPENDIX (CONTINUED)
Authorized and Actual Revenue Collections by Fiscal Year ($ in Thousands) ............................... Q-7
North Carolina General Fund Operating Appropriations ............................................................... Q-8
Capital Improvement Authorizations.........................................................................................Q-12
General Obligation Bond Acts Since 1971 ...............................................................................Q-13
Total North Carolina Budget for Debt Service............................................................................Q-14
North Carolina Bond Indebtedness ..........................................................................................Q-16
Across-The-Board Salary Cost for Each 1% Increase (Millions)..................................................Q-18
Legislative Increases..............................................................................................................Q-19
Average Salary of Employees Subject to the Personnel Act ......................................................Q-21
Page A-1
Adjusted Appropriation: An appropriation altered to reflect the distribution of reserves or other
transfers authorized by the General Assembly.
Appropriation: An action by the General Assembly authorizing withdrawal of funds from the
state treasury pursuant to Article V, Section 7 of the North Carolina Constitution.
Beginning/Ending Balance or Credit Balance: The funds available at the beginning or end of
the fiscal year based upon revenue collections and expenditures.
Capital Improvements: One-time appropriations for new construction, renovations, repairs and
land purchases.
Carryforward: Funds appropriated, but unspent in the first fiscal year of a biennium that are
brought forward for expenditure in the second fiscal year of the same biennium.
Certified Appropriation: An appropriation as officially recorded by the Office of State Budget,
Planning, and Management.
Contingency and Emergency Fund: A special reserve 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 Budget: The part of the State budget necessary to continue the current level of
services when adjusted for inflation, mandated rate increases such as social security, annualization
of programs and operation of new facilities.
Current Operations: Cost associated with the daily activity of programs supported by the State,
such as salaries, utilities, and travel.
Departmental Receipts: Monies received by State agencies and institutions as federal grants,
charges for services performed, transfers from other governmental units, license fees, gifts and
donations, or similar sources.
Disproportionate Share Funds: Share (DSH) funds are Medicaid payments made to health care
providers who deliver services to large numbers of uninsured patients.
GLOSSARY
Page A-2
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 state/local governments.
General Fund: The fund to which revenues are deposited that are not designated for special
purposes and are therefore available to support the general operations of State government.
Highway Fund: The special fund to which revenues are deposited that are designated for
transportation-related operations and capital improvements.
Highway Trust Fund: A fund established in 1989 for the completion of certain specified
highway construction projects.
Lapsed Salaries: Unexpended appropriations that accrue because funds have been budgeted for
positions that are temporarily vacant.
Negative Reserve: A method by which a budget reduction is imposed without detailing the
specific lines of expenditure to be decreased.
Nonrecurring: A term applied to revenues or expenditures that are not repeated in future years.
Reversion: The portion of an appropriation that is not expended and is returned to the fund from
which the appropriation is made when the appropriation either expires or is cancelled.
Savings Reserve: An account established in G.S. 143-15.3 to reserve General Fund monies as a
safeguard against economic fluctuations or major fiscal exigencies. Commonly referred to as the
“Rainy Day Fund.”
Special Funds: Accounts to which revenues are deposited that are designated for a specific
purpose and remain in the account until expended for that purpose.
Tax Reimbursements: State revenues disbursed to local governments as reimbursements due to
State-mandated tax relief measures which have a local financial impact on locals.
Total General Fund Availability: The sum of the beginning General Fund credit balance and
General Fund revenues for a fiscal period.
i
This document is divided into sections as follows:
Section A - Glossary
Section B - Total State Budget summarizes the composition of General Fund Availability (i.e.
Budget Reform Statement) and the total state budget including federal funds and receipts.
Section C – Economy and Revenues describes the economic and financial backdrop against
which the actions detailed in subsequent sections are conducted. Includes information 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 summary of
recent Medicaid funding and program changes.
Section E – Summary: General Fund Appropriations summarizes actions taken by the General
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 by the General Assembly for the second year of the biennium (applies to the Overview
of budgetary actions taken in the short 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 summarizes special
provisions in the appropriations act and other related legislation governing state agencies.
Section M –Reserves, Debt Service and Adjustments lists actions with statewide impact (i.e.
affecting all state agencies). Also includes a summary of availability and general provisions
included in the appropriations act.
Section N – Capital provides a list of agencies receiving appropriations for capital improvement
projects. Also includes a summary of capital related special provisions.
Section O - Salaries and Benefits identifies salary increases, as approved, together with changes
in retirement and pension plans, health insurance programs, and other benefit programs.
Section P – Revenue/Fee Bills provides a summary of bills authorizing various tax changes and
fee increases.
Section Q – Appendix provides historical data relating to state revenues and expenditures, capital
improvements, reversions, indebtedness, debt service and salaries.
INTRODUCTION
TOTAL STATE BUDGET
2002-2003
Beginning Unreserved Credit Balance 25,000,000
Revenues Based on Existing Tax Structure 12,793,950,000
Non-tax Revenues
Investment Income 115,300,000
Judicial Fees 111,300,000
Disproportionate Share 107,000,000
Insurance 46,600,000
Other Non-Tax Revenues 98,900,000
Highway Trust Fund Transfer 172,400,000
Highway Fund Transfer 15,300,000
Subtotal Non-tax Revenues 666,800,000
Total General Fund Availability 13,485,750,000
Adjustments to Availability: 2002 Session
IRC Conformity (Pensions/Education Changes, Estate Tax Credit, Accelerated Depreciated) 15,800,000
Delay 2001 Tax Breaks (Standard Deduction/Marriage Penalty, Child Tax Credit) 51,700,000
Conform Business Income 70,000,000
Correct LLC Franchise Tax 20,000,000
Conform Gift Tax Indexing (230,000)
Low Income Housing Credit (2,200,000)
Repeal Reimbursements to Local Governments 333,400,000
Project Tax Collect 32,500,000
Highway Trust Fund -- recurring inflationary adjustment 80,000,000
Highway Trust Fund Transfer -- one time transfer 125,000,000
Tobacco Settlement Trust Funds -- divert MSA receipts from Tobacco Trust Fund 38,000,000
Tobacco Settlement Trust Funds -- divert MSA receipts from Health & Wellness Trust Fund 40,000,000
Transfer of Cash from Trust and Special Funds 20,438,259
Adjustment to Transfer from Insurance Regulatory Fund 600,000
Reimbursement for Unauthorized Substance Tax Division, Department of Revenue 885,884
Nontax Revenue Offsets, Department of State Treasurer 671,618
Increase Collection Rates for Offender Fees 1,160,000
Fee Increases 38,180,000
SB 1455, Strenthen Securities Fraud Enforcement Laws 271,000
Subtotal Adjustments to Availability: 2002 Session 866,176,761
Revised General Fund Availability for 2002-2003 Fiscal Year 14,351,926,761
Less: Total General Fund Appropriations for 2002-2003 Fiscal Year (14,351,822,876)
Unappropriated Balance 103,885
Budget Reform Statement
General Fund Availability
Note: The Budget Reform Statement/General Fund Availability shown here differs from the availability statements
included in Section 2.2 of SB 1115, 2002 Appropriations and Finance Act, SL 2002-126 and Section 10 of HB 1105,
Insurance Regulatory Fund Changes, SL 2002-144. The statement shown here reflects actions taken by the General
Assembly in those bills as well as SB 1455, Securities Fraud Protections and Study, SL 2002-189, which increased
General Fund availability by $271,000 and appropriated $167,115 to the Department of the Secretary of State.
FY 2002-03
($ millions)
General Fund
Current Operations $14,320.7
Capital Improvements/Repairs & Renovations 31.1
Subtotal General Fund Budget 14,351.8
Highway Fund/Highway Trust Fund 1,900.0
Federal Funds 7,676.5
Departmental Receipts 2,371.0
Total State Budget -- All Sources $26,299.4
Source: Office of State Budget and Management
Summary of Total State Budget
2002-2003 Fiscal Year
by Source of Funds
Page B-2
General Highway Trust/
Subcommittee/Agency Fund Highway Fund * Other Federal Total
Education:
Community Colleges 669,281,390 0 143,508,211 12,818,209 825,607,810
Public Instruction 5,894,553,493 30,590,073 2,886,501 606,524,524 6,534,554,591
UNC System 1,768,097,109 0 1,018,554,382 27,490,660 2,814,142,151
Subtotal Education 8,331,931,992 30,590,073 1,164,949,094 646,833,393 10,174,304,552
Health and Human Services:
DHHS - Office of the Secretary 67,784,933 0 702,139 46,523,975 115,011,047
DHHS - Aging 28,605,910 0 8,282,754 27,349,040 64,237,704
DHHS - Blind & Deaf/Hard of Hearing 9,525,102 0 1,275,794 13,394,974 24,195,870
DHHS - Child Development 281,830,361 0 56,000 263,193,803 545,080,164
DHHS - Education Services 65,477,022 0 722,102 2,084,639 68,283,763
DHHS - Facility Services 14,694,066 0 506,774 11,558,361 26,759,201
DHHS - Medical Assistance 2,189,813,795 0 391,100,686 4,411,452,983 6,992,367,464
DHHS - MH/DD/SAS 573,361,612 0 40,375,152 79,571,825 693,308,589
DHHS - NC Health Choice 45,058,178 0 0 125,410,725 170,468,903
DHHS - Public Health 100,838,313 437,623 7,665,926 243,250,569 352,192,431
DHHS - Social Services 180,580,506 0 462,494,932 606,315,236 1,249,390,674
DHHS - Vocational Rehabilitation 38,858,851 0 2,226,176 62,157,455 103,242,482
Subtotal Health & Human Services 3,596,428,649 437,623 915,408,435 5,892,263,585 10,404,538,292
Natural and Economic Resources:
Agriculture & Consumer Services 50,445,582 3,586,465 18,945,298 6,282,919 79,260,264
Commerce 33,930,264 0 33,270,117 193,013,186 260,213,567
Commerce-State Aid 20,595,319 0 0 0 20,595,319
Environment and Natural Resources 148,818,587 846,102 71,783,449 41,472,289 262,920,427
Environment and Natural Resources - Clean
Water Management Trust Fund 66,500,000 0 0 0 66,500,000
NC Housing Finance Agency 4,759,400 0 100,000 37,242,359 42,101,759
Labor 14,166,181 0 4,220,609 5,760,427 24,147,217
Subtotal -- NER 339,215,333 4,432,567 128,319,473 283,771,180 755,738,553
Justice and Public Safety:
Correction 880,054,808 0 10,560,008 0 890,614,816
Crime Control & Public Safety 27,780,188 133,098,294 6,389,175 13,402,334 180,669,991
Judicial 294,636,169 0 252,519 0 294,888,688
Judicial - Indigent Defense 77,286,901 0 7,400,555 0 84,687,456
Justice 70,938,193 0 6,814,637 1,167,825 78,920,655
Juvenile Justice & Delinquency Prevention 128,984,633 0 7,545,544 0 136,530,177
Subtotal -- JPS 1,479,680,892 133,098,294 38,962,438 14,570,159 1,666,311,783
Summary of Total State Budget by Agency and Appropriations Subcommittee
(includes all funding sources)
2002-03 Fiscal Year
Page B-3
General Highway Trust/
Subcommittee/Agency Fund Highway Fund * Other Federal Total
Summary of Total State Budget by Agency and Appropriations Subcommittee
(includes all funding sources)
2002-03 Fiscal Year
General Government:
Administration 55,943,188 0 5,463,046 8,480,877 69,887,111
Auditor 11,068,708 0 50 0 11,068,758
Controller 10,422,828 0 30,945 0 10,453,773
Cultural Resources 55,817,206 0 2,250,726 4,788,585 62,856,517
Cultural Resources-Roanoke Island
Commission 1,708,241 0 0 0 1,708,241
General Assembly 36,899,614 0 403,000 0 37,302,614
Governor 4,938,310 0 215,482 0 5,153,792
Insurance 23,527,552 0 26,188,256 338,858 50,054,666
Insurance - Volunteer Safety Workers' Comp 2,000,000 0 0 0 2,000,000
Lieutenant Governor 616,265 0 0 0 616,265
Office of Administrative Hearings 2,561,413 0 106,014 0 2,667,427
Revenue 75,571,304 4,038,525 1,000 0 79,610,829
Rules Review Commission 315,814 0 0 0 315,814
Secretary of State 8,108,684 0 384,577 0 8,493,261
State Board of Elections 3,395,891 0 2,500 0 3,398,391
Special Boards & Commissions 0 0 3,569,720 0 3,569,720
State Budget and Management (OSBM) 5,054,881 0 26,020 0 5,080,901
OSBM Special Appropriations 3,180,000 0 0 0 3,180,000
Treasurer 7,888,435 0 648,053 0 8,536,488
Treasurer-Retirement for Fire & Rescue
Squad Workers 7,131,179 0 0 0 7,131,179
Subtotal General Government 316,149,513 4,038,525 39,289,389 13,608,320 373,085,747
Transportation: 10,902,500 1,723,537,238 38,617,668 825,448,590 2,598,505,996
Debt Service:
General Debt Service 254,516,860 0 45,500,000 0 300,016,860
Federal Reimbursement 1,155,948 0 0 0 1,155,948
Subtotal Debt Service 255,672,808 0 45,500,000 0 301,172,808
Page B-4
General Highway Trust/
Subcommittee/Agency Fund Highway Fund * Other Federal Total
Summary of Total State Budget by Agency and Appropriations Subcommittee
(includes all funding sources)
2002-03 Fiscal Year
Reserves and Adjustments:
Compensation Increases -- Includes
Teachers/Principals and Assistant/Deputy
Clerks/Magistrates 2002-03 Step Increases 243,512,099 7,200,000 0 0 250,712,099
Employee Severance & Discontinued Service 5,000,000 5,000,000
Salary Adjustment Fund 500,000 0 0 0 500,000
State Health Plan 187,378,128 9,000,000 0 0 196,378,128
Retirement Rate Adjustment (387,792,720) (12,304,320) 0 0 (400,097,040)
Contingency & Emergency Fund 5,000,000 0 0 0 5,000,000
Governor's Efficiency Commission
Recommendations (25,000,000) (25,000,000)
Management Flexibility Reserve (41,500,000) (41,500,000)
ITS Rate Reduction (7,414,318) 0 0 0 (7,414,318)
HIPPA Implementation Reserve 2,000,000 2,000,000
Mental Health/DD/SAS Trust Fund 8,000,000 8,000,000
Ruth M. Easterling Trust Fund for Children
with Special Needs 1,000,000 1,000,000
Subtotal Reserves (9,316,811) 3,895,680 0 0 (5,421,131)
Capital Improvements:
Water Resources Development Projects 31,158,000 0 0 0 31,158,000
Total State Budget
(all sources)
14,351,822,876 1,900,030,000 2,371,046,497 7,676,495,227 26,299,394,600
Source: Office of State Budget and Management
* Note: The Highway Trust/Highway Fund column does not reflect transfers to the General Fund in the amount of $392.7 million for
the 2002-03 fiscal year. See G.S. 105-187.9 and Sections 2.2(e),(f), and (g) of SB 1115, SL 2002-126 (Appropriations Act) for information
relative to this transfer.
Page B-5
Page B-6
BUDGETED POSITION SUMMARY
State of North Carolina
Full-time Equivalent Position Counts by GAAP Fund Type
(December 2001)
General Fund (1) Highway Fund Enterprise Institutional
Internal
Service Special Trust Total by
Appropriated Receipt Appropriated Receipt (2) Fund Fund Fund Fund Fund Sector
Government Sector
State Government
UNC System 28,913 1,395 - - 5,433 13,884 - - - 49,625
Justice and Public Safety 28,212 288 1,858 - - - 433 191 - 30,982
Health & Human Services 9,155 8,946 - - 34 - 12 665 4 18,816
Transportation - - 8,200 6,177 - - - - 14,378
Natural & Economic Resources 4,178 1,124 86 - 89 - - 3,010 150 8,636
General Government 4,160 407 68 - 1 - 636 363 - 5,635
Education (State Administration) 485 175 - - - - - - 14 674
Sub-total 75,103 12,335 10,212 6,177 5,557 13,884 1,081 4,229 168 128,747
Local Education
Public Schools 139,503 - 115 - - - - - 139,618
Community Colleges 13,770 - - - - - - - 13,770
Sub-total 153,273 - 115 - - - - - - 153,388
Total by GAAP Fund Type 228,376 12,335 10,328 6,177 5,557 13,884 1,081 4,229 168 282,135
Notes:
1) Salary Base includes 1,111 positions in Reserve budget codes.
2) Includes 5,643 work order positions funded out of construction and maintenance line-items in the Highway Fund Budget.
Source : Survey of State Agencies and Other State-funded Institutions, Fiscal Research Division, NC General Assembly, Office of State Budget and Management, December 2001.
ECONOMY AND
REVENUES
Page C-1
2001-02 Experience
Last fiscal year was marked by the largest revenue shortfall since the 1990-91 recession.
The amount of the shortage, expressed in dollar terms and as a percentage of the forecast,
is summarized below. The numbers are shown on both an “actual” basis and an
“economic” perspective due to the impact of tax law changes and other special factors on
the comparison between 2000-01 and 2001-02.
Actual Basis ($Mil.)
Actual Revenue 13,157.6
Less: Budgeted Revenue -14,713.1
Revenue Difference - 1,555.5
Actual Growth Rate -1.0%
Budgeted Growth Rate* +10.8%
Difference -11.8%
“Economic” Basis**
Actual Growth Rate -6.2%
Budgeted Growth Rate +4.0%
Difference -10.2%
* Includes tax changes
**Adjusted for impact of tax law changes, lawsuit payouts, and tax refund
processing delays. The revenue forecast used in the budget process begins
with this calculation and adds or deducts the impact of tax changes.
There are a number of factors that affected the performance of the forecast. First is the
timing issue. The budget revenue estimate was adopted in August 2002, one month prior
to the events of September 11. This consensus outlook was developed after a review of
the state economic forecast by three North Carolina bank and university economists. The
analysis of the outside experts suggested revenue growth of 5.0-5.5%. The rate actually
adopted was 4.0%.
The budgeted rate was also lower than the amount based on the DRI/WEFA economic
outlook purchased by the Office of State Budget and Management. Finally, the rate
compares favorably with that used in surrounding states as reported in a National
Conference of State Legislatures survey:
South Carolina 6.5%
Virginia 6.9%
Georgia 7.2%
ECONOMIC OUTLOOK AND GENERAL REVENUES
Page C-2
The reason for the seemingly optimistic forecasts is that prior to September 11 many
economists felt that the economy had escaped a recession. In fact, there were tentative
signs that a recovery from the 2000-01 slowdown was underway. The events of
September 11 changed all that. The fallout from the attacks led to FY 02 budget
shortfalls in 44 states. In many states, the budget gap was larger than the 1990-91
problem.
The impact first became evident in North Carolina around September 25 when the sales
tax remittance from large merchants for the September 1-15 retail period was tabulated.
These numbers confirmed that many consumers were glued to the television screen
during the first few days following the attacks.
The effect of September 11 on the employment side of the economy was more difficult to
track. The main reason was the fact that starting in mid-1999, the combination of
NAFTA and merger/consolidation activity in the banking and healthcare sector was
already leading to a pronounced slowdown in job growth in the state. Data illustrating
this trend is shown below:
% Change in Employment*
Manufacturing Financial** Services
1999 -1.9% 7.6% 7.1%
2000 -3.0% 1.8% 4.8%
2001 -3.2% 2.2% 2.7%
2002 -6.7% -.3% .7%
*February of each year compared to prior February
**Includes finance, insurance, and real estate sectors
The recession was characterized by the steepest drop in corporate profits in over five
decades, leading to a 27% decline in corporate income tax receipts in North Carolina.
The profits squeeze was caused by the inability of businesses to pass on higher wage and
energy costs. Indeed, the “pricing power” of all levels of business activity has been non-existent
for a couple of years.
The final issue adversely affecting General Fund revenue during 2001-02 was the bear
market in stocks that began in March 2000. The impact has been especially hard on
technology and telecommunications shares.
The effect of the markets on the state budget did not come as a surprise. The official
budget forecast assumed a 12% decline in the equity prices and a 23% drop in capital
gains for the 2001 tax year. However, the impact of September 11, combined with the
shift in portfolios in recent years to risky NASDAQ stocks, caused gains to drop by 47%.
The breakdown of the shortfall by tax schedule is shown on Page C-6.
Page C-3
National Economic Outlook for 2002-03
The recovery from the events of September 11 has been the most sluggish in decades.
The first stage of the turnaround, beginning in November 2001, was fueled by favorable
interest rates, rapid money supply growth, and aggressive fiscal policy (tax cuts, federal
disaster assistance). In addition, the level of business inventories fell by a record amount
during the fourth quarter of 2001, setting the stage for a ramping up of production.
Around March, the recovery began to experience what some economists are calling a
“soft spot.” This loss of momentum was similar to the slowing that began in late 1991
just six months after the recovery from the Gulf War had begun. In fact, the 1991-93
recovery sputtered three times before a more permane nt acceleration took place in mid-
1993.
During the summer of 2002, the indicators began to show a reacceleration. Examples
included unemployment claims, retail sales, money supply growth, refinancing activity,
and surveys of company executives.
Even though positive signs were popping up every day, we remained concerned with the
fragility of the recovery. One problem is the prolonged weakness in equity prices,
especially for NASDAQ stocks. This decline has devastated the value of 401(k) balances
and other sources of savings, leading to a drop in consumer confidence. This is in stark
contrast to the 1995-99 experience of skyrocketing stock prices, providing fuel for a
consumer-spending binge. In addition, daily news reports on accounting fraud and the
potential military action against Iraq add to the gloom.
The 2001 recession was noted for the steep decline in capital investment, due in large part
to the tech stock crash that began in March 2000. While the confidence of executives
improved dramatically in the period right after September 11, there continues to be a
reluctance to expand facilities and rehire workers. For now, most employers are
increasing the hours of their workers and bringing in part-time employees.
Until a major turnaround in stock prices occurs or we get additional federal monetary or
fiscal stimulus, the national recovery will continue to be sluggish. On the positive side,
the combination of depressed inventories and low interest rates should keep the economy
from going back into recession. Favorable financing has been a major reason for the
stability of the housing sector. Finally, aggressive pricing of car dealers has propped up
auto industry sales (but not profits).
State Prospects
One of the primary characteristics of the 2001 recession was the impact on the
manufacturing sector. This is important to North Carolina because 18% of
nonagricultural employment is in manufacturing versus 12% nationally. A more
important measure might be the share of Gross State Product represented by
manufacturing: 23% in North Carolina versus 17% for the United States.
Page C-4
The drop in manufacturing jobs did not begin with the 2001 recession. Data compiled by
the Employment Security Commission show that manufacturing experienced a fairly
rapid recovery from the 1990-91 recession, with job growth of 2.6% in 1993. The “boom
and bust” nature of manufacturing is one reason why the state’s economy grew 33%
faster than the national experience following the 1981-82 recession and 45% quicker
following the Gulf War downturn. In fact, North Carolina was the fifth fastest growing
state during the 1992-94 period, due in part to the recovery in manufacturing.
After a leveling off period, manufacturing employment began a steady decline in mid-
1995 as the natio nal economy experienced a mild slowdown following the Fed rate hikes
in 1994. The rate of decline began to accelerate in February 2001 and peaked at an 8.5%
year-over- year rate in late 2001. Particularly hard hit were the textile and apparel sectors,
dropping over 15% on a year-over-year by the spring of 2001.
There are some signs that the state’s economy has begun to improve. For one thing, the
unemployment rate has dropped from 6.9% last spring to 6.1% in September and we have
seen improvement in the number of unemployment claims. State sales tax receipts during
the quarter ending June 30 were up 2.3% over the same quarter last year, compared to
–2.0% for the first quarter of 2002 and -3.5% for the final quarter of 2001. Unit sales of
cars and light trucks have risen 4.9% for the most recent three months. Finally, real
estate conveyance tax collections, levied on an ad valorem basis, continue to benefit from
favorable mortgage rates.
For the future, we are budgeting on the basis of a continued sluggish recovery. This
experience would be very different from the explosive growth after the last two
recessions. One reason is the continued weakness of tech stock prices. As the state has
diversified away from the traditional manufacturing industries (textiles, apparel,
furniture, and tobacco) to electronics and other technology-oriented companies, we have
become more vulnerable to problems in the latter sectors.
A classic example is the experience of the Catawba Valley region (Hickory). During the
late 1990’s, this area had an unemployment rate as low as 1.5% due to the explosive
growth of fiber optic manufacturing. Earlier this year the rate was 9.4%, one of the
highest in the state. We are concerned that it may take some time for the nation’s
telecommunications companies to work down excess inventory.
Forecast Tables
The table on Pages C-7 and C-8 shows the projected change in key state and national
economic variables for the upcoming three state fiscal years. For each measure there is a
comparison between the forecast for DRI/WEFA (used by the State Budget Office),
Economy.Com (used by Fiscal Research), and the rate used in adjusting the 2002-03 state
budget. The budget outlook clearly represented a pessimistic view of the economy as of
July 2002.
Page C-5
On Page C-9 the baseline growth rate for major General Fund revenue sources is shown.
These numbers have been adjusted for the numerous tax law changes and other factors
that distort the year-over-year comparison.
The personal income tax represents 51% of the revenue base. The yield of this tax is not
only affected by economic factors (jobs, hours worked, wage rates), but has become more
sensitive to capital gains (especially on shares of stock). The table on Page C-10 shows
the history and forecast of the major items in the tax base. It is interesting to note that the
amount of reported capital gains is much more volatile than share prices as measured by
the Standard and Poor’s 500 index. One reason could be the fact that in recent years,
many investors have been purchasing more of the risky technology and
telecommunications stocks.
A factor that has recently come into play during the bear market is the tax treatment of
loss transactions. Any losses in excess of market gains can be offset against up to $3,000
of other income and the remainder can be carried forward to future years. This could
mean that as the market recovers, investors may continue to use up suspended losses.
The 1.9% baseline General Fund revenue growth rate for 2002-03 represents a cautious
view when compared to the budgeted rates in surrounding states:
South Carolina 5.9%
Georgia 5.3%
Virginia 4.8%
The table on page C-11 gives the forecast of specific General Fund Revenue sources on a
“Baseline” basis. This calculation adjusts for 1995-2002 tax law changes, tax processing
delays, and litigation payouts. The “Actual” forecast is contained on Page C-12.
GENERAL FUND REVENUE COLLECTIONS ($ MILLION)
July 01- July 01- July 00-
June 02 June 02 June 01
TAX REVENUE: Target Actual Difference Actual
PERSONAL INCOME:
LARGE EMPLOYER WITHHOLDING $6,754.1 $6,429.3 ($324.8) $6,265.8
SMALL EMPLOYER WITHHOLDING 378.7 393.9 15.2 443.3
ESTIMATED TAXES 1,202.2 938.7 (263.5) 1,104.6
NET FINAL PAYMENTS 1,244.8 846.7 (398.1) 1,009.0
WITHHOLDING REFUNDS (1,271.5) (1,345.0) (73.5) (1,092.5)
LOCAL TAX REIMBURSEMENTS (129.0) (129.0) 0.0 (129.0)
SUBTOTAL - PERSONAL INCOME $8,179.3 $7,134.6 ($1,044.7) $7,391.4
SALES & USE TAX:
REGULAR $3,447.2 $3,230.1 ($217.1) $3,053.2
UTILITY 521.4 475.7 -45.7 382.4
SUBTOTAL - SALES & USE $3,968.6 $3,705.8 ($262.8) $3,435.6
CORPORATE INCOME:
ESTIMATED PAYMENTS $798.8 $705.9 ($92.9) $880.7
FINAL PAYMENTS 236.8 193.2 -43.6 77.3
REFUNDS -189.6 -230.9 -41.3 -234.3
SCHOOL FACILITIES EARMARKING -55.2 -54.3 0.9 -58.8
LOCAL TAX REIMBURSEMENTS -204.5 -204.5 0.0 -204.5
SUBTOTAL - CORPORATE INCOME $586.3 $409.4 ($176.9) $460.3
FRANCHISE:
ANNUAL CORPORATION TAX $333.5 $258.6 ($74.9) $387.8
UTILITY GROSS RECEIPTS 322.4 341.8 19.4 358.7
LOCAL TAX SHARING -189.2 -154.1 30.3 -166.1
SUBTOTAL - FRANCHISE $466.7 $446.3 ($20.4) $580.4
INSURANCE 321.6 340.8 19.2 305.7
ALCOHOLIC BEVERAGES
NET COLLECTIONS $199.1 $201.4 $2.3 $198.9
LOCAL TAX SHARING -25.1 -26.7 -1.6 -26.1
SUBTOTAL - BEVERAGE TAX $174.0 $174.7 $0.7 $172.8
INHERITANCE 130.2 104.8 -25.5 123.2
PRIVILEGE LICENSE 26.4 26.6 0.2 3.0
TOBACCO PRODUCTS 40.7 41.5 0.8 42.0
PIPED NATURAL GAS 37.9 40.9 3.0 37.2
GIFT 23.2 13.4 -9.8 20.3
OTHER 1.1 1.1 0.0 1.2
TOTAL - TAX REVENUE $13,956.0 $12,439.9 ($1,516.1) $12,572.9
NONTAX REVENUE
INVESTMENT INCOME $166.8 $132.6 ($34.2) $170.3
JUDICIAL FEES 112.0 110.4 -1.6 109.3
DISPROPORTIONATE SHARE 107.0 110.4 3.4 109.1
INSURANCE DEPARTMENT 45.5 46.4 0.9 43.6
OTHER 139.4 131.4 -8.0 103.6
TOTAL: NONTAX REVENUE $570.7 $531.2 ($39.5) $535.8
TOTAL: TAX AND NONTAX REVENUE $14,526.7 $12,971.1 ($1,555.6) $13,108.7
TRANSFERS:
HIGHWAY TRUST FUND $171.7 $171.7 $0.0 $170.0
HIGHWAY FUND 14.5 14.6 0.1 13.8
TOTAL: TRANSFERS $186.2 $186.3 $0.1 $183.8
TOTAL GENERAL FUND REVENUE $14,712.9 $13,157.4 ($1,555.5) $13,292.5
Note: Data has not be adjusted for tax law changes, lawsuit payouts and tax processing delays.
Page C-6
Budget Baseline
Estimate Forecast
92-93 93-94 94-95 95-96 96-97 97-98 98-99 99-00 00-01 01-02 02-03 02-03***
Personal Income Tax 8.6% 7.4% 9.9% 11.0% 10.2% 13.9% 10.5% 6.2% 7.4% -7.5% 2.1% 3.7%
Sales Tax:
Regular 8.3% 10.7% 8.9% 6.2% 8.1% 6.1% 7.5% 5.5% 1.9% -2.0% 1.5% 3.2%
Utility Gross Receipts 3.7% 8.6% -0.9% 7.9% 4.2% 4.7% 4.4% 6.5% 6.4% 4.2% 2.2% 3.8%
Corporate Income Tax 13.5% 5.8% 21.2% 3.5% 10.0% 3.5% 7.8% -2.6% -11.5% -26.6% 2.8% 4.1%
Franchise Tax:
Corporation Franchise 2.8% 3.2% 4.1% 8.9% 6.6% 23.6% 5.7% -4.7% 22.6% -15.7% 1.9% 3.6%
Utility Gross Receipts 1.8% 11.8% -1.5% 7.0% 2.9% 3.8% -3.1% -3.8% 9.2% 10.1% 1.0% 2.1%
Inheritance Tax* 2.2% 18.9% 3.2% 2.7% 17.0% 12.2% 12.8% 12.0% -2.1% -15.2% 2.8% 3.0%
Insurance Tax 2.8% 16.3% 4.8% 4.6% 6.0% 3.4% 6.9% -6.1% 5.2% 10.2% 3.7% 4.8%
Alcoholic Beverage Tax 0.1% 1.2% 1.4% 2.9% 3.3% 2.3% 2.8% 5.4% 3.7% 2.9% 2.9% 3.1%
Total Revenue** 7.0% 9.1% 9.9% 6.8% 9.2% 8.8% 9.8% 4.0% 4.6% -6.2% 1.9% 3.5%
NOTE: Data has been adjusted for tax law changes, tax collection and refund delays, litigation payouts, and other special one-time factors.
*Applies to "pick-up" tax that is levied to use up federal credit for state death taxes.
**Includes minor tax sources not shown in table.
***This forecast is based on July 2002 economic outlook of Economy.com and is shown for comparison purposes.
C-9
GROWTH RATES FOR MAJOR GENERAL FUND REVENUE SOURCES
1992 1993 1994 1995 1996 1997 1998 1999 2000 2001(e) 2002(e) 2003(e)
Wages & Salaries 69.20 73.00 77.46 82.76 87.50 94.08 100.85 107.19 114.20 115.57 114.65 119.92
% Change 7.1% 5.5% 6.1% 6.8% 5.7% 7.5% 7.2% 6.3% 6.5% 1.2% -0.8% 4.6%
Interest 3.08 2.53 2.43 3.05 3.30 3.52 3.69 3.62 4.19 4.16 3.95 4.11
% Change -22.8% -17.9% -4.0% 25.5% 8.2% 6.7% 4.8% -1.9% 15.7% -0.7% -5.0% 4.0%
Dividends 1.58 1.72 1.79 2.07 2.29 2.62 2.61 2.95 3.21 3.52 3.74 3.89
% Change 2.6% 8.9% 4.1% 15.6% 10.6% 14.4% -0.4% 13.0% 8.8% 9.8% 6.0% 4.2%
Business Income 3.53 3.69 3.87 3.98 4.30 4.44 4.75 4.89 4.83 4.64 4.71 5.14
% Change 9.6% 4.5% 4.9% 2.8% 8.0% 3.3% 7.0% 2.9% -1.2% -4.0% 1.6% 9.1%
Capital Gains 2.38 2.73 2.91 3.41 5.11 7.06 8.45 9.38 10.24 5.40 3.29 3.64
% Change 18.4% 14.7% 6.6% 17.2% 49.9% 38.2% 19.7% 11.0% 9.2% -47.3% -39.1% 10.6%
% Change Stock Value 10.5% 8.6% 2.0% 17.7% 23.9% 30.1% 24.2% 22.1% 7.6% -16.4% -1.4% 7.4%
IRA Distributions 0.64 0.65 0.80 0.91 1.13 1.37 1.90 2.27 2.67 2.72 2.83 3.06
% Change 28.0% 1.6% 23.1% 13.8% 24.2% 21.2% 38.7% 19.5% 17.6% 2.0% 4.0% 8.0%
Unemployment Benefits 0.48 0.42 0.30 0.31 0.30 0.25 0.25 0.31 0.41 0.50 0.65 0.55
% Change 9.1% -12.5% -28.6% 3.3% -3.2% -16.7% 0.0% 24.0% 32.3% 22.0% 30.0% -15.4%
Pensions 4.38 4.63 5.03 5.52 6.05 6.69 7.40 8.10 8.69 9.21 9.91 10.85
% Change 6.6% 5.7% 8.6% 9.7% 9.6% 10.6% 10.6% 9.5% 7.3% 6.0% 7.6% 9.5%
Partnership 2.63 2.79 3.43 3.80 4.40 5.00 5.45 6.05 6.50 5.85 6.20 6.57
% Change 38.4% 6.1% 22.9% 10.8% 15.8% 13.6% 9.0% 11.0% 7.5% -10.0% 6.0% 5.9%
Statutory Adjustment -0.8 -0.8 -0.9 -1.0 -1.0 -1.1 -1.2 -1.3 -1.4 -1.5 -1.6 -1.7
% Change 2.5% 3.7% 7.1% 5.6% 6.3% 7.9% 10.1% 8.3% 8.5% 6.4% 6.7% 6.2%
Total Gross Income 87.09 91.32 97.12 104.86 113.37 123.94 134.15 143.46 153.53 150.08 148.33 156.03
% Change 6.8% 4.9% 6.4% 8.0% 8.1% 9.3% 8.2% 6.9% 7.0% -2.3% -1.2% 5.2%
(e) = Estimated C-10
FEDERAL TAX RETURN DATA FOR NORTH CAROLINA TAXPAYERS ($ BILLION)
Page C-13
The Highway Fund is supported from three primary revenue sources: three- fourths of the
motor fuels tax, license and fee revenues collected by the Division of Motor Vehicles,
and interest earned from investment of fund balances by the State Treasurer.
FY 2001-02 REVENUES
Highway Fund collections totaled $1.298 billion in FY 2001-02, a 3.1% increase over FY
2000-01. Motor fuels tax collections increased by 2.4%.
FY 2002-03 FORECAST
Highway Fund revenues are projected to decrease by $21.6 million, or 1.7%, in FY 2002-
03 due to lower motor fuels tax collections and lower investment income.
HIGHWAY FUND REVENUE
(MILLIONS)
FY 2001-02 FY 2002-03
Actual Projected
Motor Fuels Taxes $888.1 $861.4
Licenses, Fees, and Penalties
Staggered Vehicle Registration $148.3 $155.2
Truck Licenses $61.5 $61.8
Driver Licenses $68.9 $71.6
International Registration Plan $49.9 $52.4
Other $64.3 $62.2
Sub Total $392.9 $403.2
Investment Income $17.2 $12.0
Total Highway Fund Revenue $1298.2 $1276.6
HIGHWAY FUND REVENUE
Page C-14
The 1989 Session of the General Assembly established the Highway Trust Fund for the
purpose of funding highway construction. The 2001 General Assembly permitted the use
of $680 million of Trust Fund cash balances over three fiscal years for additional
purposes, primarily maintenance. The Trust Fund's primary revenue sources are one-fourth
of the motor fuel tax, a 3% Highway Use Tax, title fees and various registration
fees, and interest earned on cash balances. 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
change in the law in 2001, this statutory transfer in FY 2002-03 is $172.4 million and will
grow over time. In addition to this statutory transfer, the Governor transferred $80
million in FY 2001-02 and the Budget for FY 2002-03 transfers $205 million to the
General Fund. The $205 million, and an additional $80 million to be transferred in FY
2003-04, are to be paid back to the Highway Trust Fund starting in FY 2004-05.
FY 2001-02 REVENUES
Highway Trust Fund revenues for FY 2001-02 (net of transfers to the General Fund)
totaled $722.1, a decrease of 9.1% from the previous year. The decrease was primarily
due to the $80 million additional transfer to the General Fund.
FY 2002-03 FORECAST
Highway Trust Fund revenues (net of transfers to the General Fund) are expected to
decrease by 17.3% in FY 2002-03, reflecting the increased transfers to the General Fund
in the FY 2002-03 Budget.
HIGHWAY TRUST FUND REVENUE
(MILLIONS)
FY 2001-02 FY 2002-03
Actual Projected
Motor Fuels Taxes $296.3 $287.1
Highway Use Tax $555.3 $579.4
Title Fees $78.9 $81.0
Other Fees $11.8 $12.2
Investment Income $31.5 $15.0
Sub Total $973.8 $974.7
Statutory Transfer to General Fund ($171.7) ($172.4)
Additional Transfer to General Fund ($80.0) ($205.0)
Total Highway Trust Fund Availability $722.1 $597.3
HIGHWAY TRUST FUND REVENUE
FEDERAL BLOCK
GRANTS
&
SUMMARY OF
MEDICAID CHANGES
Page D - 1
HISTORY
In 1981, the Reagan Administration recommended and Congress adopted the Omnibus Budget
Reconciliation Act which created a number of new “block grants” to be distributed to state
governments in lieu of numerous 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 Administration to significantly cut the federal budget.
In previous years, Congress had appropriated money to the States for smaller, narrow-purpose
programs, such as those for disabled children, migrant health, family planning, and
immunizations. These funds were accompanied by numerous “strings” and substantial paperwork
requirements. The new block grants consolidated appropriations 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
SOCIAL SERVICES BLOCK GRANT
The Social Services Block Grant is intended to provide federal funds to help people achieve or
maintain a greater degree of economic self-support or self-sufficiency, to prevent abuse or
exploitation of children and adults who are unable to protect their own interests, and to prevent
inappropriate institutional care or to secure appropriate institutional care when other forms of care
are not appropriate. The primary providers of these services are the 100 county departments of
social services. Examples of services funded include child and adult day care and in-home
services for the elderly.
SUBSTANCE ABUSE PREVENTION AND TREATMENT BLOCK GRANT
The ADAMHA Reorganization Act of 1992 (P.L. 102-321) split the Alcohol, Drug, and Mental
Health Services Block Grant (ADMBG), thereby creating the new Substance Abuse Prevention
and Treatment Block Grant (SAPTBG). The SAPTBG provides federal financial assistance 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 community based
services for the mentally ill. Services provided through the use of the block grant must be those
described in the state’s Plan in accordance with Federal P.L. 102-321. These services include
outpatient, day treatment, psychosocial rehabilitation, emergency services, residential services,
etc.
FEDERAL BLOCK GRANT PROGRAMS
Page D - 2
FEDERAL BLOCK GRANT PROGRAMS (Continued)
MATERNAL AND CHILD HEALTH BLOCK GRANT
This block grant funds health services for mothers and children to reduce infant mortality and the
incidence of preventable diseases and handicapping 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 order to reduce the risk of
preventable illness and early death and to improve the quality of life through better 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 assistance and home weatherization or energy-related
home repairs.
COMMUNITY SERVICES BLOCK GRANT
This is a federally funded program that provides a range of services and activities designed to
eliminate the causes of poverty among the elderly, poor, and handicapped.
COMMUNITY DEVELOPMENT BLOCK GRANT
This block grant provides funds to assist local governments with community and economic
development projects that primarily benefit low and moderate-income persons.
CHILD CARE AND DEVELOPMENT FUND (CCDF) BLOCK GRANT
The Personal Responsibility and Work Opportunities Reconciliation Act of 1996 eliminated any
entitlement to child care subsidies and consolidated all federal child care programs into the CCDF
block grant. The purpose of the CCDF block grant is to improve the affordability, availa bility,
and quality of child care for families. Most of the block grant funding must be used to provide
child care subsidies to families receiving public assistance, making the transition off of public
assistance, or at risk of becoming dependent on public assistance. In addition, 4% of the total
allocation must be spent on quality and availability initiatives. CCDF requires all providers
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 Administration enacted the Personal
Responsibility and Work Opportunities Reconciliation Act of 1996 (PRWORA). Better known
as federal Welfare Reform, passage of PRWORA ended decades of the Aid to Families of
Dependent Children (AFDC) entitlement program and replaced it with the Temporary Assistance
for Needy Families (TANF) Block Grant. This action gave states unprecedented flexibility to
create their own welfare programs that emphasize self-sufficiency and work.
Page D - 3
2002-2003
DEPARTMENT OF COMMERCE
Community Development Block Grant – 2003 Program Year $45,000,000
DEPARTMENT OF HEALTH AND HUMAN SERVICES
Division of Mental Health, Developmental Disabilities and Substance Abuse Services
Social Services Block Grant $8,656,604
Mental Health Services Block Grant 10,239,850
Substance Abuse Prevention and Treatment Block Grant 39,275,687
Temporary Assistance for Needy Families Block Grant 1,875,142
Division of Social Services
Low Income Energy Block Grant $25,569,203
Social Services Block Grant 28,376,011
Temporary Assistance for Needy Families 246,965,975
Division of Facility Services
Social Services Block Grant $639,964
Division of Child Development
Social Services Block Grant $3,000,000
Child Care and Development Fund Block Grant 143,605,794
Temporary Assistance for Needy Families 99,433,430
Division of Vocational Rehabilitation
Social Services Block Grant $188,263
Division of Services for the Blind
Social Services Block Grant $3,105,711
Office of the Secretary (Office of Economic Opportunity)
Social Services Block Grant $41,302
Community Services Block Grant 16,963,303
Division of Aging
Social Services Block Grant $3,995,535
Division of Public Health
Social Services Block Grant $145,819
Substance Abuse Prevention and Treatment Block Grant 631,335
Preventive Health Services Block Grant 3,747,927
Maternal and Child Health Block Grant 16,928,823
Note: The figures listed above for the Department of Health and Human Services
do not reflect the total amount of the Block Grants, due to various transfers
to other Departments.
Page D - 4
STATE
During its 2002 Regular Session, the N.C. General Assembly enacted a $7.2 Billion
budget for the Medicaid Program for SFY 2002-03. State funding for the Medicaid
Program totals $2.19 Billion for SFY 2002-03.
During its deliberations on the proposed budget, the 2002 General Assembly reduced the
General Fund appropriations for the Medicaid Program by $111 million for SFY 2002-
03. The reductions include increasing prescription drug utilization management; reducing
personal care services from 80 hours per month to 60 hours per month; expanding the
Carolina ACCESS II/III program; applying Medicaid policy to Medicare crossover
claims; reducing case management services; reducing hospital payments by .5%,
reducing rates by 5% for durable medical equipment, optical services, home health
supplies, home infusion therapy, ambulatory surgical services and high risk intervention
services; modifying the asset policies for receiving Medicaid and transferring funds from
the Medicaid Reserve Fund.
The 2002 General Assembly also increased General Fund appropriations by $81.7 for
SFY 2002-03 to cover an increase in the Medicaid forecast.
The 2002 General Assembly also enacted other Medicaid policy changes:
·  Required nursing homes to place Medicare recipients into Medicare certified
nursing me beds.
·  Required Medicaid providers to purchase a $100,000 performance bond or other
financial instrument in order to receive payment from the Medicaid program.
·  Required parental income to be counted in determining eligibility for a pregnant
minor if the minor is residing in the home.
·  Required DMA to apply federal transfer of assets policies to real property
excluded as tenancy- in-common, or as nonhomesite property made income
producing under Title XIX, Section 1902(r)(2) of the Social Security Act.
·  Applied transfer of asset policies to noninstitutionalized individuals or spouse of
such individual as defined in Title XIX, Section 1917(c) as described in an
approved Title XIX State Plan.
·  Included personal care services under the definition of "medical assistance" in
G.S. 108A-70.5(b) - the Medicaid Estate Recovery statutes.
·  Required DMA to employ procedures to mitigate hardship to Medicaid enrollees
when implementing the Supplemental Security Income (SSI) method for
considering equity value of income producing property.
CHANGES TO THE MEDICAID PROGRAM
Page D - 5
·  Required DHHS to support the maximum number of persons through the CAP
programs within existing funding for these programs. Allowed a person who
entered a nursing facility on or before June 1, 2002 to receive CAP-DA services
even if the availability of CAP-DA services has been suspended.
·  Authorized DHHS to adopt temporary rules to clarify recipient rights related to
the pharmacy management plan.
·  Prohibited DHHS from requiring supplemental rebates from pharmaceutical
manufacturers.
FEDERAL
No significant federal changes have occurred in 2002.
DISPROPORTIONATE SHARE FUNDS
Disproportionate Share (DSH) 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 services provided to
Medicaid eligible patients. Congress originally authorized the payments as a funding
mechanism to offset the cost of uncompensated care 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 funds for DSH
payments with direct appropriations or with funds appropriated to a governmental unit for
the delivery of health care to the uninsured. 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 year 2002.
North Carolina uses state appropriations to the five state hospitals (UNC Memorial,
Dorothea Dix, Broughton, Cherry and John Umstead) as the non-federal match with
which the State draws disproportionate share payments. The 2001-03 biennial state
budgets anticipate $107 million each fiscal year in DSH payments to the State Treasurer.
Section 21.23 of Chapter 424 of the 2001 Session Laws stipulates that appropriations to
the Medicaid program that become available due to federal Disproportionate Share
receipts will be deposited as nontax revenues. The State Treasurer will reserve any DSH
payments in excess of $107 million for future appropriation.
SUMMARY:
GENERAL FUND
APPROPRIATIONS
2002-2003
FISCAL YEAR
2002-03 2002-03
Authorized Recurring Nonrecurring Net Position Revised
Appropriation Adjustments Adjustments Changes Changes Appropriation
Education:
Community Colleges 643,195,459 28,195,165 (2,109,234) 26,085,931 -11.50 669,281,390
Public Education 5,922,188,546 (11,409,327) (16,225,726) (27,635,053) 471.30 5,894,553,493
University System 1,798,320,830 (12,807,721) (17,416,000) (30,223,721) 0.00 1,768,097,109
Total Education 8,363,704,835 3,978,117 (35,750,960) (31,772,843) 459.80 8,331,931,992
General Government:
Administration 61,563,497 (5,620,309) 0 (5,620,309) -77.80 55,943,188
Auditor 11,864,673 (795,965) 0 (795,965) -5.00 11,068,708
Cultural Resources 59,427,419 (4,794,666) 1,184,453 (3,610,213) -35.45 55,817,206
Cultural Resources - Roanoke Island 1,859,463 (151,222) 0 (151,222) 0.00 1,708,241
General Assembly 39,553,848 (2,654,234) 0 (2,654,234) -10.00 36,899,614
Governor 5,442,905 (504,595) 0 (504,595) -8.00 4,938,310
Insurance 23,527,552 0 0 0 -4.56 23,527,552
Insurance - Worker's Compensation Fund 4,500,000 0 (2,500,000) (2,500,000) 0.00 2,000,000
Lieutenant Governor 669,545 (53,280) 0 (53,280) -1.00 616,265
Office of Administrative Hearings 2,795,155 (233,742) 0 (233,742) -3.00 2,561,413
Revenue 77,955,704 (2,384,400) 0 (2,384,400) -21.00 75,571,304
Rules Review Commission 325,795 (9,981) 0 (9,981) 0.00 315,814
Secretary of State 8,286,850 (194,156) 15,990 (178,166) -6.00 8,108,684
State Board of Elections 3,186,269 (40,378) 250,000 209,622 0.00 3,395,891
State Budget and Management 5,354,938 (300,057) 0 (300,057) -4.00 5,054,881
State Budget and Management -- Special 3,080,000 0 100,000 100,000 0.00 3,180,000
State Controller 11,523,868 (1,101,040) 0 (1,101,040) -5.00 10,422,828
Treasurer - Operations 7,216,817 671,618 0 671,618 -2.00 7,888,435
Treasurer - Retirement / Benefits 12,379,780 (5,248,601) 0 (5,248,601) 0.00 7,131,179
Total General Government 340,514,078 (23,415,008) (949,557) (24,364,565) -182.81 316,149,513
General Fund Appropriations
Fiscal Year 2002-03
2002 Session
(Reflects all legislation affecting General Fund availability enacted by the General Assembly during the 2002 Session, including SB 1115, HB 1105, and SB 1455)
Page E - 1
2002-03 2002-03
Authorized Recurring Nonrecurring Net Position Revised
Appropriation Adjustments Adjustments Changes Changes Appropriation
Health and Human Services:
Office of the Secretary 48,008,705 19,776,228 0 19,776,228 -24.00 67,784,933
Aging Division 29,531,910 (926,000) 0 (926,000) 0.00 28,605,910
Blind and Deaf / Hard of Hearing Services 10,168,115 (643,013) 0 (643,013) -1.00 9,525,102
Child Development 289,058,396 (22,228,035) 15,000,000 (7,228,035) -6.00 281,830,361
Education Services 69,581,525 (4,104,503) 0 (4,104,503) -77.50 65,477,022
Facility Services 15,442,236 (748,170) 0 (748,170) -5.00 14,694,066
Medical Assistance 2,219,446,892 14,114,441 (43,747,538) (29,633,097) -2.00 2,189,813,795
MH/DD/SAS 581,068,627 (9,487,015) 1,780,000 (7,707,015) -95.75 573,361,612
NC Health Choice 37,487,142 (168,964) 7,740,000 7,571,036 0.00 45,058,178
Public Health 107,434,083 (10,045,770) 3,450,000 (6,595,770) -12.45 100,838,313
Social Services 194,763,531 (12,833,025) (1,350,000) (14,183,025) -44.00 180,580,506
Vocational Rehabilitation 42,088,956 (3,230,105) 0 (3,230,105) -26.00 38,858,851
Total Health and Human Services 3,644,080,118 (30,523,931) (17,127,538) (47,651,469) -293.70 3,596,428,649
Justice and Public Safety:
Correction 930,964,916 (22,603,242) (28,306,866) (50,910,108) -366.40 880,054,808
Crime Control & Public Safety 28,493,506 (713,318) 0 (713,318) -16.00 27,780,188
Judicial Department 305,465,135 (10,128,667) (700,299) (10,828,966) -55.00 294,636,169
Judicial - Indigent Defense 68,867,771 3,469,130 4,950,000 8,419,130 61.00 77,286,901
Justice 73,785,584 (1,456,276) (1,391,115) (2,847,391) -19.00 70,938,193
Juvenile Justice & Delinquency Prevention 142,554,017 (13,357,423) (211,961) (13,569,384) -190.50 128,984,633
Total Justice and Public Safety 1,550,130,929 (44,789,796) (25,660,241) (70,450,037) -585.90 1,479,680,892
Natural And Economic Resources:
Agriculture and Consumer Services 55,268,040 (4,677,739) (144,719) (4,822,458) -67.50 50,445,582
Commerce 44,280,374 (10,150,110) (200,000) (10,350,110) -19.91 33,930,264
Commerce - State Aid 5,200,000 5,085,000 0 5,085,000 0.00 10,285,000
Environment and Natural Resources 158,722,700 (9,994,113) 90,000 (9,904,113) -114.84 148,818,587
DENR - Clean Water Mgmt. Trust Fund 70,000,000 0 (3,500,000) (3,500,000) 0.00 66,500,000
Labor 15,117,906 (951,725) 0 (951,725) -9.38 14,166,181
NC Housing Finance Agency 5,300,000 (540,600) 0 (540,600) 0.00 4,759,400
NC Biotechnology Center 6,270,468 (377,047) (250,000) (627,047) 0.00 5,643,421
Rural Economic Development Center 5,090,749 (423,851) 0 (423,851) 0.00 4,666,898
Total Natural and Economic Resources 365,250,237 (22,030,185) (4,004,719) (26,034,904) -211.63 339,215,333
Transportation 13,393,341 (1,143,341) (1,347,500) (2,490,841) 0.00 10,902,500
Page E - 2
2002-03 2002-03
Authorized Recurring Nonrecurring Net Position Revised
Appropriation Adjustments Adjustments Changes Changes Appropriation
Statewide Reserves and Debt Service:
Debt Service:
Interest / Redemption 352,266,860 (36,750,000) (61,000,000) (97,750,000) 254,516,860
Federal Reimbursement 1,155,948 0 0 0 1,155,948
Subtotal Debt Service 353,422,808 (36,750,000) (61,000,000) (97,750,000) 0.00 255,672,808
Statewide Reserves:
Teachers/Principals Step Increase 51,937,267 0 51,937,267 51,937,267
Asst/Deputy Clerks/Magistrates Step Increase 1,980,700 0 1,980,700 1,980,700
Compensation Increases 193,842,000 (4,247,868) 0 (4,247,868) 189,594,132
State Health Plan 200,000,000 (12,621,872) 0 (12,621,872) 187,378,128
Retirement Rate Adjustment (241,002,720) (144,525,000) 0 (144,525,000) (385,527,720)
Judicial Retirement Rate Adjustment (2,265,000) 0 (2,265,000)
Employee Severance Compensation 0 0 5,000,000 5,000,000 5,000,000
Contingency and Emergency 5,000,000 0 0 0 5,000,000
Salary Adjustment Fund 500,000 0 0 0 500,000
Governor's Efficiency Commission (25,000,000) 0 (25,000,000) (25,000,000)
Management Flexiblity (41,500,000) 0 (41,500,000) (41,500,000)
ITS Rate Reduction (4,000,000) (3,414,318) 0 (3,414,318) (7,414,318)
MH/DD/SAS Trust Fund 0 0 8,000,000 8,000,000 8,000,000
Easterling TF for Children with Special Needs 0 0 1,000,000 1,000,000 1,000,000
HIPAA Implementation 0 0 2,000,000 2,000,000 2,000,000
Subtotal Statewide Reserves 152,074,280 (177,391,091) 16,000,000 (161,391,091) 0 (9,316,811)
Total Reserves and Debt Service 505,497,088 (214,141,091) (45,000,000) (259,141,091) 0.00 246,355,997
Total General Fund for Operations 14,782,570,626 (332,065,235) (129,840,515) (461,905,750) -814.24 14,320,664,876
Other General Fund Expenditures:
Capital Improvements 0 0 31,158,000 31,158,000 31,158,000
Repairs and Renovations 0 0 0
Total Other General Fund Expenditures 0 0 31,158,000 31,158,000 0.00 31,158,000
Total General Fund Budget 14,782,570,626 (332,065,235) (98,682,515) (430,747,750) -814.24 14,351,822,876
Page E - 3
EDUCATION
Community Colleges
Total Budget Approved 2001 Session
FY 02-03
Budget Changes
$643,195,459
GENERAL FUND
Overview: 2002 Session Fiscal and Budgetary Actions
A. Community College System Office
($882,117)
-11.50
1 R
Reduces the Executive Divi sion by 2.5 positions totaling
$109,356 and operati ng l i n e i t ems totaling $30,650.
Reduces the Administration Di vision by 5 positions
t otaling $180,522 and operating line items totaling
$262,096. Reduces the Business and Finance Divi sion by 1
position totaling $29,026 and operating line items
t otaling $43,697. Reduces the Academic and Student
Services Division by 2 positions totaling $98,862 and
operating line items totaling $67,034. Reduces the
Workforce Development Division by 1 position totaling
$32, 110 and operating l i ne items totaling $28,694.
Operating Efficiencies
B. State Aid - Categorical Programs
2 ($27,000) R
El i mi nates the appropriation for Systemwide Projects. This
f unding was used to pay for the printing of G.S. 115D.
Si nce the Statutes are now avail able on-line, the printing
i s no l onger necessary.
Systemwide Projects
3 ($14,991) R
Reduces the appropri ation for the public radio station at
Isothermal Communi t y College by 10% from $149,912 to
$134,921. Isothermal Communi t y College is the only college
receiving a public radio subsidy that offers a degree
program in Broadcasting and Producti on Technology.
Public Radio Isothermal
($149,912)
$100,000
4 R
Reduces the State subsi dy for Craven Community College's NR
public radio station from $149,912 t o $100,000.
Public Radio Craven
$100,000
5
Provides funds for Gaston Col l ege's public radio station. NR
Public Radio Gaston
6 ($230,397) R
Reduces the State subsi dy for the sawmi l l program at
Haywood Communi t y College by 50%. Reduces the remai ning
special allotment programs by 10%.
Special Allotments
7 ($507,067) R
Reduces the appropri ation for professional development
programs by 50%, f r om $1,014,135 to $507,068.
Faculty Upgrade
Community Colleges Page F - 1
Overview: 2002 Session Fiscal and Budgetary Actions FY 02-03
8 ($1,000,000) R
Reduces the state appropri ation for equipment by $2
mi l l i on, from $16,319,732 to $14,319,732.
Equipment Reduction
9 $1,212,300 R
Cont i nues the funding for the operation of the NC
I nformation Hi ghway at 45 col l eges.
NC Information Highway Line Charges
E. Formula Modifications
10 ($3,000,000) R
Transfers funds previously appropriated in the Curriculum
f ormula for the Academi c Support Supplement to a separate
l i ne item i n State aid fund code 1600. Reduces the amount
appropriated for the Academic Support Supplement by
$3,000,000, from $11,886,683 to $8,886,683.
Academic Support Supplement
F. Tuition, Enrollment, and Financial Aid
($3,299,824)
($2,309,234)
11 R
I ncreases the budgeted amount of tuition and registration NR
f ees to more accurately reflect anticipated receipts.
Adjustment for Over-Realized Receipts
12 ($10,754,640) R
I ncreases the in-state tuition charge per semester hour by
$3.25 from $31.00 to $34.25. Increases the out-of-state
t ui t i on charge per semester hour by $17.50 from $173.25 t o
$190.75. Changes the semester credit hour limi t f o r
summer term curriculum tuition from 9 hours to 16 hours.
It is anticipated that for most students, this increase
wi l l be off-set by federal and State financial assistance
programs.
Increase Curriculum Tuition Charge
13 $51,848,813 R
Fully funds the Community Col l ege enrol l ment request.
Enrollment Adjustment
14
I ncreases the Need-Based Financi al Ai d fund from
$6,062,806 to $7,062,806. This item is funded from the
Escheats fund.
Increase Need-Based Financial Aid
G. Management Flexibility
15 ($5,000,000) R
Gives the State Board of Communi t y Col l eges t he
f l e x i b i l i t y t o i mplement a $5,000,000 reduction within the
Community Col l ege System budget.
State Board of Community Colleges Discretionary
Reduction
Community Colleges Page F - 2
Overview: 2002 Session Fiscal and Budgetary Actions FY 02-03
$28,195,165
($2,109,234)
-11.50
Budget Changes
Total Position Changes
Revised Total Budget $669,281,390
R
NR
Community Colleges Page F - 3
Special Provisions SB 1115
Department: Community Colleges
Boilerplate language allowing community colleges to establish their budgets according to their
local missions. Limits the transfer of funds from faculty salaries to 2% systemwide.
Section: 8.1
Title: Community College Funding Flexibility
Summary:
Directs the State Board to consider regionalization of existing and new programs. Requires the
State Board to report on all programs approved or terminated during the year, the reason for the
program approval, and the progress made regarding regionalization.
Section: 8.2
Title: Regional Programs
Summary:
Directs the State Board to work with the Department of Commerce and the Board of Governors of
the University System and the seven regional economic development commissions to adopt a
joint policy that requires the development of a five-year plan for each of the economic
development regions in the State. Each plan shall determine the economic development goals
and the future job market in the region and shall identify community college and university
courses currently offered or needed to effectuate those goals.
Section: 8.3
Title: Regional Economic Development Vision Plans
Summary:
Moves funding for the Regional High Tech Center at Haywood Community College (robotics) from
the special allotments line item to a new line item entitled "Haywood Regional High Technology
Center." Directs the State Board to study the Center to determine whether similar centers should
be created in other regions of the State.
Section: 8.4
Title: Haywood Regional High Technology Center
Summary:
Moves the Academic Support Supplement from the curriculum instructional formula to a separate
line item. Directs the State Board to report any recommendations regarding formula modifications
to the General Assembly. Directs the State Board to allocate up to $200,000 from overrealized
receipts for the Botanical Laboratory at Fayetteville Technical Community College.
Section: 8.5
Title: Realignment of Funding
Summary:
Allows the State Board to adopt temporary rules clarifying the conditions under which community
colleges may earn budgeted FTE for training provided to law enforcement, fire and rescue
services, and emergency medical service personnel. Allows the State Board to adopt temporary
rules clarifying the definition of fees charged to students.
Section: 8.6
Temporary Rules on FTE for Training Provided to Law Enforcement Personnel and on Generic
Fees
Title:
Summary:
Community Colleges Page F - 4
Directs Education Oversight, in conjunction with the State Board, to hire an outside consultant to
study the organization and structure of the Community College System, the administrative
formula, and the funding of multicampus colleges and off-campus centers. Also, allows
Education Oversight to hire an outside consultant to study Community College System funding,
including State funds, county funds, and tuition rates.
Section: 8.7
Title: Community College System Study
Summary:
Allows the State Board to transfer funds within the System Office budget to implement budget
reductions.
Section: 8.8
Title: Flexibility to Implement Budget Reductions
Summary:
Transfer a receipt supported position from the Community College System Office to the
Department of Public Instruction. This position was transferred to the System Office when the
Bureau of Training Initiatives was moved from the Department of Labor in FY01-02. The position
mainly works with the High School Apprenticeship program.
(Note: Section 71 of SB 1217, 2002 Technical Corrections, SL 2002-159, adds this provision to
SB 1115, S.L. 2002-126.)
Section: 8.9
Title: Transfer of Community College Position
Summary:
Allows the Hosiery Center to keep fees collected by the Center for product testing; exempts
purchases using those fees from State purchasing requirements. (Originally H.B. 1626)
Section: 8.10
Title: Hosiery Center Funds
Summary:
Allows the State Board to use up to $1 million for a non-recurring grant to the North Carolina
Community College Foundation to match a donation from Glaxo Smith Kline. (Originally S.B.
1467, H.B. 1681)
Section: 8.13
Title: Scholarships for Prospective Teachers
Summary:
Directs the State Board to report to Fiscal Research on all reductions made in order to meet the
management flexibility reduction.
Section: 8.14
Title: State Board of Community College Management Flexibility
Summary:
Community Colleges Page F - 5
Public Education
Total Budget Approved 2001 Session
FY 02-03
Budget Changes
$5,922,188,546
GENERAL FUND
Overview: 2002 Session Fiscal and Budgetary Actions
A. Adjustments to Budget Requirements
$29,857,304
461.90
16 R
Revi se the projected increase for FY 2002-03 to reflect an
additional 8,695 in average daily membership (total
i ncrease over FY 2001-02 i s 25,817). The dol l ar amount
reflects the Continuation Budget impact of this increase
on all position, dollar, and categorical allotments.
Total funded student population for FY 2002-03: 1,326,865.
The i ncrease for ADM growth for Driver Education is
$236,139 which is transferred to the General Fund from the
Hi ghway Fund.
Total ADM i ncrease for the General Fund and Highway Fund
i s $30, 093,413.
Continuation Adjustment for Average Daily Membership
17 ($22,788,638) R
Annual adj ustment of average budgeted salary for certified
personnel. Adjustment is based on actual sal aries paid to
certified personnel through December 2001.
Average Annual Salary Adjustment
18 ($5,964,427) R
I n addition to the annual Continuation Budget adjustment
t o average budgeted sal ary for certified personnel, a more
recent review of certified personnel salaries from updated
salary data identified an additional reduction in
projected salary needs for FY 2001-03.
Additional Adjustments to Average Salary Projections
($5,361,201)
19
Adjustment based on the estimated actual utilization of NR
posi t i o n a l l o t ments.
Adjustment for Unutilized Position Allotments
20 ($2,273,979) R
Adjust the increase for inflation to a 3% growth (in line
with the Consumer Price Index) from the 5% growth used to
build the Continuation Budget. The Instructional Supply
a l l o t ment for FY 2002-03 will be $41.45 per ADM af t e r t h i s
adjustment .
Also see Speci al Provision related to instructional
material/instructional supplies/equipment (SB 1115,
Sect i on 7. 9).
Classroom Materials/Instructional Supplies/Equipment
Public Education Page F - 6
Overview: 2002 Session Fiscal and Budgetary Actions FY 02-03
21 ($5,800,000) R
Current inventory levels (oil, tires, and parts) at local
school administrative units indicate that additional
supply needs for next year wi l l be mi ni mized. Last year's
non-recurring adjustment of $4 mi l l i on will become a
recurring reduction. Also, reduce for lower anticipated
f uel cost $1.8 mi l l i on.
Transportation
($19,600,000)
22
I mpl ement a lease/purchase process that will allow for the NR
payment of school buses over a 3-year peri od. See related
Special Provision (SB 1115, Section 7.14).
School Bus Purchases
($44,549,776)
23
For the 2002-03 fiscal year, do not transfer corporate tax NR
f unds t o t he Publ i c School Building Capital Fund or the
Critical School Facility Needs Fund. Instead, transfer the
f unds as a receipt to the Public School Fund to
t emporarily offset the costs for public school operations.
For FY 2002-03, General Fund appropriations will be
reduced by the amount that was scheduled to be transferred
t o t he capital accounts.
Based on 1987 legisl ation (HB 1514, Sec. 178), the Office
of State Budget Management shall continue to transfer
f unding to support six staff members in the School
Pl anning Division of the Department of Public Instruction
($450,224).
See rel ated Speci al Provision (SB 1115, Section 7.16).
Redirect Capital Funds to Support Public Schools through
the General Fund
24 ($1,000,000) R
State Board of Education Policy allows Local School
Admi nistrative Units to convert teaching positions to
dollars to cover the contract cost for Visiting
I nternational Faculty. The conversion to dollars shall be
based on an al l otted average teacher salary of $45,016
( wi t h benefits) reduced by 2.963%. Thi s wi l l adjust the
conversion amount to $43,682. The reduction included is
based on FY 2001-02 program enrollment of approximately
750 teachers.
Funding for Visiting International Faculty
25 ($4,768,604) R
Adjust Continuation Budget to reflect actual April 1,
2002, headcount. The Continuati on Budget was constructed
based on an estimated population of chi l dren with special
needs. See rel ated Special Provision (SB 1115, Section
7.4).
Revise Headcount for Children with Special Needs
Public Education Page F - 7
Overview: 2002 Session Fiscal and Budgetary Actions FY 02-03
B. Reduction of Administration Cost
($3,338,893)
-50.00
26 R
Freeze local school admini stration units (LEAs) allotments
at the FY 2001-02 al l ot ment l evel($1,574,452 reduction to
t he Continuati on Budget) and reduce each LEA by 1.75%
($1,764,441) from their FY 2001-02 funding level. The new
a l l o t ment formula devel oped by t he State Board of
Educati on is not to be implement ed i n FY 2002-03.
Also see Speci al Provision to study central office duties
( SB 1115, Sect i on 7. 19).
Central Office Administration
($4,627,564)
-87.10
27 R
Decrease the allotment for Assistant Principals by
changing the allotment formul a t o one t en-month position
f or every 761.44 students in average daily membership
( ADM). The FY 2001-02 all otment was one t en-month
position per 725.18 ADM. A reduction of 87.1 10-month
positions.
School Building Administration
28 ($3,017,317) R
El i mi nate State funding distributed to local school
admi nistrative units that could be used to support the
Regi onal Education Service Alliances. See related Special
Provision (SB 1115, Section 7.12).
Regional Education Service Alliances
($5,000,000)
29
Based on t he current NC WI SE i mplementation schedule, the NR
Department of Public Instruction has indicated that a one-t
i me reduction in funding is possible.
Also see Speci al Provision that authorizes the leasing or
purchasing of equipment from these funds (SB 1115, Section
7.6).
Uniform Education and Reporting System (UERS)
($2,750,000)
-36.00
30 R
The Depart ment of Public Instruction wi l l el i minate 36
positions. Of the 36 elimi nated positions, 9.6 are paid
from recei pts and 26.4 are paid from State funds. Three
(3) of the State positions were vacant.
Total State savings from Positions: $1,460,280
Total Other Departmental Reductions: $1,289,720
Reducti ons to receipt-supported positions are not included
i n meet i ng the $2,750,000 reduction target but are
i ncl uded i n the position reduction count.
See rel ated Speci al Provision (SB 1115, Section 7.13).
Department of Public Instruction
Public Education Page F - 8
Overview: 2002 Session Fiscal and Budgetary Actions FY 02-03
C. Continuation Budget Reductions
($10,000,000)
-412.00
31 R
Reduce al l otment approximately 3.3%. Funding is used to
empl oy custodi ans, school clerical support and substitute
t eacher pay. The reduction will not impact the amount of
f unding available for substitute teachers. The estimated
i mpact is the equivalent of 240 custodian positions and
172 clerical positions.
Non-Instructional Support Personnel
32 ($3,134,984) R
Restrict funding to mentor teachers assigned to State-paid
first and second year teachers and first-year
i nstructional support. See related Special Provision (SB
1115, Section 7.10).
Mentor Pay
33 ($3,750,000) R
Teachers are allowed to have excess annual leave over 30
days ei t her converted to sick leave or paid at the end of
t he year. The amount of l eave t hat can be paid is limited
t o t he excess days that can be attri but ed to required work
days which made i t i mpossi ble for the teacher to take the
l eave duri ng t he school year. The payment option was
established since the amount of sick-leave allowed to be
converted to empl oyment credit at retirement was
restricted to the amount earned over the empl oyees term of
empl oyment. Last year the sick leave conversion maximum
was el i minated. By elimi nating this maxi mum, teachers can
now convert all sick leave earned towards retirement
credit; therefore, this special payment option is no
l onger needed. See rel ated Special Provision (SB 1115,
Sect i on 7. 11).
Payments for Teacher Unused Vacation Days (Forfeited
Vacation)
34 ($208,230) R
Reduce funding to Publi c School Forum, Ci t i es/Communities
i n Schools, NC Network, Teacher Cadet, and Schools Attuned
by 10%.
Appropriations to Non-Public School Agencies
35 $100,000 R
Appropriate funds to ExplorNet non-profit for assistance
t o public schools
ExplorNet
36 $50,000 R
Appropriate funds to TQE (a non-profit program) for
assi stance to public schools.
Total Quality Education (TQE)
Public Education Page F - 9
Overview: 2002 Session Fiscal and Budgetary Actions FY 02-03
E. Management Flexibility
($42,613,922)
37
The State Board of Educati on shall distribute this local NR
educati on agency discretionary reduction in an equitable
manner and require allotment reductions in this amount
within 30 days of budget passage.
Local School Admi nistrative Units have flexibility to
adjust their budgets to implement this reduction;
t herefore, it is not possible to identify the number of
posi t i o n s i mpacted.
See rel ated Speci al Provision (SB 1115, Section 7.26).
Local Education Agency Discretionary Reduction
F. Other Budget Adjustments
$101,000,000
38
Provide funding for ABC bonuses for school s meet i ng or NR
exceedi ng expected growth in 2001-02. See related Special
Provision (SB 1115, Section 7.7).
ABC Bonuses
$26,806,005
594.50
39 R
Reduce the teacher to student al l otment r a t i o f o r f i r s t
grade to 1:18 (down from 1:20). See related Special
Provision (SB 1115, Section 7.25).
Reduction in Class Size
40 $1,200,000 R
Cont i nue State fundi ng for payment of Information Highway
connectivity for sites previously funded.
Information Highway Line Charges
41 $3,000,000 R
I ncrease fundi ng for school districts in counties with
l ess ability to generate local resources for public schools
Low Wealth Supplemental Funding
42 $1,000,000 R
I ncrease fundi ng to county school systems eligible for
small county supplement al funding. See related Special
Provision (SB 1115, Section 7.43).
Small County Supplemental Funding
($100,827)
43
A one t i me adj ust ment i n f unding. NR
Staff Development
($11,409,327)
($16,225,726)
471.30
Budget Changes
Total Position Changes
Revised Total Budget $5,894,553,493
R
NR
Public Education Page F - 10
Special Provisions SB 1115
Department: Public Education
Outlines teacher salary schedules for fiscal year 2002-03. The schedule is the same schedule as
authorized in FY 2001-02, however, teachers will receive a salary increase by moving up the
schedule for another year of experience. The average teacher salary increase is 1.84% (ranging
from 0% for teachers with 29+ years of experience to 5.85% for teachers with 3 years of
experience). Teachers with 29+ years of experience will receive an additional 2 weeks of paid
annual leave (see Section 28.3A and Section 82 of SB 1217 [technical corrections bill]).
Section: 7.1
Title: Teacher Salary Schedules
Summary:
Outlines principal and assistant principal salary schedules for fiscal year 2002-03. The schedule
is the same schedule as authorized in FY 2001-02, however, principals and assistant principals
will receive a salary increase by moving up the schedule for another year of experience (principals
also receive an additional step increase for every 3 years employed as a principal). The average
salary increase is 2%.
Section: 7.2
Title: School-Based Administrator Salary Schedule
Summary:
Authorizes the State Board to transfer $500,000 from the State Public School Fund to pay
expenses related to pending litigation.
Section: 7.3
Title: Litigation Reserve Funds
Summary:
Specifies the number of students funded (161,845) and the supplemental appropriation per
funded student ($2,686.50), which will be adjusted for legislated salary/benefit changes.
Section: 7.4
Title: Children With Disabilities
Summary:
Specifies that 4% of a local education agency's average daily membership (ADM) shall receive
supplemental funding for services to academically and intellectual gifted students. Statewide
funding is based on 53,075 students at a funding level of $888 per funded student. The funding
factor will be adjusted for legislated salary/benefit changes.
Section: 7.5
Title: Funds for Academically Gifted Children
Summary:
Allows for the use of up to $1 million from the funds appropriated for the new student information
system to be used for the purchase or lease of equipment by the Department of Public Instruction
for implementation of the NC WISE system.
Section: 7.6
Title: Funds for the Testing and Implementation of the New Student Information System
Summary:
Public Education Page F - 11
Authorizes the State Board of Education to utilize funds appropriated for FY 2002-03 ($101
million) to assure that incentive awards earned in FY 2001-02 are paid.
Bonus payments remain at the same level as previous years:
- Up to $1,500 for certified school employees and $500 for teacher assistants in schools that
exceeded ABCs expectations.
- Up to $750 for certified school employees and $375 for teacher assistants in schools that met
ABCs expectations.
- Funding is included for the five school systems piloting a modified ABCs program that
disaggregates student performance within designated demographic groups. This funding is in
addition to the awards outlined above ($750 for certified personnel and $325 for teacher
assistants if the goals are met). The five school districts are Bladen, Craven, Forsyth,
Mecklenburg, and Pasquotank.
Section: 7.7
Title: Funds to Implement the ABCs of Public Education
Summary:
Authorizes the State Board to transfer up to $1 million of funds appropriated to revise the reading
and writing assessments.
Section: 7.8
Title: Revision of Reading and Writing Assessments
Summary:
Eliminates the requirement to allow teachers access to $100 for the purchase of classroom
supplies (established in the FY 2001-02 budget).
Requires that the Joint Legislative Education Oversight Committee study the viability of the State
utilizing an on-line school supply vendor to allow teachers to directly purchase supplies for the
classroom.
Section: 7.9
Title: Funds for Instructional Supplies
Summary:
Authorizes the use of State mentor funding for State-paid teachers and instructional support
personnel only. Mentors will be paid $100 per month to work with newly certified State-paid
teachers in their first two years of employment as teachers or for entry-level instructional support
personnel who have not previously been teachers.
Section: 7.10
Title: Funds for Mentor Pay
Summary:
Eliminates the ability for teachers to be paid for excess annual leave days (over 30 days at the
end of the year when the teacher was not able to take the time due to required teacher work
days). Since the General Assembly removed the limit on the amount of sick leave that can be
converted toward retirement (in last year's budget), the special payment provision was no longer
required. Excess annual leave will be converted to sick leave at the end of the fiscal year.
Section: 7.11
Title: Conversion of Accumulated Leave Time
Summary:
Public Education Page F - 12
The budget eliminated funding for Regional Education and Technical Assistance Centers.
Unused funds as of June 30, 2002 were allowed to carryover into FY 2002-03. This provision
moves the carryover to staff development.
Section: 7.12
Title: RESA Funds Shall Be Used for Staff Development
Summary:
Allows the Department of Public Instruction to shift and reclassify positions as necessary to
implement the reduction in force required by the budget (36 positions were eliminated).
Requires the Office of State Budget and Management to obtain bids for an outside review of the
Department of Public Instruction's structure and operation.
Authorizes the State Board of Education to reorganize, create an additional Associate
Superintendent position, and move funding among fund codes.
Section: 7.13
Title: Base Budget Reduction to Department of Public Instruction/Reorganization of the Department
Summary:
Authorizes the lease purchase of school buses. Buses can be purchased over a 3-year period.
Waives the vendor payment of the electronic procurement transaction fee (1.75%) when
purchasing school or school activity buses.
Section: 7.14
Title: Replacement School Buses Funds
Summary:
Changes the State Board requirement to revise academic content standards for each core
academic area from 5-year intervals to 'on a regular basis' (gives the State Board the discretion to
establish when to revise academic content).
Section: 7.15
Title: Curriculum Review Required on a Regular Basis
Summary:
Redirects, for one year only, the funding earmarked for the Critical School Facility Needs Fund
and the Public School Building Capital Fund to the State Public School Fund to support ongoing
school operations. The provision continues to allow some of the funding to be used by the
Department of Public Instruction to support six positions in the School Planning Division.
Section: 7.16
Title: Corporate Tax Transfer Moratorium
Summary:
Public Education Page F - 13
This provision extends several studies outlined in last year's budget bill since the Joint Legislative
Education Oversight Committee was only able to meet a few times between sessions. Studies
included are:
- Compliance report on nonsupplant requirement related to low wealth and small county
supplemental funding.
- Study of the Textbook Distribution System. An outside contractor will review if the textbook
warehouse is the most efficient way to distribute textbooks to public schools along with studying
the effectiveness of the textbook distribution process.
- Study the Salaries of School Fund Service Workers and Custodians.
- Study the Salary Differentials for Instructional Support Personnel. The study examines how
salaries are tied to degrees and credentialing.
- Fairness in Testing. The study requires a complete review of the State's testing program.
- Study of Professional Development for School Personnel.
The provision also deletes the study for Noncitizen Tuition Rates (included in last year's Study
Bill)..
Section: 7.17
Title: Study Modifications
Summary:
Suspends for 2-years the requirement for teachers to complete a portfolio as a part of
Performance Based Licensure. Interim requirements will be established by the State Board and
presented to the Joint Legislative Education Oversight Committee for review.
Requires the State Board to contract with an outside consultant to review and recommend
changes to the initial certification, continuing certification, and the recertification programs.
Results of the study/review shall be presented to the Joint Legislative Education Oversight
Committee by January 1, 2004.
Section: 7.18
Title: Performance-Based Licensure Program/Suspension of Portfolio Requirement and Study
Summary:
Requires the State Board to determine how duties can be coordinated among school systems that
could lead to savings in the Central Office Administration funding formula.
Section: 7.19
Title: Study of Coordination of Central Office Duties
Summary:
Authorizes the State Board of Education to move resources around to assure that school
systems receive funding based on actual student enrollment (when actual average daily
membership (ADM) exceeds projected ADM by 100 students or 2%).
Authorizes the State Board of Education to reduce selected allotment categories when actual first-month
ADM is 100 or 2% less than projected. The reduction to the selected allotment categories
will be based on one-half of the excess ADM.
Section: 7.20
Title: Discrepancies Between Anticipated and Actual ADM
Summary:
Public Education Page F - 14
Requires the State Board of Education to stop developing the High School Exit Exam until the
State Board studies the high school equivalent exam requirements outlined in the federal No
Child Left Behind Act of 2001.
Section: 7.21
Title: High School Exit Examination
Summary:
Clarifies that the $1,800 bonus for math, science, and special education teachers in designated
schools is only for teachers assigned to classes in grades 6 through 12. Designated schools are
middle and high schools with 80% or more of the students eligible for free and reduced lunch or
50% or more of the students are performing below grade level in Algebra I and Biology.
Section: 7.22
Title: Clarification to Provision on Addressing Teacher Shortage
Summary:
Extends the sunset date on this lateral entry option:
When a LEA determines there is or anticipates there will be a shortage of qualified teachers for
particular subjects or grade levels, the local board can employ an individual for up to one year
under a provisional certificate so long as:
·The individual has at least a bachelors degree
·The individual has an out-of-state teaching certificate with one-year of teaching experience
relevant to the subject or grade to be taught, or at least one year of relevant classroom teaching
experience in an institute of higher learning, or three years of other experience that the local board
believes is related to the subject the individual will teach (and the individual’s education must also
be determined by the local board as relevant).
·The individual is eligible for re-employment by his or her prior employer.
·The individual must take and pass the PRAXIS to become permanently certified. The teacher
certified in another state does not have to take and pass Praxis if the LEA wants to rehire them.
Section: 7.24
Title: Extend Alternative Lateral Entry Program
Summary:
The provision follows the money that reduced the teacher to student allotment ratio from one
teacher for every 20 students in average daily membership (ADM) to one teacher for every 18
students in ADM.
The additional positions can only be used to reduce class size in the first grade.
The maximum average class size for all first grade classes within an LEA for FY 2002-03 will be
21 students. Individual classes cannot exceed 24 students.
Section: 7.25
Title: Additional Teacher Positions for First Grade
Summary:
Public Education Page F - 15
Within 14 days of the date the Budget Bill becomes law, the State Board of Education will notify
the local education agencies (LEAs) as to the amount of reductions each LEA must identify to the
State allotments distributed to the LEA in the Initial Allotment.
The Flexibility Reserve will be adjusted (reduced) if any LEA's first-month average daily
membership (ADM) is more than 500 students less than originally projected. Once adjusted, the
Flexibility Reserve will be distributed to all LEAs based on each LEA's ADM.
LEAs have 30 days from the date the Budget Bill becomes law to identify which State allotments
will be reduced to zero out the Flexibility Reserve.
Section: 7.26
Title: Local Education Agency Flexibility
Summary:
Establishes a 27 member Alliance to help ensure that the effective use of technology is a part of
North Carolina's school system. The Alliance advises the State Board of Education of how to
prepare for a technologically literate citizen in 2025. The Alliance also will advise the State Board
of Education on:
- a technology infrastructure, delivery, and support system
- staff development programs for teachers
- on what kind of funding and accountability system is needed
No State funding will be used to support the Alliance (federal and private funding will support the
Alliance).
Section: 7.27
Title: Business and Education Technology Alliance
Summary:
Allows the State Superintendent of Public Instruction to grant a waiver for the FY 2002-03 school
year which will allow a school not to implement the requirements outlined for High Priority Schools
if:
- the Local Board requests the waiver; and
- the Superintendent determines that the school is making efforts comparable to the High Priority
School requirements and the educational progress of the students in the school is satisfactory.
High Priority Schools are required to have class size allotments of one teacher per 15 students,
the State does not fund teacher assistants for these schools (this does not eliminate the
placement of teacher assistants at the school), extends the school year for students by 5
additional days, and extends the employment period for teachers by 5-days. High Priority
Schools also receive an additional Instructional Support position to assist with community
relationships.
Section: 7.28
Title: High Priority School Waiver
Summary:
Requires the State Board to minimize the frequency of field testing at a specific school and to
notify schools by October 1 of each year if they will have field tests at the school and what tests
will be involved.
TECHNICAL CORRECTION in SB 1217 (Section 70):
Changed the October 1, 2002 date to January 1, 2003 for FY 2002-03.
Section: 7.30
Title: Notification of Field Testing
Summary:
Public Education Page F - 16
This provision emphasizes that funding for Driver Education will be adjusted based on changes in
9th grade average daily membership (ADM) . The provision also requests the State Board of
Education to consider the needs of low wealth and small counties when allocating funding for
driver education.
Section: 7.31
Title: Driver Education Funding
Summary:
Allows the State Board of Education to have discretion on which strategies to implement and
which schools to target with supplemental funding to support schools classified as continually low
performing.
A continually low performing school is one that has been identified as low performing (via the
ABCs) in 2 of the 3 consecutive years.
Funding is provided to the State Board based on a teacher to student allotment in grades 4-5 in
identified schools of one teacher per 17 students. Grades K-3 is based on one teacher per 15
students. Funding is also provided based on extending teacher contracts by 10 days (5 for staff
development and 5 for extended instruction).
Section: 7.32
Title: Intervention Strategies for Continually Low-Performing Schools
Summary:
Allows the Joint Legislative Education Oversight Committee to study how standardized test are
used to evaluate students in vocational education classes.
Section: 7.33
Title: Study Vocational Education Tests
Summary:
This provision was required to comply with reporting requirements related to the federal 'No Child
Left Behind Act of 2001'. The federal act requires that a report be distributed to the parents that
outlines specific information about the school and the personnel assigned to the school. This
information requires that the certification status of the teacher be included which previously was
not allowed by North Carolina statute.
Section: 7.36
Title: Availability of Information on Employee Qualifications
Summary:
Requires that the State Board of Education review the duties of school counselors which includes
the examination of the amount of time school counselors are spending coordinating the testing
programs in the school.
Section: 7.37
Title: Study of the Duties of School Counselors
Summary:
Requires that a retired teacher who is returning to the classroom (returning under Section 28.10
of this bill) must be evaluated as a career teacher even though the teacher's employment is
classified as probationary. The probationary classification relates to the returning teacher not
being eligible for career status (tenure) once they return (when they return via Section 28.10 of
this bill).
Section: 7.38
Title: Definition of Retired Teacher Modified
Summary:
Public Education Page F - 17
Allows a retired teacher returning to the classroom (returning under Section 28.10 of this bill) to
not have to renew their teaching certification for 5 years (as long as the certification was up to
date when the teacher retired).
Section: 7.39
Title: Limit Certification Renewal for Retired Teachers
Summary:
Requires that all school nurses employed in North Carolina's public schools after July 1, 1998,
must be nationally certified. A nationally certified nurse must meet either the American Nurses'
Association (ANA) or the National Association of School Nurses (NASN) requirements. Both of
these organizations require a baccalaureate degree for certification.
Requires the Joint Legislative Education Oversight to review what is the appropriate level of
certification/qualifications for nurses in public schools.
Section: 7.41
Title: Certification of School Nurses
Summary:
This provision addresses the distribution of the additional $1 million appropriated for this
category. The minimum instructional supplies/equipment allotment for each eligible county school
system was increased $37,037. 27 county school systems with average daily membership less
than 4,000 receive this funding.
Section: 7.43
Title: Small School System Supplemental Funding
Summary:
To allow limited one-year assessment of K-2 students with a standardized reading test . This
assessment is a condition of receipt of $20 million in federal Reading First Grants. The
assessment will be limited to 5% of the students in eligible public and charter schools. (Note:
Section 70.5 of Senate Bill 1217 eliminates the one-year and 5% limitations and adds clarification
that the assessment is authorized only to the extent necessary to receive federal Reading First
grant funds.)
TECHNICAL CORRECTION in SB 1217 (Section 70.5):
Authorizes a pilot study to validate current K-2 assessment by utilizing a standardized reading
assessment. Allows the assessment to be administered in eligible public schools which includes
charter schools (eligibility relates to a school qualifying for the federal Reading First Grant).
Standardized assessment will not be allowed if the federal reading first grant is not awarded to
North Carolina.
Section: 7.44
Title: Sample Test to Validate K-2 Assessment
Summary:
Authorizes the salary increase outlined in 7.1 and 7.2 of this bill to be granted to teachers and
principals in other State agency schools and in the North Carolina School for Science and
Mathematics.
Section: 7.45
Title: Reserve for Experience Step Increase for Teachers and Principals in Public Schools
Summary:
Public Education Page F - 18
Special Provisions SB 1217
Department: Public Education
Rewrites G.S. 115C-302.1(j) to allow teachers to use up to 30 days of sick leave to care for a child
placed with the teacher for adoption.
Adds 115C-336.1 which outlines current school policy that allows any school employee to take
annual leave or leave without pay to care for a new born child or for a child being placed with an
employee for adoption or foster care. An employee can take up to 30 days of sick leave to care
for a child placed with the employee for adoption.
Section: 37.5
Title: Use of Sick Leave for Child Adoption
Summary:
Specifies that nothing in the General Statutes or any local act entitles any charter school to
retroactively recover any funds for penalties, fines, forfeitures, or supplemental taxes.
Section: 91.1
Title: Ability for Charter Schools to Receive Funding Retroactively
Summary:
Public Education Page F - 19
UNC System
Total Budget Approved 2001 Session
FY 02-03
Budget Changes
$1,798,320,830
GENERAL FUND
Overview: 2002 Session Fiscal and Budgetary Actions
Campus Reductions
($2,666,533)
44
Reduce funding in reserves for operation of new facilities NR
due to del ays in completion dates.
Reserves for New Facilities
45 ($800,000) R
Budget tui t i on collected from 25% surcharge f or taking
more than 110% of required credit hours for degree.
Tuition Surcharges
46 ($50,245,059) R
Budget a reduction of 2.88% i n all campus and ot her
related budget codes. Deci sions on where to take the
reductions will be made at campus or operating level. This
reduction does not appl y to the NC School of Sci ence and
Mathematics.
Campus Flexibility Reserve
($250,000)
47
Reduce thi s year' s appropriation to the Endowment for the NR
Cent er for Alcohol Studies.
Center for Alcohol Studies
Related Educational Programs
($1,938,000)
48
Use fund balances in schol arship trust funds to reduce NR
General Fund requirements for one year. Fund bal ances in
Principal Fellows, Nursing Fellows, Nursing Need-based,
and dormant funds in old Social Work Schol arship Funds are
affected.
Scholarships
UNC General Administration
49 ($2,063,801) R
Reduce UNC General Admi nistration and its programs. Board
of Governors has authority to allocate reductions. No more
t han fi ve percent (5%) shall be taken from any component
program of the Center for School Leadershi p Devel opment.
Budget Reduction
50 ($400,000) R
Reduce funding for contracted services from MCNC. Services
may be provided on a fee for service basis, or MCNC may
provide services for less cost.
MCNC Contract
UNC System Page F - 20
Overview: 2002 Session Fiscal and Budgetary Actions FY 02-03
University Expansion Funds
51 $66,803,142 R
Provide funding for enrollment i ncreases as proposed by
t he UNC Board of Governors. Provides fundi ng for regular
t erm enrol l ment, distance education enrollment, and
holding 3 campuses harmless from enroll ment declines.
Enrollment Increases
$11,000,000
$2,666,533
52 R
Provide funding to 7 campuses desi gnated by UNC as NR
"focused growth" institutions to prepare for enrollment
i ncreases. $10 mi l l i on of the recurring funds shall be
allocated in equal dollar amounts to the focused growth
i nstitutions.
Enrollment: Focused Growth
53 $115,000 R
Provide funds for inflationary increases for operating
budget.
NC School of Science and Mathematics: Inflationary
Increases
54 $500,000 R
Funds t o conti nue the operati on of the NC TEACH program t o
provide lateral entry alternatives for prospective public
school teachers.
NC TEACH
55 ($39,966,108) R
Tui t i on increases of 8% for in-state students and 12% for
out-of-state students have been approved by the Board of
Governors for the 2002-03 academic year.
Tuition Increases
56
Provides an additional $4,497,000 in need-based student
f i nanci al ai d for UNC students from the Escheats Fund.
Student Financial Aid
($15,228,000)
57
Fund conti nuat i on budget for UNC need-based scholarshi p NR
f unds with income from the Escheats Fund.
Student Financial Aid: Funding Shift
58 $2,249,105 R
Provides financial aid funding for additional NC students
attending private college in North Carolina.
Aid to Students Attending Private Colleges
($12,807,721)
($17,416,000)
Budget Changes
Total Position Changes
Revised Total Budget $1,768,097,109
R
NR
UNC System Page F - 21
Special Provisions SB 1115
Department: UNC System
Consolidates the collection of loan repayments from the NC Teaching Fellows Commission to the
State Education Assistance Authority.
Section: 9.2
Title: Transfer Collection Responsibilities for Certain Scholarship Programs to SEAA
Summary:
Allows NCSU and NC School of the Arts to substitute bond projects.
Section: 9.3
Title: Substitution of UNC Bond Projects
Summary:
Consolidates UNC Scholarships into one fund entitled UNC Campus Scholarships in order to
protect the programs from potential lawsuits.
Section: 9.4
Title: UNC Scholarship Programs Consolidated
Summary:
Saves the university money by requiring only one mailing explaining the federal education tax
credits instead of two.
Section: 9.5
Title: Eliminate UNC Mailing List Duplication
Summary:
Makes a technical correction to last year's codification of the Aid to Private College money.
Section: 9.6
Title: Aid to Private Colleges Technical Corrections
Summary:
Requires each Chancellor to report the specific budget reductions made to implement the UNC
Management Flexibility Reserve.(Note: Sec. 72 of Senate Bill 1217 changes the due date of the
report from October 31, 2002 to November 30, 2002)
Section: 9.7
Title: UNC Flexibility Guidelines
Summary:
Allows three universities to use focused growth enrollment money for up to twenty prospective
teaching scholars by waiving out-of-state tuition for these students.
Section: 9.9
Title: Focused Growth Pilot Program
Summary:
Requires a report from the Board of Governors to the Governmental Operations Committee on
any activities undertaken under exemptions to the Umstead Act by the Centennial Campus at
NCSU, the Horace Williams Campus at UNC-CH or any Millennial campus of the UNC system.
Section: 9.10A
Title: Report on Umstead Act Exemptions
Summary:
UNC System Page F - 22
Changed the aid to private college statute to allow eligibility for colleges accredited by the New
England Association of Colleges and Schools with a main permanent NC campus. The intent is to
make Johnson and Wales University students at a proposed Charlotte, NC campus eligible for
student aid funds.
Section: 9.11
Title: Out-of-State Institutions with NC Campuses
Summary:
Education Oversight shall study the School of Science and Mathematics. In addition, it prohibits
the imposition of the proposed $850 fee for the 2001-02 academic year and requires General
Assembly approval prior to initiating fees.
Section: 9.12
Title: North Carolina School of Science and Mathematics
Summary:
Requires UNC-Chapel Hill to keep open the Horace Williams airport until January 1, 2005. Prior to
moving the AHEC operations from this airport, the Chancellor must report to Governmental
Operations Commission on the impact of any move.
Section: 9.13
Title: Horace Williams Airport
Summary:
The UNC Board of Governors shall establish policies that allow the Chancellors with Cooperative
Extension or Agriculture Research programs to redesignate EPA non-teaching faculty to EPA
teaching faculty if it more accurately reflects the job responsibilities.
Section: 9.14
Title: Cooperative Extension/Agriculture Research Faculty
Summary:
Universities shall not issue any debt or establish contracts for golf courses or transient
accommodations facilities prior to providing the Governmental Operations Commission with
specified financial and architectural information.
Section: 9.15
UNC Institutions/Golf Course and Transient Accommodations Facility/Umstead Act Exemption
Reporting Requirement
Title:
Summary:
The UNC Board of Governors shall report to the Government Operations Commission on the
fiscal and contingent liabilities and financing arrangements of all buildings on UNC property,
regardless of ownership.
Section: 9.16
Title: Report on University Fiscal Liabilities
Summary:
Changes the statute on the distribution of the Escheat Fund to allow the income to be used for
grants for need-based financial aid, as well as loans. This allows a non-recurring reduction in the
General fund of $20,725,000 to provide for need-based financial aid in higher education.
$15,228.000 is in the UNC base budget. This funds an increase of $4,497,000 for UNC and $1
million for community colleges in need-based student financial aid. The Governor is required to
replace these with recurring General Fund money in the 2003-05 continuation budget.
Section: 9.19
Title: Funds for Need-Based Scholarships
Summary:
UNC System Page F - 23
HEALTH
&
HUMAN SERVICES
Health and Human Services
Total Budget Approved 2001 Session
FY 02-03
Budget Changes
$3,644,080,118
GENERAL FUND
Overview: 2002 Session Fiscal and Budgetary Actions
Division of Aging
1 ($6,000) R
Reduces funding for 3 meetings per year from $9, 000 to
$3,000 each fi scal year.
Funds for Senior Tarheel Legislature
2 ($4,000) R
Reduces funding for meetings of the Governor' s Advi sory
Counci l on Agi ng.
Governor's Advisory Council on Aging
3 ($165,000) R
Reduces the operating budget for the Di vision of Aging.
Central Office Administration
4 ($381,000) R
Reduces funding for Senior Center Devel opment and Outreach.
Senior Centers
5 ($370,000) R
Reduces funding for planni ng and admi ni stration for 17
AAAs across the state.
Area Agency on Aging Administration
Division of Child Development
6 ($56,286) R
El i mi nates the remai ning state funds that support the
f ederal Early Head Start Program.
Early Head Start Funds
7 ($500,000) R
El i mi nates funding for the Smart Start evaluation.
Smart Start Evaluation
8 ($16,000) R
Reduces professional devel opment funds that are used to
help child care empl oyees improve their educational
qual i f i c a t i o n s .
Smart Start Professional Development Funds
9 ($44,810) R
Reduces funds to Divisi on of Information and Resource
Management f o r i n f o r mat i on technology activities that
support Smart Start.
Smart Start Automation
Health and Human Services Page G - 1
Overview: 2002 Session Fiscal and Budgetary Actions FY 02-03
10 ($20,000,000) R
Reduces the amount of funds for acti vities at the local
partnership level. (SB 1115, Section 10.55)
Local Smart Start Partnership Funds
11 ($980,000) R
Reduces the North Carol i na Partnership for Children's
admi nistrative costs.
NCPC Administration
12 ($12,000) R
Reduces the budget for rei mbursement to the State Bureau
of Investigation for the cost of obtaining record checks.
Criminal Record Checks
($618,939)
-6.00
13 R
Reduces admi ni strative expenses including positions,
operating costs, and equipment. El i minates three vacant
and three filled positions: 1.0 Admi nistrative Secretary
I I , 1 . 0 Office Assistant IV, 1.0 Child Program Speci al i s t ,
2.0 filled Processing Assistant III's, and 1.0 filled
Policy and Planning Consul t ant. Positions funded through
a transfer of funding from the More At Four Program
i ncl ude: 1.0 filled and 2.0 vacant Child Program
Specialists, and 1.0 vacant Admi nistrative Assistant I.
( SB 1115, 10.56(d))
DCD Administration
$15,000,000
14
I ncrease state appropriations for child care subsidy to NR
replace federal funds historically used for this purpose.
Due to a reduction i n t he Temporary Assistance for Needy
Families (TANF) Block Grant, child care subsidy was funded
at $3,800,000 less for 02-03 fiscal year. These funds will
also be used to address the waiting list for child care
subsidy.
Child Care Subsidy
Division of Facility Services
15 ($126,000) R
Reduces operating expenses throughout the Divisi on of
Faci l i t y Servi ces including computer equipment replacement .
Operating Expenses
16 ($150,000) R
Reduces travel expenses throughout the Division of
Faci l i t y Servi ces.
Travel
17 ($35,974) R
El i mi nates the contract with the Department of Justice for
one paralegal position.
( Not e: Section 84 of Senate Bill 1217, 2002 Technical
Corrections, modified this reduction. The description
reflects the modification. The Conference Commi t t ee Report
f or SB 1115 el i mi nat ed one paral egal position in the
Division of Facility Services.)
Legal Services
Health and Human Services Page G - 2
Overview: 2002 Session Fiscal and Budgetary Actions FY 02-03
18 ($244,731) R
El i mi nates the following contracts:
Solucient $54,000
Sheps Cent er $90,731
Reduce the fol l owi ng contracts:
Miscellaneous Contracts $100,000
Various Contracts
($191,465)
-4.00
19 R
El i mi nates two vacant and two fi l l ed positions: 1.0
Faci l i t y Engineer Speci al i s t , 1 . 0 F a c i l i t y Survey
Consul t ant I , 1 . 0 St aff Devel opment Coordi nat or in the
Office of EMS, and 1.0 Admi ni strative Assistant II in the
Office of EMS.
Position Eliminations
Division of Medical Assistance
20 ($3,028,281) R
Adopts the Supplemental Security Income (SSI) method for
considering equity value in income-produci ng property for
aged, blind, and disabled persons. (SB 1115, Section
21.19(y) in Section 10.11(a) and amended by SB 1217,
Sect i on 59)
Asset Policy Change
21 ($37,374,352) R
Expands implement ation of various drug utilization
measures t o contain the cost of prescription drugs,
i ncl udi ng expandi ng the use of generic drugs. (SB 1115,
Sect i on 10.19(b) and amended by SB 1217, Sect i on 75)
Drug Utilization Management
22 ($496,639) R
Reduces reimbursement rates for private duty nursing
service providers by 5%.
Private Duty Nursing
23 ($2,655,057) R
Reduces Personal Care Services by reducing the monthly
l i mi t f or services from 80 hours per month to 60 hours per
mont h.
Personal Care Services Limitations
24 ($423,959) R
Modifies transfer of asset policy by applying the policy
t o persons receiving personal care services while residing
i n t heir home. ( SB 1115, Sect i on 10. 11(b) and SB 1217,
Sect i on 59)
Asset Policy Changes for PCS Recipients
25 ($244,793) R
Modifies policy for determi ni ng eligibility for pregnant
women coverage for minors by counting parental i ncome. ( SB
1115, Section 21.19(n) 0f Section 10.11(a))
Pregnant Women Coverage for Minors
Health and Human Services Page G - 3
Overview: 2002 Session Fiscal and Budgetary Actions FY 02-03
26 ($1,409,819) R
Reduces payments to hospitals by 0.5%. Options for
reducing payment include using waivers to reduce hospital
costs associated with billing Medicaid and implementing a
revised outpatient/emergency payment method to relate
payment to services received. (SB 1115, Section 10.18)
Hospital Payments
27 ($991,979) R
Establishes prospective rate payment system f or Home
Heal t h Services and pays for services based on an
assessment of the specific needs of the Medicaid
recipient. Payment for services will no longer be tied to
t he number of provider visits.
Prospective Rates for Home Health Services
28 ($88,809) R
Reduces reimbursement rates for home infusion therapy
providers.
Home Infusion Therapy
29 ($190,000) R
Reduces reimbursement rates for home health supplies
providers.
Home Health Supplies
30 ($250,000) R
El i mi nates optional circumcision procedures except in
cases of medical necessity. (SB 1115, Section 10.13)
Optional Services
31 ($9,425,000) R
Reduces expenditures for the Medicaid program to reflect
anticipated savings from t he expansi on of Caroli na ACCESS
II/III activities including reducing hospital admissions,
reducing ER vi sits, using best prescribing practices,
i ncreased generic prescribing, implementing polypharmacy
review, reducing therapy visits, and better managing of
high risk/high cost patients. (SB 1115, Section 10.12)
Carolina ACCESS II/III Cost Savings
32 ($608,964) R
Reduces reimbursement rates by 5% for the following
services: ambul at ory surgical centers, and high risk
i ntervention.
Reimbursement Rate Reduction
33 ($569,954) R
Reduces reimbursement rates for durable medical equipment
providers.
Durable Medical Equipment
34 ($202,840) R
Reduces reimbursement rates for optical service providers
by 5%.
Optical Service Providers
35 ($1,900,000) R
Appl i es Medicaid medical policy to Medi care Crossover
c l a i ms.
Medicare Crossover Claims
Health and Human Services Page G - 4
Overview: 2002 Session Fiscal and Budgetary Actions FY 02-03
36 ($7,716,342) R
Reduces case management services for adults and children
by reducing rates, streaml i ni ng services and eli minating
duplicative services. (SB 1115, Section 10.14)
Case Management Services
($60,005)
-2.00
37 R
El i mi nates two filled positions: 1.0 Physician II and 1.0
Dent i s t I I .
Position Eliminations
($43,747,538)
38
Transfers funds from G. S. 143-23.2 reserve to support NR
current services and to reduce appropriations. (SB 1115,
Sect i on 10.19D)
Medicaid Reserve Funds
39 $81,751,234 R
Provides Increased funding for the Medicaid Program due to
t he revised forecast for SFY 2003.
Revised Medicaid Forecast
Division of Mental Health, Developmental Disabilities, and Substance Abuse
Services
($630,487)
-6.50
40 R
Reduces expenditures for state-operated mental retardation
centers by decreasing outreach expenditures by 10%,
e l i mi nating 4.50 vacant and 2.0 filled positions, and
reducing salary reserve. Elimi nated positions include: 1.0
Parent Trainer, 0.5 Housekeeper, 1.0 DHHS School
Admi nistrator II, 2.0 Outreach Special i s t I I ' s , a n d 1 . 0
Rehab Therapy Tech, and 1.0 DHHS Policy and Planning
Coordinator. (SB 1115, Section 10.23)
( Not e: Section 84 of Senate Bill 1217, 2002 Technical
Corrections, modified this reduction. The description
reflects the modification. The Conf erence Committee
Report for SB 1115 i ncl uded 1.0 Outreach Specialist and
1.0 Patient Review Coordinator. SB 1217 i ncreased the
number of Outreach Specialists to 2.0 and deleted the
Pati ent Revi ew Coordinator.)
Mental Retardation Centers
Health and Human Services Page G - 5
Overview: 2002 Session Fiscal and Budgetary Actions FY 02-03
($2,895,097)
-61.00
41 R
Reduces expenditures for state-operated psychiatric
hospitals by elimi nating 35 vacant and 26 filled
positions; reducing education, training, and staff
development; reducing expenditures for supplies, printing,
and equipment; cl osi ng 5-bed TB Uni t at Cherry hospital;
Cl osing CPI outpatient unit at John Umstead Hospital, and
e l i mi nating 10 psychiatric beds at Cherry Hospital with no
community transfer of funding. Elimi nated position