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The North Carolina State Budget
2006- 2007
Michael F. Easley
Governor
Recommended Adjustments
The North Carolina State Budget
2006- 2007
Office of State Budget and Management
Office of the Governor
Raleigh, North Carolina
www. osbm. state. nc. us
David T. McCoy, State Budget Officer
Charles E. Perusse, Deputy State Budget Officer
May 2006
Recommended Adjustments
State of North Carolina
Office of the Governor
20301 Mail Service Center • Raleigh, NC 27699- 0301
Michael F. Easley
Governor
May 9, 2006
The North Carolina Senate
The Honorable Marc Basnight, President Pro Tempore
The North Carolina House of Representatives
The Honorable James Black, Speaker
The Citizens of North Carolina
Dear Mr. President, Mr. Speaker, Ladies and Gentlemen of the General Assembly and Fellow North
Carolinians:
I am pleased to submit to you my operating and capital budget recommendations for fiscal year
2006- 07. This budget reflects my continued commitment to build ONE NORTH CAROLINA, where all
North Carolinians have access to the educational opportunities they need to be successful in the global
economy.
When I took office in January 2001, North Carolina faced cumulative budget deficits that had not
been encountered since the Great Depression. A national recession, the terrorist attacks of September 11 and
unfair federal trade policies dealt a blow to North Carolina’s economy. Despite these challenges, together
we continued to make critical investments in education and job creation strategies to promote long- term
economic growth across our state. As a result of our efforts, our unemployment rate is now below the
national average and is at a six- year low of 4.5 percent. North Carolina has added 68,000 jobs over the last
12 months ( a 1.8 percent increase), ranking among the national leaders in job creation. Due to our strong,
transitioning economy and our commitment to conservative budget practices, we were able to report a
surplus of over $ 680 million at the end of fiscal year 2004- 05. It is estimated that the surplus will total
almost $ 1.1 billion at the end of fiscal year 2005- 06 and we anticipate continued revenue growth throughout
fiscal year 2007.
My fiscal year 2007 budget contains $ 10.7 billion in investments in education from pre- K through
the university to build a skilled workforce prepared to compete in the global economy. It includes an average
8 percent pay increase for teachers in order to surpass the national average by 2008- 09. Additional funds are
provided to expand the Disadvantaged School Supplemental Fund, to fully fund the Low Wealth formula,
and to expand middle and high school reform programs in order to improve graduation rates. It provides
increased access to higher education opportunities at the community college and university systems.
Additional monies are also included for need- based financial aid, scholarships for nurses, professional
training to recruit and retain quality teachers and principals, and several biotech and economic development
initiatives. In addition to the General Fund increases, the new North Carolina Education Lottery will provide
proceeds for reduced class sizes, additional academic pre- K slots, school construction and college
scholarships for needy students.
This budget makes unprecedented investments in improving our court system. Funds are included to
add core court personnel, including assistant district attorneys, deputy clerks, district court judges and
Location: 116 West Jones Street • Raleigh, NC • Telephone: ( 919) 733- 5811
magistrates. It also provides funds to modernize several court information programs and to operate the
Custody Mediation and Drug Treatment Court Programs statewide.
My budget recommendations continue our commitment over the last five years to keep spending at
responsible levels, while cutting taxes by $ 220 million for hard- working North Carolina taxpayers. It caps
the gas tax at current levels and reduces the state sales tax rate from 4.5 percent to 4.25 percent. The budget
also recommends depositing an additional $ 324 million in the State's Rainy Day Fund, setting aside $ 50
million for future disaster- related expenses, and providing an additional $ 195 million to the Highway Trust
Fund. By the end of the current fiscal year, the Rainy Day Fund balance will be $ 637 million, 4 percent of
last year’s operating budget.
My budget includes funds to hold several programs harmless due to federal budget cuts and reduces
the waiting list for child care subsidies. Funds are provided for community capacity enhancement and the
Mental Health Trust Fund to assist with mental health reform programs. Additional monies are also included
for early intervention services, adoption and foster care assistance, and child welfare services. I include a
recommendation for a new adoption tax credit based on the current federal tax credit.
The budget solidifies North Carolina as a national leader in recruiting new business and growing
existing businesses. It includes recurring funds for the One NC Fund, which has resulted in the creation of
18,875 jobs and $ 2.4 billion in investment throughout the state. The budget also provides support for new
and emerging companies through investments in the Small Business Innovation Research matching grant
program and in biotechnology. Sales tax refunds that would benefit the motor sports industry and a sales tax
exemption on research and development equipment will help strengthen these emerging industries.
The fiscal year 2007 budget proposal provides additional funds for the environment and agriculture.
It includes funds to enhance well water safety programs and to protect drinking water supplies. Funds are
provided for land conservation, forest development and habitat protection programs. The budget also
includes funds to increase disease surveillance and detection programs to ensure a safe food supply.
The budget provides funding for priority health, public safety, education and economic development
projects outlined in the state's Capital Improvement Plan. Projects include constructing a new public health
lab and emergency operations center, expanding facilities at the UNC Wilmington School of Nursing, UNC-Charlotte,
and the NC State University Engineering Complex, adding two skilled care nursing homes for the
state's veterans, and expanding the Museum of Art.
I recognize and appreciate the work of our state employees and recommend a 4% cost of living
increase. The fiscal year 2007 budget also provides a 3.7% cost of living adjustment for state retirees and
makes another payment to the retirement system for funds that were withheld in fiscal year 2000- 01.
I look forward to working cooperatively with members of the General Assembly to ensure that the
fiscal year 2007 budget is fiscally responsible and meets the needs of all North Carolinians.
With kindest regards, I remain
Very truly yours,
Michael F. Easley
Table of Contents
List of Figures and Tables....................................... vii
Preface...................................................................... ix
Introduction............................................................. 1
Executive Priorities and Budget Summary.............. 3
Major Expansion Budget Recommendations
by Subject Area......................................................... 9
Fiscal Responsibility.............................................. 11
Education............................................................. 12
Health and Human Services................................. 15
Economic Development and Infrastructure.......... 16
Courts and Public Safety...................................... 17
Environment and Agriculture............................... 18
Capital Improvements.......................................... 19
Teachers and State Employees............................... 20
Economy and Revenue by Topic............................ 21
Economy
Outlook for the Nation and State.................. 23
Revenue
General Fund Forecast................................... 27
Highway Fund.............................................. 31
Highway Trust Fund..................................... 33
General Fund
Recommended Appropriations
Education
Public Education ( 13510)................................ 37
The University of North Carolina ( 160xx)....... 47
Community Colleges ( 16800)......................... 53
Education Lottery Fund ( 23003)..................... 59
General Government
General Assembly ( 11000)............................... 63
Office of the Governor ( 13000)....................... 65
Office of State Budget and Mgt. ( 13005)......... 67
NC Housing Finance Agency ( 13010)............. 69
OSBM - Reserve for Special Appropriation
( 13085)........................................................... 71
Office of the Lieutenant Governor ( 13100)..... 73
Dept. of Secretary of State ( 13200).................. 75
Office of the State Auditor ( 13300)................. 78
Dept. of State Treasurer ( 13410)...................... 80
State Treasurer - Retirement for Fire and Rescue
Squad Workers and Line of Duty Death Benefits
( 13412)........................................................... 83
Dept. of Insurance ( 13900)............................. 84
Insurance – Volunteer Safety Workers’ Compen-sation
Fund ( 13901)........................................ 86
Dept. of Administration ( 14100)..................... 87
Office of the State Controller ( 14160)............. 92
Dept. of Revenue ( 14700)............................... 93
Dept. of Cultural Resources ( 14800)............... 96
Roanoke Island Commission ( 14802)............ 100
State Board of Elections ( 18025)................... 101
Office of Administrative Hearings ( 18210).... 103
Health and Human Services
Dept. of Health and Human Serv. ( 144xx).... 105
Div. of Central Management and Support
( 14410)....................................................... 108
Div. of Aging and Adult Services ( 14411).... 111
Div. of Child Development ( 14420)............ 113
Office of Education Services ( 14424).......... 115
Div. of Public Health ( 14430)..................... 118
Div. of Social Services ( 14440).................... 122
Div. of Medical Assistance ( 14445)............. 125
NC Health Choice ( 14446)........................ 127
Div. of Services for the Blind, Deaf, and Hard
of Hearing ( 14450)..................................... 128
Div. of Mental Health/ Developmental Disabili-ties/
Substance Abuse Services ( 14460)......... 129
Div. of Facility Services ( 14470).................. 132
Div. of Vocational Rehabilitation ( 14480)... 133
Justice and Public Safety
Judicial Branch ( 12000)................................. 135
Judicial Branch- Indigent Defense ( 12001)..... 140
Dept. of Justice ( 13600)................................ 142
Dept. of Juvenile Justice and Delinquency Pre-vention
( 14060)............................................. 146
Dept. of Correction ( 14500)......................... 149
Dept. of Crime Control and Public Safety
( 14900)......................................................... 154
Natural and Economic Resources
Dept. of Agriculture and Consumer Services
( 13700)......................................................... 159
Dept. of Labor ( 13800)................................. 162
Dept. of Environment and Natural Resources
( 14300)......................................................... 164
v
DENR- Clean Water Management Trust Fund
( 14301)......................................................... 170
Dept. of Commerce ( 14600)......................... 171
Commerce- State Aid to Non- State Entities
( 14601)......................................................... 175
Transportation
Overview............................................................ 179
Highway Fund ( 84210)...................................... 181
Highway Trust Fund ( 84290)............................. 190
Capital Improvements
General Fund ( 19600)........................................ 197
Reserves, Debt Service, and Other Adjustments
General Fund ( 190xx)........................................ 207
vi
List of Figures and Tables
Figures
1. Recommended Appropriation for General Fund Operating
Budget, 2006- 07.................................................................. 3
2. General Fund Supported Positions, 2006- 07........................ 4
3. Savings Reserve Account Balance........................................ 11
4. Average Daily Membership Budgeted................................. 12
5. Enrollment in Community College System........................ 13
6. Enrollment in the University System.................................. 14
7. Recommended Continuation Appropriations by Division,
Health and Human Services............................................... 15
8. Recommended Expansion Appropriations by Activity,
Health and Human Services............................................... 15
9. Recommended Capital Funding......................................... 19
10. Average Teacher Compensation.......................................... 20
11. NC Unemployment Rate Falls Significantly....................... 24
12. NC Employment Expands................................................. 24
13. Nonfarm Employment by Category................................... 25
14. State Income Expected to Exceed U. S................................ 26
15. State Maintains Employment Growth................................ 26
16. General Fund Revenue....................................................... 30
17. Highway Fund Revenue Collections................................... 31
18. Highway Trust Fund Revenue Collections.......................... 33
19. Funding Sources, NC Transportation Program................. 180
20. Appropriations, NC Transportation Program................... 180
Tables
1. Recommended General Fund Appropriations...................... 3
2. Recommended General Fund Supported Positions............... 4
3. Governor’s Recommended General Fund Budget................. 5
4. Recommended Availability and Appropriations.................... 7
5. Annual Nonfarm Employment by Category....................... 25
6. General Fund Revenue, Detailed Revised Estimates........... 29
7. General Fund Revenue, Revised Estimates......................... 30
8. Highway Fund................................................................... 32
9. Highway Trust Fund.......................................................... 34
10. NC Transportation Program............................................. 179
11. Condition of the Highway Fund...................................... 188
12. Changes to the Highway Fund Budget............................. 189
13. Condition of the Highway Trust Fund............................. 194
14. Recommended Highway Trust Fund Appropriations........ 194
vii
Preface
The North Carolina State Budget: Recommended Adjust-ments,
2006- 2007 reflects the work of multiple people
within the Office of State Budget and Management
( OSBM), including budget administrators and ana-lysts,
economists, technical staff, and paraprofessionals.
The OSBM team is listed below by administrative area.
This document is available online at www. osbm. state.
nc. us. For additional information about its contents,
please contact the appropriate administrator at the
e- mail address cited below or by telephone at 919/ 807-
4700. The mailing address for OSBM is 20320 Mail
Service Center, Raleigh, NC 27699- 0320.
OSBM Staff
David McCoy, State Budget Officer
david. mccoy@ ncmail. net
Debbie Young
Fiscal Office
Arnetha Dickerson
Frances Doak
Human Resources
Tonya Austin
Ursula Hairston
Janie Johnson
Katie Shearon
Carolyn West
Special Appropriations
Julie Mitchel
Charles Perusse, Deputy State Budget Officer
charles. perusse@ ncmail. net
Zorida Maighnath
Capital Projects
Jim Lora, Assistant State Budget Officer
jim. lora@ ncmail. net
Adam Brueggemann
Chris Harder
Jennifer Wimmer
Department of Correction, Department of Crime Control
and Public Safety, Department of Justice, Department
of Juvenile Justice and Delinquency Prevention, Judicial
Branch
Marc Nelson
Sheryl Stephens
Department of Transportation
Mercidee Benton
Emergency Management
Kevin Hutchinson
Statewide Information Technology
Jonathan Womer, Assistant State Budget Officer
jonathan. womer@ ncmail. net
Jim Dolan
Community Colleges, Public Education, University of
North Carolina
Elizabeth Grovenstein, Assistant State Budget Officer
elizabeth. grovenstein@ ncmail. net
Bryan Conrad
Kristen Crosson
Susie Esealuka
Pam Leaman
Trey O’Quinn
ix
Departments of General Government and Departments of
Natural and Economic Resources
David Brown, Assistant State Budget Officer
david. brown@ ncmail. net
Thomas Cheek
Celia Cox
Donna Cox
Pat Taylor
Economic Forecasting, Revenue Forecasting, Revenue and
Tax Issues, Economic Impact of Rules
Nathan Knuffman
Warren Plonk
Department of Health and Human Services
Daphne Lyon, Assistant State Budget Officer
daphne. lyon@ ncmail. net
Debbie Barnes
Kari Barsness
Pam Kilpatrick
Pat Taylor
Wayne Williams
Management
Tom Newsome, Assistant State Budget Officer
tom. newsome@ ncmail. net
Data Services
Bob Coats
Sue Farr
Joel Sigmon
Francine Stephenson
Bill Tillman
Information Systems
Agness Gunter
Paul Young
Management Analysis
Barbara Baldwin
Donald Crooke
Angela Houston
Kay Radford
Joe Turlington
Salary and Benefits
Bill Stockard
Salary Control
Emily Moore
x
Introduction
The purpose of this document is to describe the Gov-ernor’s
recommended state budget adjustments for the
second year of the 2005- 07 biennium. These recom-mended
changes are based on the certified budget for
2006- 07 approved by the 2005 session of the General
Assembly.
Recommendations for the General Fund, Highway
Fund, and the Highway Trust Fund are included in the
document, along with capital improvements, reserves,
debt service, and other adjustments.
Governor Easley’s priorities in budget development
precede key expansion budget recommendations. De-tails
of recommended appropriations by agency follow.
Items of change are described under one of three
categories within a department/ budget code or sec-tion:
reductions, expansion, or technical adjustments.
“ Reductions” denotes recommended decreases to
budgets that support current operations, while “ Ex-pansion”
denotes new programs, expansion of existing
programs, and salary and benefit increases. “ Technical
Adjustments” is a category for describing other perti-nent
changes in school- age populations or Medicaid
enrollments that necessitate a recommended change in
the certified budget.
For each item of change that is described, there is
a listing of the resulting fiscal change as well as the
change in number of positions, when appropriate.
Fiscal changes are categorized as “ Requirements” or
“ Nonrecurring Requirements.” They may also be
categorized as “ Receipts” or “ Nonrecurring Receipts”
to designate changes in departmental receipts. Always,
“ requirements” less “ receipts” equals “ appropriation.”
A summary table for the revised recommended budget
for 2006- 07 is presented at the beginning of each de-partment/
budget code or section. In addition, there are
summary tables for the items of change following each
of the change types, i. e., reduction adjustments, expan-sion
adjustments, and technical adjustments. At the
end of each department/ budget code or section, there
is a table that summarizes all recommended changes.
A summary of recommended adjustments by depart-ment/
budget code for the entire state budget appears
in table 3, “ Governor’s Recommended General Fund
Budget, 2006- 07.”
1
2
Governor Easley’s priorities guiding budget develop-ment
included the following:
Recommending a fiscally responsible budget that
replenishes the Rainy Day Fund, invests in the
state’s infrastructure, and provides tax relief
Continuing our investments in education from
pre- kindergarten through the university system to
build a skilled workforce prepared to compete in
the global economy
•
•
Executive Priorities and Budget Summary
for 2006- 07
Enhancing North Carolina’s aggressive strategies
for job creation and long- term economic growth
Providing quality health and family services to
those who can least afford them
Protecting and preserving our natural heritage
through land and water conservation, enforcement
of our Clean Smokestacks legislation, and other
environmental laws
Improving the court system and public safety of
our communities
•
•
•
•
Figure 1
Recommended Appropriation for General Fund
Operating Budget, 2006- 07
University System
13%
Community
Colleges 5% Public Schools
40%
Debt Service and
Other Reserves 4%
General
Government and
Natural and
Economic
Resources 5%
Justice and Public
Health and Human Safety 10%
Services 23%
Public Schools $ 6,881 $ 7,404 7.6% 40.0%
Community Colleges 828 912 10.1% 4.9%
University System 2,151 2,408 11.9% 13.0%
Total Education 9,860 10,724 8.8% 57.9%
Health and Human Services 4,057 4,249 4.7% 22.9%
Justice and Public Safety 1,783 1,917 7.5% 10.4%
Natural and Economic Resources 853 866 1.5% 4.7%
Debt Service and Other Reserves 588 765 30.1% 4.1%
Total Operating Budget $ 17,141 $ 18,521 8.1% 100.0%
Capital Improvements 55 329 498.2%
Total General Fund Appropriation $ 17,196 $ 18,850 9.6%
Table 1
Recommended General Fund Appropriations, 2006- 07
Compared with Authorized General Fund Appropriations, 2005- 06
($ million)
Authorized
2005- 06
Recommended
2006- 07
Change
2005- 06 to
2006- 07
Percent of Total
Operating Budget
3
Figure 2
General Fund Supported Positions
2006- 07
Health and Human
Services 4%
Justice and Public
Safety 12%
General
Government and
Natural and
Economic
Resources 3%
Public Schools
62%
Community
Colleges 6%
University System
13%
Public Schools 143,180 156,161 9.1% 62.1%
Community Colleges 14,082 15,589 10.7% 6.2%
University System 29,587 32,575 10.1% 12.9%
Health and Human Services 8,991 9,244 2.8% 3.7%
Justice and Public Safety 27,541 29,924 8.7% 11.9%
General Government and
Natural and Economic Resources 7,980 8,125 1.8% 3.2%
Total Positions 231,361 251,618 8.8% 100%
Table 2
Recommended General Fund Supported Positions, 2006- 07
Compared with Authorized General Fund Positions, 2005- 06
Authorized
2005- 06
Recommended
2006- 07
Change
2005- 06 to
2006- 07
Percent of
Total
Positions
4
2006- 07 Appropriation Appropriation 2006- 07 Net
Budget Certified Supported Supported Net Recommended Position
Code Function Appropriation Recurring Nonrecurring Positions Recurring Nonrecurring Positions Change Appropriation Change
Education
13510 Public Education $ 6 ,579,807,097 $ ( 184,044,719) $ - - $ 196,398,197 $ 115,221,507 3.00 $ 127,574,985 $ 6,707,382,082 3.00
16800 Community Colleges 7 67,295,886 - - - 39,606,340 232,423 5.00 39,838,763 807,134,649 5.00
160xx University System 2 ,120,397,081 - ( 9,634,513) ( 91.80) 120,313,014 12,707,409 - 123,385,910 2,243,782,991 ( 91.80)
Total Education 9 ,467,500,064 ( 184,044,719) ( 9,634,513) ( 91.80) 356,317,551 128,161,339 8.00 290,799,658 9,758,299,722 ( 83.80)
General Government
14100 Administration 58,818,473 - - - 3,089,529 2,602,289 18.72 5,691,818 64,510,291 18.72
13300 State Auditor 10,840,918 - - - 207,564 200,000 - 407,564 11,248,482 -
14800 Cultural Resources 62,917,147 - - - 3,903,858 348,744 33.00 4,252,602 67,169,749 33.00
14802 Cultural Resources - Roanoke Island 1,783,374 - - - - - - - 1,783,374 -
11000 General Assembly 46,965,432 - - - - 238,346 - 238,346 47,203,778 -
13000 Governor's Office 5,344,528 - - - 100,000 - - 100,000 5,444,528 -
13010 NC Housing Finance 4,750,945 - - - 5,000,000 - - 5,000,000 9,750,945 -
13900 Insurance 28,110,582 - - - 555,912 41,991 7.00 597,903 28,708,485 7.00
13901 Insurance - Worker's Comp. Fund 4,500,000 - - - - - - - 4,500,000 -
13100 Lieutenant Governor 753,037 - - - 2,600 - - 2,600 755,637 -
18210 Office of Administrative Hearings 2,969,712 - - - 357,000 8,000 2.00 365,000 3,334,712 2.00
14700 Revenue 80,673,250 - - - 570,173 789,887 10.00 1,360,060 82,033,310 10.00
13200 Secretary of State 9,369,633 - - - 711,621 127,050 9.25 838,671 10,208,304 9.25
18025 State Board of Elections 5,069,307 - - - 143,279 - 2.00 143,279 5,212,586 2.00
13005 State Budget and Management ( OSBM) 5,021,795 - - - 240,438 169,500 3.00 409,938 5,431,733 3.00
13085 OSBM- Special Appropriations 5,111,429 - - - 599,000 656,000 - 1,255,000 6,366,429 -
14160 Controller's Office 10,044,511 - - - - - - - 10,044,511 -
13410 State Treasurer 8,295,843 - - - 281,784 - - 281,784 8,577,627 -
13412 State Treasurer - Retirement / Benefits 8,651,457 - - - - - - - 8,651,457 -
Total General Government 359,991,373 - - - 15,762,758 5,181,807 84.97 20,944,565 380,935,938 84.97
Health and Human Services
14410 Central Administration 118,880,919 ( 66,646,653) - - 1,344,442 1,271,533 - ( 64,030,678) 54,850,241 -
14411 Aging 29,495,139 - - - 3,000,000 - - 3,000,000 32,495,139 -
14420 Child Development 267,356,799 - - - 30,453,222 12,291 10.00 30,465,513 297,822,312 10.00
14424 Education Services 34,281,895 - - - 778,548 50,000 23.00 828,548 35,110,443 23.00
14430 Public Health 150,814,496 - - - 19,889,744 416,000 203.00 20,305,744 171,120,240 203.00
14440 Social Services 190,679,285 - - - 12,399,153 2,287,393 - 14,686,546 205,365,831 -
14445 Medical Assistance 2,751,209,159 ( 150,000,000) - - - - - ( 150,000,000) 2,601,209,159 -
14446 Child Health 51,882,902 - - - - - - - 51,882,902 -
14450 Services for the Blind 9,681,220 - - - - - - - 9,681,220 -
14460 Mental Health/ DD/ SAS 602,556,655 - - - 54,133,395 35,000,000 163.00 89,133,395 691,690,050 163.00
14470 Facility Services 15,959,466 - - - - - - - 15,959,466 -
14480 Vocational Rehabilitation 42,142,193 - - - 699,856 - 4.00 699,856 42,842,049 4.00
Total Health and Human Services 4,264,940,128 ( 216,646,653) - - 122,698,360 39,037,217 403.00 ( 54,911,076) 4,210,029,052 403.00
Justice and Public Safety
14500 Correction 1,048,492,502 - ( 904,430) - 21,578,893 10,854,928 161.00 31,529,391 1,080,021,893 161.00
14900 Crime Control and Public Safety 35,153,488 - - - 3,960,741 8,000 30.00 3,968,741 39,122,229 30.00
12000 Judicial 345,760,410 - - - 18,577,456 7,581,365 249.75 26,158,821 371,919,231 249.75
12001 Judicial - Indigent Defense 88,648,414 - - - 3,591,162 2,622,438 - 6,213,600 94,862,014 -
13600 Justice 78,697,271 - - - 2,075,180 2,496,580 20.00 4,571,760 83,269,031 20.00
14060 Juvenile Justice 138,873,166 - - - 2,795,026 265,826 66.00 3,060,852 141,934,018 66.00
Total Justice and Public Safety 1,735,625,251 - ( 904,430) - 52,578,458 23,829,137 526.75 75,503,165 1,811,128,416 526.75
Reductions Expansion
Table 3
Governor's Recommended General Fund Budget
2006- 07
5
2006- 07 Appropriation Appropriation 2006- 07 Net
Budget Certified Supported Supported Net Recommended Position
Code Function Appropriation Recurring Nonrecurring Positions Recurring Nonrecurring Positions Change Appropriation Change
Reductions Expansion
Table 3
Governor's Recommended General Fund Budget
2006- 07
Natural and Economic Resources
13700 Agriculture and Consumer Services 51,032,884 - - - 1,003,323 317,516 10.50 1,320,839 52,353,723 10.50
14600 Commerce 36,728,265 - - - 17,366,828 1,880,000 10.00 19,246,828 55,975,093 10.00
14601 Commerce - State Aid 47,358,087 - - - 2,000,000 - - 2,000,000 49,358,087 -
14300 Environment and Natural Resources 168,451,089 - - - 9,888,956 1,336,072 11.00 11,225,028 179,676,117 11.00
14301 Clean Water Management Trust 100,000,000 - - - - - - - 100,000,000 -
13800 Labor 14,434,925 - - - 450,000 - 3.50 450,000 14,884,925 3.50
Total Natural and Economic Resources 418,005,250 - - - 30,709,107 3,533,588 35.00 34,242,695 452,247,945 35.00
14222 Transportation - - - - - - - - - -
Net Agency 16,246,062,066 ( 400,691,372) ( 10,538,943) ( 91.80) 578,066,234 199,743,088 1,057.72 366,579,007 16,612,641,073 965.92
19600 Capital Improvements - - - - - 329,453,300 - 329,453,300 329,453,300 -
Debt Service
19420 General Debt Service 619,291,140 - ( 50,000,000) - - - - ( 50,000,000) 569,291,140 -
19425 Federal Reimbursement 1,616,380 - - - - - - - 1,616,380 -
Total Debt Service 620,907,520 - ( 50,000,000) - - - - ( 50,000,000) 570,907,520 -
Reserves and Adjustments
19001 Contingency and Emergency Reserve 5,000,000 - - - - - - - 5,000,000 -
19003 Compensation Increase Reserve 229,300,000 - - - 585,761,473 8,775,417 - 594,536,890 823,836,890 -
19004 Salary Adjustment Reserve 14,094,294 - - - 20,000,000 - - 20,000,000 34,094,294 -
19008 Retirement Payback Reserve - - - - - 30,000,000 - 30,000,000 30,000,000 -
190xx Heating/ Cooling Assistance Reserve - - - - - 10,000,000 - 10,000,000 10,000,000 -
190xx Reserve for Innovative IT Projects - - - - 3,000,000 - - 3,000,000 3,000,000 -
19028 Longevity Svc. ( Clerks of Superior Court) Definition 41,411 - - - - - - - 41,411 -
19047 Disability Income Plan 6,586,500 - - - - - - - 6,586,500 -
19047 Death Benefit Trust 12,899,200 - - - - - - - 12,899,200 -
19027 ITS Rate Restructuring Reserve ( 2,300,000) - - - - - - - ( 2,300,000) -
19040 Minimum Fair Wage for SPA employees 750,000 - - - - - - - 750,000 -
19043 Health Plan Reserve 142,728,000 - - - - - - - 142,728,000 -
19037 State Business Infrastructure Project 2,525,000 - - - 7,260,523 34,527,880 50.75 41,788,403 44,313,403 50.75
19047 Retirement Rate Adjustment Reserve 13,810,800 - - - 48,000,000 - - 48,000,000 61,810,800 -
19044 IT Initiative 5,500,000 - - - 298,826 - 2.00 298,826 5,798,826 2.00
19040 Minimum Fair Wage Reserve ( DPI) 12,400,000 - - - 8,582,073 - - 8,582,073 20,982,073 -
19024 Reserve for Contingent Appropriations 85,000,000 - - - - - - - 85,000,000 -
190xx Reserve for Lawsuits - - - - - 2,000,000 - 2,000,000 2,000,000 -
190xx Reserve- Disaster Expenditures - - - - - 50,000,000 - 50,000,000 50,000,000 -
190xx Reserve- Military Morale, Recreation, and Welfare 1,000,000 - - - - - - - 1,000,000 -
Total Reserves and Adjustments 529,335,205 - - - 672,902,895 135,303,297 52.75 808,206,192 1,337,541,397 52.75
Total $ 17,396,304,791 $ ( 400,691,372) $ ( 60,538,943) ( 91.80) $ 1,250,969,129 $ 664,499,685 1,110.47 $ 1,454,238,499 $ 18,850,543,290 1,018.67
6
2006- 2007
Description Recommended
Budget Availability
Beginning Credit Balance
Unappropriated Balance from FY 2005- 06 $ 113,386,988
Anticipated Reversions from FY 2005- 06 125,000,000
Anticipated Overcollections from FY 2005- 06 1,072,100,000
Emergency Appropriation for Department of Correction ( 15,000,000)
Credit to Savings Reserve ( 324,000,000)
Credit to Repair and Renovation Reserve ( 200,000,000)
Anticipated Beginning Unreserved Credit Balance 771,486,988
Recommended Budgeted Revenue
Tax Revenue 17,631,550,000
Non- tax Revenue 520,300,000
Highway Fund Transfer -
Highway Trust Fund Transfer 252,663,009
Disproportionate Share Receipts 100,000,000
Total General Fund Revenue 18,504,513,009
Adjustments to Revenues
Reduce Sales Tax Rate by .25% on October 1, 2006 ( 196,500,000)
Cap Gas Tax Effective July 1, 2006 ( 23,550,300)
Reduce Highway Trust Fund Transfer to General Fund for FY 2006- 07 ( 195,176,407)
Sales Tax Changes ( Research and Development and Component Parts) ( 7,230,000)
Adoption Tax Credit ( 50% of Federal Tax Credit) ( 3,000,000)
Total Adjustment to Recommended Budgeted Revenues ( 425,456,707)
Total Availability 18,850,543,290
Recommended Appropriations
Original Certified Budget 17,396,304,791
Recommended Reductions ( 461,230,315)
Recommended Expansion 1,915,468,814
Total Appropriations Recommended 18,850,543,290
Total Ending Balance $ -
Table 4
Recommended Availability and Appropriations
2006- 2007
7
8
Major Expansion Budget
Recommendations
by Subject Area
Fiscal Responsibility
Education
Health and Human Services
Economic Development and
Infrastructure
Courts and Public Safety
Environment and Agriculture
Capital Improvements
Teachers and State Employees
9
10
Governor Easley recommends a fiscally responsible
budget that replenishes the Rainy Day Fund, invests in
the state’s infrastructure, and provides tax relief.
Save for the Future
Deposit $ 324 million in the Rainy Day Fund,
thereby increasing the balance to $ 637 million
or 4.0% of the prior year’s operating budget ( see
figure 3).
Set aside $ 50 million for disaster- related expenses.
Return Money to North Carolina Taxpayers
Cap the gas tax on July 1, 2006.
Reduce the state sales tax by 0.25% on October 1,
2006.
Enact a state tax credit for adoption expenses.
These actions will save North Carolinians over $ 220
million in 2006- 07.
•
•
••
•
Invest in Our Infrastructure
Reserve $ 200 million to repair university and state
buildings.
Appropriate $ 329 million in “ pay- as- you- go”
financing as well as $ 245 million in special financ-ing
to implement the Capital Improvement Plan.
Spend $ 42 million to replace and enhance the Hu-man
Resources/ Payroll System.
Reserve $ 195 million to replenish the Highway
Trust Fund.
•
•
•
•
Fiscal Responsibility
Major Recommendations
0
150
267
313
637
0
100
200
300
400
500
600
700
2002 2003 2004 2005 2006
Figure 3
Savings Reserve Account Balance
Rainy Day Fund
June 30 ($ mil)
11
For education, Governor Easley’s budget focus contin-ues
the state’s investments in education from prekin-dergarten
through the university system to build a
skilled workforce prepared to compete in the global
economy.
Public Education
Provide a significant increase in teacher salaries,
including a step increase plus a flat $ 2,250 ( for an
overall average of 8%), while substantially increas-ing
the competitiveness of North Carolina’s begin-ning
teacher salary.
Provide an additional $ 523 million for public
schools, a 7.6% increase over 2005- 06.
Continue funding for record enrollment increases,
projected at 38,103 or 2.7% more than the
1,397,372 students enrolled in the 2005- 06 school
year ( see figure 4).
Fully fund the ABCs accountability program.
More than double the disadvantaged- student
supplemental funding.
•
•
•
••
Appropriate $ 42 million to ensure full funding for
low wealth LEAs whose ability to generate local
revenue per student is below the state average.
Expand the governor’s 21st Century High School
program by $ 14.1 million to ensure operating
funds for 34 Learn and Earn schools and 32 small
redesigned high schools to improve graduation
rates, student performance, and competitiveness in
the 21st century.
Fund literacy coaches for professional develop-ment
of faculty in 100 middle schools to ensure
student mastery of 21st century skills.
Appropriate $ 4 million to expand access to the
NC Education Network for the state’s K- 12 public
schools.
Fund $ 2.8 million for the NC Virtual Public
School to provide statewide access to online
courses and learning opportunities.
Provide $ 16.4 million for the rising cost of diesel
fuel for buses.
•
•
•
•
•
•
Education
Major Recommendations
Source: Department of Public Instruction, Financial and Business Services School Allotment Section
Figure 4
Average Daily Membership Budgeted
NC Public Schools
1,150,000
1,200,000
1,250,000
1,300,000
1,350,000
1,400,000
1,450,000
1998- 99 1999- 00 2000- 01 2001- 02 2002- 03 2003- 04 2004- 05 2005- 06 2006- 07
0
0.5
1
1.5
2
2.5
3
Percent Change
ADM Percent Change
12
Budgeted FTE is the sum of curriculum, continuing education, and basic skills FTE. It is computed as
the three- year average or the prior year's enrollment for each college, whichever is higher. The community
colleges' enrollments are aggregated for the entire Community College System. ( The three- year average
creates slight differences between budgeted and actual FTE; recently, this systemwide difference has been
less than 100.)
Source: NCCCS System Office
Figure 5
Enrollment in Community College System
Curriculum, Continuing Education, Basic Skills
Budgeted FTE
-
50,000
100,000
150,000
200,000
250,000
1999- 00 2000- 01 2001- 02 2002- 03 2003- 04 2004- 05 2005- 06 2006- 07
0%
2%
4%
6%
8%
10%
12%
Percent Change
FTE Percent Change
Community Colleges
Provide an additional $ 84 million for community
colleges, a 10.1% increase over 2005- 06.
Fully fund enrollment growth ( an additional $ 7
million) for all community college campuses ( see
figure 5).
Appropriate a recurring enrollment reserve of $ 2
million to assist community colleges experiencing
fall semester enrollment growth of 5% above the
prior year.
Increase salaries for community college faculty and
professional staff by an additional 4% ( total of 8%)
to attract and retain highly qualified personnel.
Appropriate $ 3.9 million to improve and expand
distance learning opportunities, thereby increasing
access for North Carolina students regardless of
geography.
•
•
•
•
•
Approve $ 11 million to address equipment needs at
community colleges, including equipment to reduce
program waiting lists.
Allocate $ 500,000 in financial aid to community
college students enrolling in teaching or nursing
programs to address the growing demand for these
professionals.
Fund two new regional customized industry train-ing
coordinators to provide all North Carolina eco-nomic
development regions with training assistance.
Provide for additional student services and financial
aid staffing at community colleges, enabling them
to better serve growing student enrollments.
Appropriate funds for the State Board of Commu-nity
Colleges to direct start- up grants for new and
innovative college programs.
•
•
•
•
•
13
Source: UNC General Administration
Budgeted FTE is calculated by converting budgeted Student Credit Hours ( fall and spring)
into the measure of regular term full time equivalent students ( FTEs).
Figure 6
Enrollment in the University System
Budgeted FTE
-
20,000
40,000
60,000
80,000
100,000
120,000
140,000
160,000
180,000
200,000
1999- 00 2000- 01 2001- 02 2002- 03 2003- 04 2004- 05 2005- 06 2006- 07
0%
1%
2%
3%
4%
5%
6%
7%
8%
9%
Percent Change
Enrollment Units ( FTE) Percent Change
University System
Appropriate an additional $ 257 million for the Uni-versity
of North Carolina system, a 11.9% increase
over 2005- 06.
Fully fund university enrollment increases ($ 79 mil-lion
for a 4.1% FTE increase) ( see figure 6).
Provide $ 21.6 million to fully fund the need- based
financial aid program.
Approve $ 1.3 million for federally required state
agricultural research and extension program match-ing
funds.
Provide $ 4.8 million for nurses’ scholarships and
programs to address the growing demand for nurses
in North Carolina.
Appropriate $ 1 million for 400 additional prospec-tive
teacher scholarship loans.
•
•
•
•
•
•
Provide $ 1 million to continue the 2+ 2 E- learning
initiative between the University of North Carolina
system and community colleges in order to make
online teacher education accessible across the state.
Allocate $ 2 million for new professional develop-ment
programs for teachers and principals.
Appropriate $ 2 million for the DESTINY traveling
science laboratory to increase access to state- of- the-art
science instruction and high quality professional
development for science teachers.
Provide $ 11.5 million for rising electrical, natural
gas, fuel oil, gasoline, and diesel costs.
Approve $ 2.4 million to update information tech-nology
infrastructure at the 16 university campuses.
•
•
•
•
•
14
Governor Easley is committed to providing quality
health and family services to those who can least afford
them. His budget includes an expansion of over $ 160
million in this area, with 55% designated for mental
health, developmental disabilities, and substance abuse
services.
Supporting the Family
Continue funding quality child care services for
96,000 children currently receiving subsidies, plus
provide funds for an additional 3,000 children of
low- income working parents.
Provide mental health and social services support
to child and family teams in 100 schools across the
state.
Appropriate approximately $ 2 million to support
pregnant women who are substance abusers or
domestic violence victims.
Support the nationally acclaimed Smart Start pro-gram
with $ 10 million.
Supporting Individuals with Special Needs
Provide $ 12 million to meet the increasing needs
of children receiving foster care and adoption as-sistance
services.
Appropriate an additional $ 7 million for early
intervention for children with, or at risk for, devel-opmental
disabilities.
•
•
•
•
•
•
Continue funding services for about 5,500 people
with developmental disabilities threatened with
loss of support due to changes in federal policy.
Approve an additional $ 58 million investment in
mental health reform.
Increase grants to local programs to serve frail
seniors who want to remain in their own homes.
Provide 23 new positions to support preschoolers
and students attending residential schools for the
blind and deaf.
Establish an adoption tax credit.
Promoting Health
Provide antiviral medications for first responders
in case of an influenza pandemic.
Add influenza vaccine to the universal vaccine
program.
Appropriate $ 3.25 million to support 65 school
nurses.
Controlling Medicaid Expenditure Growth
Reduce Medicaid funding by $ 150 million,
primarily due to a higher federal match rate and
savings to the state from the new Medicare Drug
Plan.
•
•
•
•
•
•
•
•
•
Health and Human Services
Major Recommendations
Figure 7
Recommended Continuation Appropriations
by Division
Health and Human Services, 2006- 07
($ mil)
2,751
603
267 191 151 302
64.5%
14.1%
6.3% 4.5% 3.5% 7.1%
-
500
1,000
1,500
2,000
2,500
3,000
Medicaid MH/ DD/ SAS Child
Development
Social
Services
Public Health All Other
DHHS
Programs
Total: $ 4,265
Figure 8
Recommended Expansion Appropriations
by Activity
Health and Human Services, 2006- 07
($ mil)
89
30
17 13
8 3 2
8.2% 4.7% 1.9% 1.0%
10.3%
18.8%
55.1%
-
10
20
30
40
50
60
70
80
90
100
MH/ DD/ SAS Child
Develpment
At Risk
Children
Public Health Early
Intervention
Elder Care Residential
Schools
Total: $ 162
15
Governor Easley remains committed to fostering
long- term economic growth and enhancing the state’s
aggressive strategies for creating jobs. In addition, the
governor’s budget recommendations focus on restoring
and maintaining the state’s transportation infrastruc-ture
and promoting public transit initiatives as key
components for continued economic growth.
The One North Carolina Fund
Provide $ 10 million to recruit new businesses
or support industries interested in significantly
expanding in the state.
The One North Carolina Small Business In-novation
Research Program
Appropriate $ 5 million as incentive funding for
small businesses to apply for federal innovation re-search
grants. The program reimburses applicants
50% of the costs of preparing and submitting a
proposal and also helps bridge the funding gap
between proposal completion and initiation of an
award, up to an annual limit of $ 100,000.
Motor Sports Program
Fund the promotion of motor sports, an industry
contributing more than $ 5 billion annually to
North Carolina’s economy with its 24,400 jobs.
Establish a sales tax exemption for racing- vehicle
components.
Biotechnology
Provide $ 2 million for the North Carolina Bio-technology
Center to help the state remain an
internationally recognized biotechnology leader.
Approve $ 480,000 for community college biotech-nology
programs.
Appropriate $ 4.5 million for biomanufacturing
research and training at North Carolina State Uni-versity
and North Carolina Central University.
•
•
•
•
•
•
•
North Carolina as a Business Location
Allocate $ 1.5 million to advertise and promote
North Carolina as a location for business and
industry in order to help stem job losses and com-pete
with neighboring states and foreign countries.
Establish a research and development sales tax
reduction.
North Carolina Housing Trust Fund
Add $ 5 million in recurring dollars for the Hous-ing
Trust Fund to help families secure safe, decent,
and affordable homes, create jobs, increase state
and local tax revenues, and leverage millions of
dollars in additional business investment.
Transportation
Provide an additional $ 83 million ( a 44% increase
over the previous year) in contract resurfacing
funds to address degrading pavement conditions.
Approve $ 57 million for highway system preser-vation
and maintenance, including pavements,
bridges, and traffic signal systems.
Appropriate an additional $ 10 million ( a 29%
increase over the previous year) in small urban
construction funds for use statewide for economic
development, spot safety, or transportation im-provement
projects.
Allocate a $ 9.4 million increase ( 14% over the
previous year) in public transportation funding to
provide access to dial- a- ride services for citizens,
operating costs of fixed- route systems, and ad-ditional
state matching of federal funds for public
transportation initiatives.
Approve a $ 2 million increase ( 15% over the pre-vious
year) in state aid to assist rural airports with
capital improvements critical to attracting new
business and industry to local communities.
Provide $ 2 million for short- line railroad rehabili-tation
projects.
•
•
•
•
•
•
•
•
•
Economic Development and Infrastructure
Major Recommendations
16
Improving the court system and community public
safety are key aspects of Governor Easley’s budget
recommendations.
Criminal Investigation Resources
Allocate $ 1.5 million for the State Bureau of
Investigation to fund new field agent and crime
lab positions to improve conviction rates related to
identify theft, child exploitation on the Internet,
and methamphetamine and other drug trafficking.
Provide initial funding of $ 1.9 million for needed
replacement of the Statewide Automated Finger-print
Identification System, which is essential for
solving crimes and conducting criminal back-ground
checks.
Public Safety
Include $ 1.4 million to fund emergency manage-ment
staff and logistics operations to improve
emergency planning, response, and recovery
capabilities.
Provide $ 1.4 million to enable the state to monitor
convicted sex offenders with Global Positioning
System technology and to increase public aware-ness
of offenders establishing residency in North
Carolina communities.
Add $ 1.5 million for additional State Highway
Patrol troopers and support staff to reduce fatal ve-hicle
collisions and increase enforcement visibility.
Provide $ 10 million for improved communica-tions
between public safety agencies by expanding
the statewide interoperable voice radio network
( VIPER).
Appropriate $ 2.5 million to expand prison bed
capacity to meet both current and future projected
inmate population needs.
Approve $ 150,000 to ensure trained response
teams are in place statewide to protect the public
from incidents involving hazardous materials.
•
•
•
•
•
•
•
•
Provide an additional appropriation of $ 620,000
for services of urban search and rescue teams and
swift water rescue teams.
Fund $ 1.3 million to help reduce repeat criminal
offenses by substance abusers.
Court System Improvements
Fund a $ 9.5 million increase to expand the num-ber
of prosecutors, judges, and support staff to
reduce case backlogs and process child custody and
criminal cases more expeditiously.
Provide $ 5.5 million to support new and existing
technology initiatives, including a statewide war-rant
repository, electronic filing for civil cases, an
electronic traffic court, and an electronic payment
system for court fees.
Allocate $ 5.3 million to improve overall operating
efficiency by replacing outdated technology and
office equipment essential for court operations.
Approve $ 820,000 to expand custody mediation
and guardian ad litem programs to protect chil-dren
involved in custody, abuse, and neglect cases.
Financial Assistance
Include $ 500,000 for Operation ROTC ( Reaching
Out to Children) for extended day care needed by
military dependents when spouses are deployed.
Provide $ 700,000 in additional funding for the
Crime Victims Compensation Fund so that lost
wage and hospital expense payments to victims of
crime will be awarded faster.
Add $ 500,000 in increased funding for commu-nity
programs that reach out to delinquent and at-risk
youth to continue to improve recidivism rates.
•
•
•
•
•
•
•
•
•
Courts and Public Safety
Major Recommendations
17
Governor Easley’s budget recommendations reflect his
belief in protecting and preserving the state’s natural
heritage through land and water conservation and
enforcement of clean smokestack legislation and other
environmental laws.
Water Resources
Provide $ 467,000 for seven inspectors to monitor
construction sites to prevent further water pollu-tion
from sediment and erosion.
Allocate $ 500,000 for the expansion of the Con-servation
Reserve Enhancement Program ( CREP)
into additional watersheds in need of riparian buf-fers
and restored wetlands.
Provide $ 500,000 for the cleanup of orphan haz-ardous
sites throughout the state. These sites will
then be converted to safe uses.
Approve $ 2.9 million for the Drinking Water State
Revolving Fund as a 20% state match for $ 14.5
million in federal funds. The primary purpose of
the fund is to provide low interest loans for water
supply infrastructure improvements.
Fund $ 3.2 million to provide a 20% match as a
condition of the EPA Capitalization Grants for the
Clean Water State Revolving Fund programs. The
funding allows local governments to address their
wastewater treatment needs more efficiently and to
improve North Carolina’s water quality.
Provide $ 2.4 million for private well construc-tion.
The funding will support the enforcement of
standards for private well construction and provide
incentive funds for new county well programs.
Allocate $ 259,067 to support and maintain the
Basinwide Information Management System
( BIMS) by establishing three additional staff
positions. BIMS is the result of Water Quality
Division efforts to consolidate essential regulatory
agency data into one database.
•
•
•
•
•
•
•
One North Carolina Naturally Initiatives
Provide $ 277,527 to establish four coastal habitat
protection Compliance Coordinator positions to
concentrate on permit monitoring, enforcement,
and compliance activities, thereby allowing exist-ing
field staff to focus on permit delivery activities.
Appropriate $ 333,778 to soil and water conser-vation
districts and counties to implement best
management practices for water quality.
Approve $ 400,000 to help agricultural producers
implement best management practices on private
agricultural lands to improve water quality.
Appropriate $ 563,695 to encourage private wood-land
owners to reforest their land after harvest and
to plant trees on idle or unproductive land, thus
ensuring future timber supplies while providing
environmental protection to the state’s woodlands.
Provide $ 375,000 to implement the Coastal Rec-reational
Fishing License Program ( CRFL).
Agriculture
Approve $ 250,000 to fund three positions to ad-dress
the threat of avian influenza, exotic New-castle
disease, bovine spongiform encephalopathy,
and any other emerging or potential foreign
animal diseases.
Provide $ 345,000 for eight positions to provide
increased protection of the food supply by inspect-ing
slaughterhouses and processing plants and
surveying food samples.
Appropriate $ 350,000 to offset deficits of state
farms in transitioning from production facilities to
research facilities.
Approve $ 58,323 to establish an Export Certifica-tion
Specialist position to provide technical help to
North Carolina producers sending raw agricultural
products to markets outside of the United States.
•
•
•
•
•
•
•
•
•
Environment and Agriculture
Major Recommendations
18
Governor Easley recommends a balanced capital
financing package, using a combination of pay- as- you-go
and debt sources to prevent the state from an over-burdened
debt capacity and critical project delays. The
proposed capital budget totals approximately $ 764.2
million, including $ 329.5 million from General Fund
appropriations, $ 20 million in revenue bonds, $ 245
million in special financing, and $ 169.7 million from
receipts. In addition, $ 200 million is recommended for
the Repair and Renovation Reserve.
Education
Appropriate $ 27 million to expand the School of
Nursing at UNC- Wilmington.
Approve $ 61 million for the Engineering Complex
III at North Carolina State University to continue
the relocation of the College of Engineering to
Centennial Campus.
Provide $ 45.8 million for a new UNC- Charlotte
classroom building to house graduate and profes-sional
education programs.
Public Health
Approve the issue of $ 101 million in special
financing to construct a new public health lab and
office for the Chief Medical Examiner.
Appropriate $ 8 million from the General Fund to
combine with a $ 16 million federal grant to con-struct
two skilled- care nursing homes for North
Carolina’s veterans.
Justice and Public Safety
Provide $ 8.5 million to construct an Emergency
Operations Center within the new National
Guard Readiness Center.
Approve $ 151.7 million, including $ 144 mil-lion
in special financing and $ 7.9 million from
receipts, to build a Regional Medical Center and a
Mental Health Center at North Carolina’s Central
Prison in Raleigh.
•
•
•
•
•
•
•
Natural and Economic Resources
Approve $ 106.4 million, including $ 18.5 million
in appropriations and $ 87.9 million in federal and
local matching funds, for water resources develop-ment
projects.
Appropriate $ 15 million for land acquisition to
expand Chimney Rock State Park.
Provide $ 7.5 million from the General Fund to
add to $ 16.6 million in receipts to buy two new
container cranes for the Port of Wilmington.
Appropriate $ 1.5 million to combine with $ 1 mil-lion
in gifts and grants for the Children’s Discov-ery
Center to expand interactive and educational
exhibits at the North Carolina Zoo.
Approve $ 10 million to add to $ 40 million in
gifts and grants for the Nature Resource Center,
a Museum of Natural Sciences annex to engage
teachers, students, and the public in interactive
scientific research.
General Government
Appropriate $ 40 million to expand the Museum
of Art to showcase new collections and programs.
Approve the issue of $ 20 million in revenue bonds
for a new parking deck in the downtown complex.
Provide $ 50 million to construct a new building
to consolidate Department of Environment and
Natural Resources offices.
•
•
•
•
•
•
•
•
Capital Improvements
Major Recommendations
Figure 9
Recommended Capital Funding
2006- 07
329.5 ($ mil)
20.0
245.0
169.7
0
50
100
150
200
250
300
350
General Fund Revenue Bonds Special Financing Receipts
Total: $ 764.2 million
19
Teachers and State Employees
Major Recommendations
Appropriate $ 323 million as a step increase plus
a $ 2,250 flat increase for public school teachers,
equaling an average 8% increase. The $ 323 mil-lion
includes $ 8.8 million as nonrecurring salary
increases for school personnel at the top of the
scale. The proposal also includes an average 7%
increase for principals and assistant principals. ( See
figure 10.)
Provide $ 8.6 million to increase the minimum
hourly or monthly salary of noncertified public
education employees to the state employee mini-mum.
Approve $ 244 million for a 4% salary increase for
all other state employees, including community
college faculty and professional staff.
Provide $ 28 million for an additional 4% increase
•
•
•
•
Source: 1997- 99 to 2005- 06 Highlights of the North Carolina Public School Budget February 2006,
Information Analysis NCDPI.
Note: 2006- 07 to 2008- 09 National projections based upon National Education Association figures.
Figure 10
Average Teacher Compensation
1998 - 2009
$ 30,000
$ 35,000
$ 40,000
$ 45,000
$ 50,000
$ 55,000
1997-
98
1998-
99
1999-
00
2000-
01
2001-
02
2002-
03
2003-
04
2004-
05
2005-
06
2006-
07
2007-
08
2008-
09
Salary
- 2%
0%
2%
4%
6%
8%
10%
12%
Percent Change
NC US NC Percent Change US Percent Change
( 8% total) for community college faculty and pro-fessional
staff to attract and retain highly qualified
personnel.
Allocate $ 48 million for a 3.7% cost- of- living ad-justment
( COLA) for retirees of the Teachers’ and
State Employees’ Retirement System.
Approve $ 30 million to repay funds withheld from
the Retirement System in the 2001- 02 budget
crisis. This repayment is the fourth in the five- year
payback period.
Allocate $ 20 million to the Salary Adjustment
Fund. This fund provides salary adjustments for
job groups with state salaries that are not competi-tive
in the market place and increases where the
state is having difficulty recruiting and retaining
employees.
•
•
•
20
Economy and Revenue
by Topic
Economy
Outlook for the Nation and State
Revenue
General Fund Revenue Forecast
Highway Fund Revenue
Highway Trust Fund Revenue
21
22
Economy
Outlook for the Nation and State
Review of 2004- 05
Continued strong growth in U. S. economy. After
gathering momentum in 2002- 03 and 2003- 04, the
U. S. economy continued to expand at a solid pace
in 2004- 05. This growth was fueled by consumer
spending and business investment. The labor market
improved drastically after several years of minimal
growth.
Real Gross Domestic Product ( GDP) grew
strongly during 2004- 05. The value of all goods
and services produced within the U. S., adjusted
for inflation, grew at 3.7%. Most components of
demand that accounted for growth in 2003- 04,
such as consumer spending, business investment,
and exports, continued to grow in 2004- 05.
Hiring picked up. Employers created roughly two
million new jobs, while the unemployment rate
declined to 5.1% by the end of 2004- 05 ( down
0.5 percentage point from the previous year).
The service sector accounted for most of the job
growth, while the manufacturing sector continued
to lose jobs.
Consumers continued to spend more. Despite a
gradual cooling in the housing market, solid job
growth and rising household incomes drove con-sumer
spending. Total personal income increased
by 6.3% in 2004- 05, while wages and salaries
increased 2.4%. Consumer spending grew 3.7%.
The federal funds rate increased. The Federal
Reserve continued to move toward a neutral
monetary policy stance. The federal funds rate was
gradually increased to its current level of 4.75%.
Overall inflation, as measured by the Consumer
Price Index, increased very slightly during 2004-
05 to 3.0%. Core inflation, which excludes food
and energy prices, remained in the 2% range.
Solid growth in North Carolina’s economy. The
North Carolina economy continued to expand as the
labor market strengthened. Employers added jobs and
•
•
•
•
statewide unemployment dropped significantly from
its recession peak in the spring of 2002 ( see figures 11
and 12). Nonagricultural employment increased by
62,650 jobs or 1.7% in 2004- 05.
The service sector fueled employment gains.
Consistent with the trend in recent years ( see
figure 13 and table 5), the service sector experi-enced
outstanding job growth. In particular, the
professional/ business and education/ health services
sectors were the main drivers of this expansion.
After growth of 3.2% in 2003- 04, the education
and health sector gained another 4.1% in 2004-
05. Building on the 0.6% gain in 2003- 04, the
professional and business services sector increased
employment by 3.7% in 2004- 05. While job
growth has been a bit more inconsistent in the
leisure and hospitality services, the sector realized a
1.7% growth.
The pace of manufacturing employment losses
slowed. While the state’s manufacturing sector
continued to lose jobs in 2004- 05, the 0.5% loss
was the lowest since 1997- 98.
Outlook for 2006 and 2007
Continued growth expected in U. S. economy.
The U. S. economy is off to a strong start in 2006. The
value of all goods and services produced within the
U. S., adjusted for inflation, grew at 4.8% in the first
quarter ( one of the strongest quarters in the recent
past). The labor market also continues to grow as
employers add jobs. While rising energy prices and
the weakening housing market are a concern, most
economic forecasts project steady growth for the
remainder of 2005- 06 and 2006- 07. Highlights of this
economic outlook include the following:
Real GDP is expected to increase by 3.2% in both
2006 and 2007.
The labor market should continue its steady per-formance,
as an average of 182,000.
nonagricultural jobs is expected to be added dur-
•
•
•
•
23
Source: Labor Market Information, Employment Security Commission
Figure 11
NC Unemployment Rate Falls Significantly
Percent Unemployed
6.8
6.4
5.6
5.1
4.5
0
1
2
3
4
5
6
7
8
March 2002 March 2003 March 2004 March 2005 March 2006
Source: Labor Market Information, Employment Security Commission
Figure 12
NC Employment Expands
Total Nonfarm Employment ( 000s)
2002 to 2006
3,828.4
3,776.9 3,786.5
3,879.6
3,947.1
3650
3700
3750
3800
3850
3900
3950
4000
March 2002 March 2003 March 2004 March 2005 March 2006
24
Source: Labor Market Information, Employment Security Commission
Figure 13
Nonfarm Employment by Category
Percent of Total
0 5 10 15 20 25
Trade, Transportation, and Utilities
Government
Manufacturing
Education and Health Services
Professional and Business Services
Leisure and Hospitality Services
Construction
Financial Activities
Other Services
Other
1995 2000 2005
Category 1995 2000 2005
Trade, Transportation, and Utilities 19.6 19.1 18.8
Government 15.9 15.8 17.0
Manufacturing 23.7 19.3 14.5
Education and Health Services 8.8 9.6 11.9
Professional and Business Services 9.0 11.2 11.3
Leisure and Hospitality Services 8.0 8.2 9.1
Construction 5.1 5.8 5.9
Financial Activities 4.2 4.6 5.0
Other Services 3.6 4.1 4.4
Other 2.1 2.3 2.1
Table 5
Annual Nonfarm Employment by Category
Percent of Total
Source: Labor Market Information, Employment Security Commission
1995, 2000, and 2005
Percent of Total
25
ing the final two quarters of fiscal year 2006. Job
gains in 2007 are expected to average 149,000 per
month. The unemployment rate is projected to
remain at 4.8% in 2006, while increasing slightly to
4.9% in 2007.
Inflation is expected to remain near 2.5% over
the rest of 2006 and 2007. Core inflation, which
excludes food and energy, is expected to increase
slightly over the next two years.
The federal funds rate is expected to reach 5.25%
by the end of June, as the Federal Reserve Bank
continues to move toward a neutral monetary policy
stance.
After a sluggish fourth quarter in 2005, consumer
spending jumped 5.1% in the first quarter of 2006.
Consumer spending is expected to grow at 3.1% for
the remainder of 2006 before falling below 3.0%
in 2007 due to higher interest rates and a projected
slowdown in the housing market.
Large corporate profits and positive perceptions of
the economic outlook are expected to increase busi-ness
investment over the next two years. Business
investment is expected to increase by 9.1% and
6.4% in 2006 and 2007.
Continued expansion expected in North Caro-lina.
Driven by growth in the services sector, the
state’s economy is expected to expand and build on the
employment growth momentum generated in 2004- 05.
This growth, combined with business investment and an
increase in wages, is expected to fuel North Carolina’s
expansion.
Economists’ projections for the state’s economy in 2005-
06 and 2006- 07 include these forecasts:
Personal income is expected to outpace the U. S.
in 2006- 07 after falling slightly behind the U. S.
growth in 2005- 06 ( see figure 14).
Employment growth is expected to remain con-sistent
with that of the nation. Nonagricultural
employment is forecasted to expand 1.5% in 2005-
06, followed by 1.7% growth in 2006- 07 ( see figure
15).
Professional and business services employment is
expected to expand 4.6% in 2005- 06 and 4.2% in
2006- 07.
•
•
•
•
•
•
•
Employment in the leisure and hospitality services
sector is forecasted to grow 2.6% in 2005- 06 and
3.1% in 2006- 07.
Construction employment is expected to slow in
2005- 06 and 2006- 07, growing at 2.5% and 1.2%,
respectively.
High- tech manufacturing is forecasted to help limit
manufacturing losses in 2005- 06 to 1.6% followed
by losses of 1.9% in 2006- 07.
•
•
•
Data for fiscal years 2006 and 2007 are forecasts.
Source: Global Insight
Figure 15
State Maintains Employment Growth
Percentage Growth in Nonagricultural Employment
- 3
- 2
- 1
0
1
2
3
4
FY99 FY00 FY01 FY02 FY03 FY04 FY05 FY06 FY07
North Carolina U. S.
Data for fiscal years 2006 and 2007 are forecasts.
Source: Global Insight, U. S. Bureau of Economic Analysis
Figure 14
State Income Expected to Exceed U. S.
Percentage Growth in Personal Income
0
1
2
3
4
5
6
7
8
FY99 FY00 FY01 FY02 FY03 FY04 FY05 FY06 FY07
North Carolina U. S.
26
Revenue
General Fund Forecast
About half of North Carolina’s total revenue originates
from tax collections and other sources comprising the
General Fund. The other half consists of funds from
the federal government, highway funds, the education
lottery, and other receipts and fees ( e. g., tuition).
General Fund revenues are primarily derived from
three major sources: individual income tax, corporate
income tax, and the sales and use tax. Other important
sources include franchise, insurance, alcohol, and other
miscellaneous taxes. In addition, nontax revenues, such
as earnings from investment of state funds, also sup-port
the General Fund.
Forecast reflects the state’s growing economy.
As the North Carolina economy has expanded, Gen-eral
Fund tax revenue growth has exceeded expecta-tions.
Through the first nine months of 2005- 06, total
General Fund revenues ( including nontax receipts and
transfers from the Highway Trust Fund) rose 9.7% to
$ 12,324.3 million, about $ 400 million above expecta-tions.
By the end of 2005- 06, it is currently projected
that General Fund revenue collections will total
$ 17,890.7 million.
Baseline General Fund revenue growth is expected to
be 3.2% in 2006- 07. Recognizing the strong economic
forecast, General Fund revenue for 2006- 07 is adjusted
upward by $ 273.4 million ( net of tax cuts). Table 6
details this revised estimate for 2006- 07, adjusted for
the recommended tax changes discussed below. It also
shows the projected General Fund revenue for 2005-
06 and the certified budgeted revenue for 2005- 07.
For each of the major categories of General Fund rev-enue,
the current performance and 2006- 07 baseline
forecast are discussed below, along with any recom-mended
tax changes.
Individual income taxes. Through the first three
quarters of 2005- 06, net individual income tax receipts
totaled $ 6,312.7 million, about $ 136 million above
the official estimate. Individual income tax receipts of
$ 9,390.4 million are expected for the fiscal year, an
increase of 11.7% over the previous fiscal year.
This growth is fueled by North Carolina’s strong
employment gains over the past year. In particular, the
professional and business services and the education
and health services sectors have driven this expansion.
In 2006- 07, the strong job market is expected to
continue to lead growth in individual income tax
collections. Baseline growth is expected to be 3.2% in
2006- 07.
Tax changes will also affect individual income tax col-lections.
The Governor recommends that the General
Assembly enact a state tax credit for adoption expenses,
effective January 1, 2006, based on the existing federal
tax credit. The state credit would equal 50% of the
federal adoption tax credit claimed in the tax year.
Families who adopt children would save an estimated
$ 3 million from the credit.
Adjusting for the tax change, growth in individual
income tax collections is expected to be $ 295.2 million
in 2006- 07.
Sales and use taxes. Sales and use tax collections
exceeded the official forecast by $ 143.5 million in the
first three quarters of 2005- 06. By the end of 2005- 06,
growth in total sales and use tax collections is expected
to be 10.8% above 2004- 05. For 2006- 07, baseline
growth in sales tax collections is expected to equal
4.1%.
The following changes are also expected to affect col-lections
from sales and use taxes.
Sales tax rate reduced by 0.25%. To provide relief to
taxpayers, the Governor recommends reducing the
state sales tax rate from 4.5% to 4.25%, effective
October 1, 2006. There is a commensurate reduction
of 0.25% in state taxes on telecommunications and
satellite television. This reduction is expected to save
taxpayers $ 196.5 million in 2006- 07.
27
Motor sports exemption. The Governor recommends
refunding $ 3.2 million in sales taxes to professional
motor sports racing teams for racing- vehicle parts and
equipment. This refund will help increase the state’s
leadership position in building its $ 5.9 billion motor
sports industry.
Sales tax reduction for research and development. To
support and encourage research and development, the
Governor recommends reducing the sales tax on equip-ment
used for research. This reduction is expected to
save taxpayers $ 4 million in 2006- 07.
Adjusting for these tax changes, collections of sales and
use taxes are expected to be $ 4,972.6 million in 2006-
07.
Corporate income taxes. Corporate income tax
receipts for 2005- 06 reflect the strong business climate
in North Carolina. Through the first quarter of 2006,
corporate income tax receipts were up 7.7%, exceeding
the official estimate by $ 132 million.
Recognizing the historical volatility and cyclical nature
of this revenue source, baseline corporate income tax
receipts are expected to decrease 6.2% in 2006- 07.
28
2005- 06 2005- 06 2006- 07 2006- 07
Certified Revised Certified Revised
Budgeted Estimate Budgeted Estimate *
Tax Revenue
Individual Income $ 8,839,760,000 $ 9,390,400,000 $ 9,399,150,000 $ 9,685,600,000
Corporate Income 905,940,000 1,137,600,000 910,870,000 1,067,200,000
Sales and Use 4,692,700,000 4,972,400,000 4,915,325,000 4,972,600,000
Franchise 493,800,000 480,100,000 520,450,000 506,750,000
Insurance 441,700,000 451,400,000 485,600,000 490,400,000
Tobacco Products 161,274,000 169,900,000 231,171,000 232,000,000
Beverage 195,950,000 196,900,000 202,550,000 203,000,000
Inheritance 137,900,000 138,600,000 139,300,000 139,300,000
Licenses 46,300,000 42,500,000 47,500,000 43,700,000
Mill Machinery 16,600,000 11,400,000 40,000,000 32,400,000
Piped Natural Gas 35,500,000 32,800,000 35,900,000 33,200,000
Gift 20,000,000 15,700,000 22,500,000 18,200,000
Freight Car Lines 540,000 200,000 540,000 200,000
Miscellaneous 560,000 300,000 560,000 300,000
Total Tax Revenue $ 15,988,524,000 $ 17,040,200,000 $ 16,951,416,000 $ 17,424,850,000
Nontax Revenue
Investment Income 74,800,000 114,200,000 78,700,000 108,700,000
Judicial Fees 161,725,771 155,700,000 168,605,271 162,600,000
Disproportionate Share Receipts 100,000,000 91,200,000 100,000,000 100,000,000
Insurance Department 49,889,013 52,400,000 51,543,813 53,000,000
Miscellaneous 188,801,932 182,200,000 202,719,921 178,307,275
Total Nontax Revenue $ 575,216,716 $ 595,700,000 $ 601,569,005 $ 602,607,275
Transfers
Highway Fund 2,200,000 2,200,000 - -
Highway Trust Fund 252,558,117 252,558,117 252,663,009 51,599,027
Total Transfers $ 254,758,117 $ 254,758,117 $ 252,663,009 $ 51,599,027
Total General Fund Revenue $ 16,818,498,833 $ 17,890,658,117 $ 17,805,648,014 $ 18,079,056,302
Table 6
General Fund Revenue
Detailed Revised Estimates for 2005- 06 and 2006- 07
Totals may differ from the sum of their parts due to rounding.
* Net of tax cut proposals
29
Figure 16
General Fund Revenue
Revised Estimates for 2006- 07
Individual Income
Tax 53%
Corporate Income
Tax 6%
Sales and Use
28%
Franchise 3%
Insurance 3%
Other Tax Revenue
4%
Highway Trust
Fund Transfer 0%
Nontax Revenue
3%
Percent
Change
2005- 06 2005- 06 2006- 07 2006- 07 2005- 06 to
Budget Revised Difference Budget Revised Difference 2006- 07
Individual Income Tax 8,840 9,390 551 9,399 9,686 286 3.1%
Corporate Income Tax 906 1,138 232 911 1,067 156 - 6.2%
Sales and Use 4,693 4,972 280 4,915 4,973 57 0.0%
Franchise 494 480 ( 14) 520 507 ( 14) 5.6%
Insurance 442 451 10 486 490 5 8.6%
Other Tax Revenue 615 608 ( 6) 720 702 ( 18) 15.5%
Nontax Revenue 575 596 20 602 603 1 1.2%
Highway Trust Fund Transfer 255 255 0 253 52 ( 201) - 79.7%
Total Revenues 16,818 17,891 1,072 17,806 18,079 273 1.1%
Unreserved Credit Balance 771
Total Availability 18,850
Table 7
General Fund Revenue
Revised Estimates for 2005- 06 and 2006- 07, ($ mil)
Totals may differ from the sum of their parts due to rounding.
30
The Highway Fund receives its support from three pri-mary
sources: ( 1) three- fourths of the motor fuel taxes
collected by the Department of Revenue, 2) licenses
and fees collected by the Division of Motor Vehicles,
and 3) interest earned from investments of the High-way
Fund cash balance held by the State Treasurer.
In 2005, the North Carolina General Assembly autho-rized
an increase in many of the licenses and fees col-lected
under the Highway Fund. Some of these licenses
and fees were last adjusted in 1981. The certified rev-enue
increase from the Highway Fund fee package was
$ 105.78 million for 2005- 06 and $ 144.64 million for
2006- 07. As of March 2006, revenue collections from
the fee package exceeded projections by $ 15.3 million.
As for motor fuel tax collections for the same period,
revenues were up 1.2% or $ 9.4 million over budget.
The increase in motor fuel tax collections resulted from
higher motor fuel prices at the pump.
For 2006- 07, total Highway Fund revenue is expected
to reach $ 1,767.1 million, an increase of 4.1% over
the amount certified for 2006- 07. Demand for fuel is
expected to remain strong in 2006- 07, despite high
fuel prices. Consequently, motor fuel tax collections
are expected to increase 5.9%. Licenses and fees are
expected to show a slight decline of 2.5% in total
collections for 2006- 07. The increase in the rate of
growth in the motor fuels tax for 2006- 07 is the result
of the rising wholesale price of motor fuels and increas-ing
the variable component of the motor fuels tax rate
in 2005- 06. For the period, investment income will
be flat at $ 8.0 million. The decline in licenses and fees
is a result of slower than expected revenue collections
in staggered registration.
The transfer of $ 17.6 million from the General Fund
to the Highway Fund is to hold the Highway Fund
harmless from a freeze in the variable component of
the excise tax on motor fuels at the January 2006 base
rate.
Revenue
Highway Fund
Total excludes transfers to or from the General Fund
Figure 17
Highway Fund Revenue Collections
2006- 07
Other Licenses and
Fees 2.7%
Investment Income
0.5%
Truck Licenses
6.6%
Motor Fuel 67.1%
Gasoline
Inspection and
Highway Usage
Registration 0.9%
Staggered
Registration 12.2%
International
Registration Plan
( IRP) 3.8%
Driver Licenses
6.3%
31
2005- 06 2006- 07 2006- 07 2006- 07
Source Certified Certified Adjustments Revised
Motor Fuels Tax
Motor Fuels $ 1,087,640,000 $ 1,107,180,000 66,147,275 $ 1,173,327,275
Gasoline Inspection 15,000,000 15,450,000 ( 150,000) 15,300,000
Highway Use Reg. 160,000 160,000 - 160,000
Total Motor Fuel Taxes 1,102,800,000 1,122,790,000 65,997,275 1,188,787,275
Percent Change 13.10% 1.81% 5.9%
Licenses and Fees
Staggered Registration 214,098,050 236,607,067 ( 23,667,067) 212,940,000
International Registration Plan 62,256,816 67,809,104 ( 1,579,104) 66,230,000
Driver Licenses 107,762,811 119,416,209 ( 8,376,209) 111,040,000
Truck Licenses 87,487,148 95,555,438 19,184,562 114,740,000
Other Licenses and Fees 45,115,175 47,762,182 ( 22,182) 47,740,000
Total License and Fees 516,720,000 567,150,000 ( 14,460,000) 552,690,000
Percent Change 21.04% 9.76% - 2.5%
Investment Income 8,000,000 8,000,000 - 8,000,000
Percent Change - 16.35% 0.00% 0.0%
Total Highway Fund Revenue 1,627,520,000 1,697,940,000 51,537,275 1 ,749,477,275
Transfer from General Fund * 17,662,725 17,662,725
Total Highway Fund Availability $ 1,627,520,000 $ 1,697,940,000 $ 69,200,000 $ 1,767,140,000
Percent Change 15.30% 4.33% 4.1%
* Transfer from General Fund to hold Highway Fund harmless from capping variable component of Motor Fuels Tax at the January 1,
2006 rate for 2006- 07.
Table 8
Highway Fund
Recommended Budget Adjustments, 2006- 07
Revenue Availability
32
Established in 1989, the Highway Trust Fund receives
support from four primary sources: 1) one- fourth of
motor fuel tax collections, 2) highway use tax collec-tions
from the sales of motor vehicles in excess of the
amount transferred to the General Fund, 3) title fees
and various registration fee collections, and 4) interest
earned from investment of the Highway Trust Fund
cash balance held by the State Treasurer.
In 2005, the North Carolina General Assembly autho-rized
an increase in the fees collected under the High-way
Trust Fund. The fees were last adjusted in 1989.
The certified revenue increase from the Highway Trust
Fund fee package was $ 13.37 million for 2005- 06
and $ 18.27 million for 2006- 07. As of March 2006,
revenue collections from the fee package were down
$ 34.7 million over projected collections. For the same
period, motor fuel tax collections were up $ 2.8 million
or 1.1% of budget. The greatest decline in Highway
Trust Fund revenues occurred in the highway use tax,
where revenues were down $ 28.3 million or 6.2% of
budget. The decline in highway use tax collections
resulted from slow vehicle sales.
Highway Trust Fund revenue is expected to total
$ 1,100.6 million in 2006- 07 or 3.1% less than the
amount certified for 2006- 07. In spite of higher fuel
prices at the pump, the motor fuels tax collections
are expected to increase by 6.2% due to continued
fuel consumption. As a result of declining auto sales,
highway use tax collections are expected to decline
8% from the previously certified amount for 2006- 07.
Revenues from title fees are expected to show little
change. Interest on investments is expected to show a
significant decline as a result of decreases in cash bal-ances.
The transfer of $ 5.8 million from the General Fund
to the Highway Trust Fund is to hold the trust fund
harmless from a freeze in the variable component of
the excise tax on motor fuels at the January 2006 base
rate.
After a reduction of $ 195.2 million in transfers to the
General Fund, the available balance in the Highway
Trust Fund is expected to be $ 1,043.1 million.
Revenue
Highway Trust Fund
Total excludes transfers to or from the General Fund
Figure 18
Highway Trust Fund Revenue Collections
2006- 07
Interest on
Investments 0.2%
Miscellaneous Title
Fees 1.6%
Certificate of Title
Fees 8.5%
Highway Use
53.9%
Motor Fuels Tax
35.7%
33
2005- 06 2006- 07 2006- 07 2006- 07
Source Certified Certified Adjustments Revised
Motor Fuels Tax $ 362,590,000 $ 369,170,000 $ 21,942,425 $ 391,112,425
Highway Use 611,090,000 639,810,000 -$ 49,410,000 590,400,000
Certificate of Title Fees 95,801,827 101,193,164 -$ 7,613,164 93,580,000
Miscellaneous Title Fees 17,248,173 19,266,836 -$ 2,116,836 17,150,000
Subtotal 1,086,730,000 1,129,440,000 - 37,197,575 1,092,242,425
Percent Change 8.95% 3.93% - 3.3%
Interest on Investments 6,500,000 6,500,000 - 4,000,000 2,500,000
Percent Change 0.22% 0.00% - 61.5%
Total Highway Trust Fund Revenue 1 ,093,230,000 1 ,135,940,000 - 41,197,575 1,094,742,425
Transfer from General Fund1 - - 5,887,575 5,887,575
Total Highway Fund Availability 1,093,230,000 1,135,940,000 - 35,310,000 1,100,630,000
Percent Change 8.90% 3.91% - 3.1%
Transfer to General Fund2 252,558,117 252,663,009 - 195,176,407 57,486,602
Balance Available $ 840,671,883 $ 883,276,991 $ 1,043,143,398
2 Transfer required by G. S. 105- 187.9 ( Includes reduction of $ 115 million to allow for repayment of outstanding loan balance from 2002- 03).
Revenue Availability
Table 9
Highway Trust Fund
1 Transfer from General Fund to hold Highway Trust Fund harmless from capping variable component of Motor Fuels Tax at the January 1, 2006 rate for
2006- 07.
Recommended Budget Adjustments, 2006- 07
34
Recommended
Appropriations
General Fund
Education
General Government
Health and Human Services
Justice and Public Safety
Natural and Economic Resources
35
36
Public Education ( 13510)
Total Appropriations and Positions
2006- 07
Certified
2006- 07
Recommended
Percentage
Change
Requirements $ 7,652,962,737 $ 7,909,034,556 3.3 %
Receipts 1,073,155,640 1,201,652,474 12.0 %
Appropriation $ 6,579,807,097 $ 6,707,382,082 1.9 %
Positions 507.200 519.200 2.4 %
Appropriation Items -- Recommended Adjustments
Technical Adjustments
2006- 07
1. Average Daily Membership
Positions, textbooks, instructional equipment, and supplies allocated to the public schools are
budgeted on the basis of average daily membership ( ADM) of students in the classroom. The
revised ADM estimate for 2006- 07 is an increase of 18,363 over the 1,417,112 ADM in the
continuation budget, and a 38,103 increase over 2005- 06. This recommended appropriation
supports the ADM increase and includes a 2,000 ADM reserve due to military base closings.
Receipts from the Highway Fund for the Driver Education program are adjusted by $ 457,971
due to a projected increase in ADM in the ninth grade.
Requirements $ 76,757,787
Receipts $ 457,971
Appropriation $ 76,299,816
2. Average Annual Salary Adjustment
An adjustment is recommended to revise budgeted average annual salaries using actual 2005-
06 sixth pay period salaries as the base. This adjustment is made annually after reviewing
budgeted salary projections for all certified personnel. Typically, because of turnover in these
positions, the actual salaries are lower than budgeted salaries and a reduction is made
accordingly. This recommended adjustment does not reduce teacher salaries.
Appropriation ($ 56,180,428)
Recommended Budget Adjustments, 2006- 07 General Fund
Public Education
37
3. Reprogram Class Size Appropriation
It is recommended that $ 127.9 million of the 2006- 07 budget for class size be
reprogrammed to lottery proceeds, consistent with legislation establishing and directing the
use of proceeds from the NC Education Lottery. The General Fund money that has been
fronted for this purpose is redirected to pay for increased public school teacher salaries.
Requirements -
Receipts $ 127,864,291
Appropriation ($ 127,864,291)
Total Recommended Technical Adjustments
Recurring
Requirements $ 20,577,359
Receipts 128,322,262
Appropriation ($ 107,744,903)
Number of Positions -
Nonrecurring
Requirements -
Receipts -
Appropriation -
Number of Positions -
Expansion
2006- 07
Quality Teachers, Quality Pay
1. Teacher and Administrator Compensation
Funds are recommended in the Compensation Reserve for employees paid on the teacher
salary schedule or the principal and assistant principal salary schedule in schools operated
by local boards of education, the Department of Health and Human Services, the
Department of Correction, the Department of Juvenile Justice, and the North Carolina
School of Science and Mathematics. These funds will provide for movement on the salary
schedule based on years of experience, and will increase the salary schedule base by $ 2,250.
Teachers will receive an average increase of 8% and administrators 7% in 2006- 07.
Employees at the top of their respective salary schedules and who therefore do not receive a
step increase shall be paid a one- time bonus. The funds for this are shown in the Reserves
Section of this document.
Recommended Budget Adjustments, 2006- 07 General Fund
Public Education
38
2. School- Based Incentive Awards Under the ABCs Program
The ABCs initiative directs that each year a school must assure that students receive a year's worth
of education for a year of instruction. Nonrecurring funds in the amount of $ 90 million are
recommended for awards earned in the 2005- 06 school year and awarded in fall 2006. This
recommended appropriation will maintain the current incentive levels based on the
implementation of the new growth model.
Appropriation - Nonrecurring $ 90,000,000
Recruiting and Retaining Quality Teachers
1. Online Professional Development Resource Center
The Online Professional Development Resource Center is a web portal that catalogues
professional development opportunities available to teachers and administrators. The portal
includes searchable databases of professional development providers and criteria for determining
quality of professional development offerings. A $ 100,000 nonrecurring appropriation is
recommended for placement in a reserve in the NC Professional Teaching Standards Commission
budget. Funding for the IT project will be released upon approval of the State Budget Director and
the Chief Information Officer. The Professional Teaching Standards Commission will report to the
State Board of Education no later than March 15, 2007.
Appropriation - Nonrecurring $ 100,000
Investing More Resources and Demanding More Accountability
1. Full Support for Low Wealth Supplemental Funding
The Low Wealth Funding Formula provides supplemental funds based on a county's ability to
generate revenue to enhance the instructional program and student achievement throughout the
state. This appropriation increases the funding to local education authorities ( LEAs) with below
state- average ability to raise local revenue for public schools. The use of the funds distributed
through this formula is restricted to those items described in 2005 Session Law, Chapter 276,
Section 7.6 ( b). Local boards of education are required to report annually to the State Board of
Education on funds used for this purpose. This recommended appropriation fully funds the Low
Wealth Formula.
Appropriation $ 41,893,391
2. Disadvantaged Student Supplemental Funding ( DSSF)
The Governor recommends an appropriation increase of $ 26,697,440. This appropriation increases
the current budget of $ 22,500,000 allotted in fiscal year 2005- 06 to the sixteen pilot LEAs and
supports the distribution of funds to all 115 LEAs. Funds appropriated for Disadvantaged Student
Supplemental Funding ( DSSF) shall be allotted based upon a teacher to student ratio for the
eligible DSSF population using the following formula: ( 1) LEAs in counties with wealth greater
than ninety percent (> 90%) per the low wealth supplemental formula shall receive one teaching
position per 20.5 DSSF population, ( 2) LEAs in counties with wealth between eighty and ninety
percent (> 80% and < 90%) shall receive one teaching position per 20 DSSF population, ( 3) LEAs in
counties with less wealth than eighty percent (< 80%) per the low wealth supplemental formula
shall receive one teaching position per 19.5 DSSF population, and ( 4) LEAs receiving DSSF funds in
2005- 2006 shall receive one teaching position per 16 DSSF population based on county wealth.
LEAs receiving DSSF funds in 2005- 2006 shall receive no less than the DSSF amount allotted in
2005- 2006. LEAs are encouraged to reduce class size and/ or hire additional instructional support
personnel, such as counselors, social workers, and nurses.
Appropriation $ 26,697,440
Recommended Budget Adjustments, 2006- 07 General Fund
Public Education
39
3. Evaluate Effectiveness of DSSF and Low Wealth Initiatives
A key component of the Disadvantaged Student Supplemental Funding initiative is that local
boards of education that are eligible for this fund are to submit plans to improve student
performance by following specific strategies prescribed by the State Board of Education. To
determine the effectiveness of these strategies, a third- party evaluation independently reviews
the strategies being used to determine which ones lead to improved student performance. These
funds also make it possible to evaluate other reform initiatives, including the high school reform
programs and the impact of fully funding the Low Wealth Formula. The department received a
nonrecurring appropriation of $ 150,000 in 2005- 06. This recommended appropriation provides
recurring funds to evaluate the extent to which LEAs use DSSF and Low Wealth supplemental
allotments to improve outcomes for students at risk for school failure and the extent to which the
Department of Public Instruction supports the LEAs in using DSSF and other supplemental
allotments efficiently and effectively.
Appropriation $ 750,000
4. 21st Century Literacy Coaches
This recommended appropriation would support hiring 100 school- based literacy coaches to be
placed in 100 middle schools ( or other public schools with an eighth grade) starting with the 2006-
07 school year. Coaches will provide research- based teaching practices and job- embedded
professional development to assist teachers in the development of curricula that enable students
to develop mastery of 21st century skills. Funds for training the coaches are in the University of
North Carolina budget.
Appropriation $ 4,767,400
5. Director of High School Turnaround
The Department of Public Instruction is currently contracting with an individual to coordinate
assistance activities in school districts. Funding is recommended to continue this initiative. The
responsibilities of the director will be to plan, organize and implement activities that focus on
improving the performance of designated high schools in medium and small districts that have
performance composites below 60%. The current contract salary is based on an annualized salary
of $ 94,000 plus benefits of $ 17,350, totaling $ 111,350. The recommended expansion amount
supports the current costs plus $ 11,000 for operating expenses such as supplies and travel.
Appropriation $ 122,350
Number of Positions 1.000
21st Century Schools
1. Learn and Earn High School Initiative
A key element of the Governor's 21st Century High School Program is the Learn and Earn initiative,
created in 2004 to better prepare students for college and the workforce. The Governor
recommends an increase in appropriation to expand the Learn and Earn program from 13 to 34
high schools in 2006- 07. The funds will support program staff in each school and operating
expenses to support students in preparing for the workforce and college. The recommended
nonrecurring appropriation provides funds in the amount of $ 210,000 for start- up costs, $ 800,000
to support 20 planning grants for schools that will become operational in academic year 2007- 08,
and $ 523,360 to support the cost of four months principal's salary for each Learn and Earn
planning site prior to becoming operational in the 2007- 08 academic year.
Appropriation $ 8,232,388
Appropriation - Nonrecurring $ 1,533,360
Recommended Budget Adjustments, 2006- 07 General Fund
Public Education
40
2. New Schools Project High Schools
As part of the Governor's 21st Century High School Program, this program was funded to create
small specialty schools- within- schools at eight existing high schools. This recommended
appropriation will fund one additional principal, guidance counselor, and two clerical staff at 11
new sites, resulting in 21 new redesigned high schools in 2006- 07, bringing the total to 32. A
nonrecurring appropriation is recommended to support 10 planning grants in schools where the
instruction is specifically redesigned around the following curricula: science, technology,
engineering, and/ or math ( STEM). Nonrecurring funds recommended also include $ 261,680 to
support four months principal's salary for each planning site prior to becoming operational in the
2007- 08 academic year. Any implementation grants for STEM schools shall come from non- state
sources, such as private and other public sources.
Appropriation $ 3,805,970
Appropriation - Nonrecurring $ 661,680
State Board of Education Initiatives
1. State Board of Education Operating Support
The Governor recommends that the current operating budget for the State Board of Education be
increased by $ 50,000 on a recurring basis.
Appropriation $ 50,000
2. Virtual High School
This recommended appropriation provides funds to the State Board of Education to support 2006-
07 implementation of North Carolina Virtual Public Schools ( NCVPS) initiatives identified during the
pilot phase conducted in 2005- 06. This amount includes the cost of seven full- time positions for
administration and support functions; course reviews, acquisition, and/ or development; the cost of
22 positions for three months for instructional staff in preparation for 2007- 08 academic year; and
marketing and operational costs including rent, office supplies and furniture.
Appropriation $ 2,588,722
Appropriation - Nonrecurring $ 189,132
Number of Positions 7.000
3. School Connectivity
The Governor recommends an appropriation to support the NC Education Network and expand the
number of the state's K- 12 public schools to use technology as an instructional tool to prepare
students for the demands of the 21st century workforce.
Appropriation - Nonrecurring $ 4,000,000
4. Increase Noncertified Employee Pay
This recommended appropriation of $ 8,582,073 supports a salary increase for noncertified
personnel who are currently paid less than the minimum monthly or hourly state employee wage.
These personnel include bus drivers, custodians, and teacher assistants. These funds are shown in
the Compensation Reserve.
Recommended Budget Adjustments, 2006- 07 General Fund
Public Education
41
Agency Administrative Improvements
1. Civil Penalty and Forfeiture Fund
Session Law 2005- 276 directed a reduction of $ 120.5 million in appropriation in 2005- 06 and
$ 125.5 million in 2006- 07, to be replaced with receipts from fines and forfeitures. Actual
collections did not reach the projected amounts in fiscal year 2005- 06 leaving the department
with a shortfall. The recommended recurring appropriation is necessary to correct for actual
collection experience.
Appropriation $ 30,000,000
2. Reserve for Utility and Fuel Costs
Due to the increase in diesel fuel costs, the State Public School Fund
experienced a shortfall in the 2005- 06 fuel budget. A nonrecurring
appropriation is recommended to support actual diesel fuel cost
projections for fiscal year 2006- 07.
Appropriation - Nonrecurring $ 16,361,485
3. Legacy System Migration and Upgrade
This recommended nonrecurring appropriation brings the Department of
Public Instruction's information technology applications into compliance
with statewide architecture requirements. Funds will be placed in a
reserve in the Department of Public Instruction. These nonrecurring funds
may be carried forward into 2007- 08. Funds not expended for this project
will revert to the General Fund June 30, 2008.
Appropriation - Nonrecurring $ 2,000,000
4. Network Tool Replacement
The Department of Public Instruction currently relies on a network tool
that will no longer be supported by Information Technology Services ( ITS)
effective June 2007. This recommended nonrecurring appropriation will
support the cost of migrating to the tool that will be supported by ITS. The
migration needs to occur in 2006- 07 to meet the June 2007 deadline.
Appropriation - Nonrecurring $ 375,850
5. Information Technology Security Analyst
A recurring appropriation of $ 40,000 is recommended to support a half-time
IT security analyst position. The position will assist in the
development of a security program and the execution of the department's
security charter to ensure compliance with federal regulations and state
statute. The recommended appropriation includes salary and benefits in
the amount of $ 38,467, plus operating costs.
Appropriation $ 40,000
Number of Positions .500
Recommended Budget Adjustments, 2006- 07 General Fund
Public Education
42
6. Business Continuity Planning Analyst
This recommended recurring appropriation supports a half- time business continuity planning
analyst position. Currently the department does not have any FTE dedicated to continuity
planning for the agency. The department has not fully addressed the business continuity
planning function within the organization and requires additional staff to perform functions
that will improve the agency's score on the security assessment.
Appropriation $ 42,500
Number of Positions .500
7. Purchasing Agent II
A purchasing agent II position is recommended for the Department of Public Instruction to
meet workload demands to ensure that all contracts requiring bids are processed accurately.
The position grade is a 69 and position cost including benefits is $ 58,220.
Appropriation $ 58,220
Number of Positions 1.000
8. Facility Electrical Engineer III
A facility electrical engineer III position is recommended for the school planning section. This
position requires advanced electrical engineering work in the review of designs, installation
method, ease and economy of maintenance and repair of electrical systems. This review is
required by G. S 115C- 521 for all school construction regardless of the scope of work. This
position also functions as the electrical engineering advisor to the staff of local school systems.
The position is a grade 80 with a salary of $ 82,179. Total cost of the position is $ 101,925
including benefits and $ 4,000 of operating support. It is recommended that this position be
funded from Public School Building Capital Fund receipts.
Requirements $ 101,925
Receipts $ 101,925
Appropriation -
Number of Positions 1.000
9. Business Technology Applications Analyst
This recommended position would serve exclusively on the Exceptional Children's ( EC) project
team, which consists of five business units with 82 information technology systems. Critical
functions performed by this position include collecting business requirements, conducting
business process analysis, writing functional specifications. The EC delivery team is responsible
for seven software systems in addition to the large, statewide technology system for
exceptional children ( CECAS). Project risk is high without exclusively dedicated staff trained in
Exceptional Children Division business specifications. The total cost of the position is $ 72,647
including benefits. This position would be supported with federal receipts.
Requirements $ 72,647
Receipts $ 72,647
Appropriation -
Number of Positions 1.000
Recommended Budget Adjustments, 2006- 07 General Fund
Public Education
43
Expansion Pass- Through Funds
1. Communities in Schools
This recommended recurring appropriation expands the current 2006- 07 certified budget of
$ 607,500 by $ 750,000. The program connects at- risk students and their families with resources
to assist in school success and dropout prevention. Services include tutoring and mentoring.
Appropriation $ 750,000
2. NC Network
NC Network provides training for school- based management teams to improve the capacity of
local administrative units. LEAs may contract with this agency using allotments that can be
expended for professional development. The current budget is $ 312,625. This recommended
recurring appropriation will expand the current budget by $ 100,000.
Appropriation $ 100,000
3. Teach for America
The Governor recommends a recurring appropriation of $ 200,000 for the Teach for America
( TFA) program. These funds will support TFA's efforts to recruit teachers to North Carolina.
Teach For America is the national corps of outstanding recent college graduates of all
academic majors who commit two years to teach in urban and rural public schools and
become lifelong leaders in ensuring educational equity and excellence for all children.
Currently over 200 TFA corp members are teaching in North Carolina.
Appropriation $ 200,000
Total Recommended Expansion
Recurring
Requirements $ 120,272,953
Receipts 174,572
Appropriation $ 120,098,381
Number of Positions 12.000
Nonrecurring
Requirements $ 115,221,507
Receipts -
Appropriation $ 115,221,507
Number of Positions -
Recommended Budget Adjustments, 2006- 07 General Fund
Public Education
44
Total Recommended Adjustments for
Public Education
2006- 07
Recurring
Requirements $ 140,850,312
Receipts 128,496,834
Appropriation $ 12,353,478
Number of Positions 12.000
Nonrecurring
Requirements $ 115,221,507
Receipts -
Appropriation $ 115,221,507
Number of Positions -
Recommended Budget Adjustments, 2006- 07 General Fund
Public Education
45
The University of North Carolina ( 160xx)
Total Appropriations and Positions
2006- 07
Certified
2006- 07
Recommended
Percentage
Change
Requirements $ 3,044,371,616 $ 3,181,338,196 4.5 %
Receipts 923,974,535 937,555,205 1.5 %
Appropriation $ 2,120,397,081 $ 2,243,782,991 5.8 %
Positions 32,055.420 31,963.620 ( 0.3)%
Appropriation Items -- Recommended Adjustments
Technical Adjustments
2006- 07
1. Restore NC A& T's Library Book Inflation Increase
The universities received library book inflation increases for both years of the 2005- 07
biennium. NC A& T's library book increase for 2006- 07 was accidentally removed from the
continuation budget. It is recommended that NC A& T's library book inflation increase be
restored.
Appropriation $ 145,491
2. Restore NC A& T's Utility Inflation Increase
The universities received utility inflation increases for both years of the 2005- 07 biennium. NC
A& T's increase for 2006- 07 was accidentally removed from the continuation budget. It is
recommended that NC A& T's utility inflation increase be restored.
Appropriation $ 17,786
3. Correct NCSSM's Textbook Increase
The North Carolina School of Science and Math ( NCSSM) received funds in the continuation
budget for textbooks for 2006- 07. However, after the continuation budget was finalized,
NCSSM reported they had requested an insufficient amount. It is recommended that NCSSM's
2006- 07 textbook budget be increased.
Appropriation $ 52,250
Recommended Budget Adjustments, 2006- 07 General Fund
The University of North Carolina
46
4. Building Reserves
As a result of adjustments to schedules in constructing or renovating facilities at
constituent institutions of the University system, changes are recommended for funds that
had been appropriated for 2006- 07 for building reserves. Some campuses have buildings
for which scheduled completion is later than the original date for which building reserves
were approved. The budgets for the monthly operating costs are being
reduced or increased according to the updated anticipated activation. A second
adjustment is for replacing one- time appropriations lost during the 2005 session when
some building reserves were moved from 2005- 06 to 2006- 07. These one- time costs include
initial police officer supplies, equipment, moving costs and initial cleaning supplies.
Appropriation - Nonrecurring ($ 9,634,513)
Number of Positions ( 91.800)
Total Recommended Technical Adjustments
Recurring
Requirements $ 215,527
Receipts -
Appropriation $ 215,527
Number of Positions ( 91.800)
Nonrecurring
Requirements ($ 9,634,513)
Receipts -
Appropriation ($ 9,634,513)
Number of Positions -
Expansion
2006- 07
Increasing Quality Teachers Across the State
1. UNC and NC Community College System 2+ 2 Joint E- Learning Initiative
UNC and the NC Community College System are already working closely to develop 2+ 2
programs online. The Governor recommends recurring funding be provided to continue
this 2+ 2 joint online initiative that began in 2005- 06 with nonrecurring funds. This funding
will be used to continue to build online capacity, teacher education courses, and
accessibility for students in 2+ 2 teacher education programs.
Appropriation $ 1,000,000
Recommended Budget Adjustments, 2006- 07 General Fund
The University of North Carolina
47
2. UNC- Chapel Hill DESTINY Traveling Science Lab
It is recommended that funds be provided for the DESTINY mobile science lab at UNC- Chapel Hill.
These funds will support an additional mobile laboratory as well as the personnel and other costs
associated with the program. Besides providing additional laboratory space, DESTINY will expand
its subject area focus beyond high school biology, to extend collaborative partnerships with
schools, local school administrative units, and other external organizations, and enhance its ability
to provide teachers with science curricula and professional development.
Appropriation $ 1,650,000
Appropriation - Nonrecurring $ 350,000
3. PEP Initiative to Improve the Management and Leadership Skills of Principals in High Need Schools
The Governor recommends that recurring funding be provided to the Principals' Executive Program
( PEP) to provide focused support to eligible high schools based on criteria set by the State Board of
Education. PEP shall provide a customized professional development program and a
coaching/ mentor component that provides assistance at the school level. Important components of
this overall initiative are teacher recruitment and retention, as reported through the Teacher
Working Conditions Survey, and data driven decision making.
Appropriation $ 250,000
4. North Carolina Teacher Academy Training of 21st Century Literacy Coaches
Funds are recommended for the North Carolina Teacher Academy ( NCTA) to train 21st Century
Literacy coaches, as chosen by the State Board of Education, who will each be assigned to a middle
school ( or school containing an eighth grade) to provide professional development in 21st Century
Literacy skills. NCTA will use appropriated funds to design, develop, and implement face- to- face
training for these coaches. Additional online training modules will also be developed. Training will
begin in the summer of 2006.
Appropriation $ 1,675,000
Appropriation - Nonrecurring $ 225,000
5. Prospective Teacher Scholarship Loan
The Governor recommends recurring funds to provide an additional 400 Prospective Teacher
Scholarship Loans ( PTSL). The PTSL program currently awards $ 2,500 annually to undergraduates
working on teaching certification. Each year, over 900 qualified student applicants are unable to
receive funding. Priority for the additional awards shall be given to students seeking teacher
licensure in middle and high school mathematics and science and students participating in 2+ 2
teacher education programs.
Appropriation $ 1,000,000
Increasing Access to Higher Education
1. Enrollment
1. Enrollment Growth for UNC Campuses
The 2005- 06 budget funded 172,245 full time equivalent ( FTE) students, an increase of 6,736 FTE,
which represented an increase of 4.07% over the 2004- 05 levels. UNC campuses are projected to
experience additional enrollment of 7,110 FTE or 4.13% for 2006- 07 bringing the total FTE to
179,355. Full funding for enrollment growth is recommended by the Governor to support the
student growth at UNC institutions. 92,573,799
Recommended Budget Adjustments, 2006- 07 General Fund
The University of North Carolina
48
2. NC School of Science and Mathematics Enrollment Growth
The Governor recommends $ 240,000 in enrollment growth for 12 new students at the NC
School of Science and Mathematics. Funds will provide staff positions and student- related
costs for food, medical coverage, textbooks, and furniture. 240,000
Requirements $ 92,813,799
1. Enrollment Growth for UNC Campuses 13,580,670
Receipts $ 13,580,670
Appropriation $ 79,233,129
2. Need- Based Financial Aid
Full funding of the UNC System's need- based financial aid request is recommended to address
the system- wide enrollment growth as well as to hold needy students harmless from any
tuition and fee increases approved for 2006- 07. The program currently serves 30,000 needy
resident undergraduates and was fully funded at $ 67,248,016 from Escheats Fund receipts in
2005- 06.
Appropriation $ 21,587,990
Nursing and Health Care Programs
1. Temporary Space for the Pharmacy Program at Elizabeth City State University
A nonrecurring appropriation is recommended until additional budgetary data are made
available to the Office of State Budget and Management's Capital Section in order to manage
accurately the project's budget in accordance with S. L. 2004- 179, Section 1.1.
Appropriation - Nonrecurring $ 43,000
2. Nurse Scholars Program
Recurring funds are recommended to expand the maximum scholarship loan award from
$ 5,000 to $ 6,500 per year, as well as to increase the number of scholarships available from 450
to 750.
Appropriation $ 2,750,000
3. Graduate Nurse Scholarship Program for Faculty Production
The Governor recommends recurring funding to create a graduate nurse scholarship loan
program to provide $ 15,000 for up to two years for master's candidates in nursing education,
or three years for doctoral candidates. Within 7 years of graduation, each recipient is required
to teach in a public nursing education program in North Carolina for 12 months for each year
they receive a scholarship loan or they must repay the loan.
Appropriation $ 1,200,000
Recommended Budget Adjustments, 2006- 07 General Fund
The University of North Carolina
49
4. New Bachelor of Science in Nursing Programs
It is recommended that Fayetteville State University ( FSU) and the University of North Carolina at
Pembroke ( UNCP) receive funds to support two new Bachelor of Science in Nursing programs, and
that Appalachian State University ( ASU) receive funds to support its new RN to
BSN program. The new programs can be established more rapidly if initial funding is made
available for faculty hiring, equipment and other necessities. FSU and UNCP will each receive
$ 300,000 and ASU will receive $ 250,000.
Appropriation $ 301,368
Appropriation - Nonrecurring $ 548,632
Other UNC Initiatives
1. Judicial College at UNC- Chapel Hill
It is recommended that recurring funding be provided to expand the Judicial College program at
UNC- Chapel Hill to provide ongoing training to judicial officials throughout the State.
Appropriation $ 750,000
2. Information Technology
A recurring appropriation for campus level information technology is recommended. Campuses are
encouraged to use these funds for Banner implementation and disaster related costs, where
applicable. Banner is a replacement of the legacy system; it has modules for finance, human
resources, financial aid, student services, and advancement.
Appropriation $ 2,400,000
3. NC A& T State University Matching Funds
The Governor recommends that NC A& T receive $ 1,300,000 in mandated matching funds. The
campus match of federal funds was increased from 90% to 100% for agricultural research and
extension programs as mandated by the Agricultural Research, Extension, and Education Reform
Act of 1998. The funds are appropriated to the School of Agriculture and Environmental Science.
Appropriation $ 1,300,000
4. Biomanufacturing Research Institute and Technology Enterprise ( BRITE) at NCCU
In 2005- 06, the General Assembly appropriated $ 2 million in recurring funds to the
Biomanufacturing Research Institute and Technology Enterprise ( BRITE) at NCCU. Funding was to be
used for scientific equipment and supplies and hiring administrative and research personnel. It is
recommended that BRITE be appropriated $ 2.5 million in recurring funds for operating support,
curriculum development and equipment. BRITE's current budget is $ 2.5 million.
Appropriation $ 2,500,000
5. Biomanufacturing Training and Education Center ( BTEC) at NCSU
In 2005- 06, the General Assembly appropriated $ 2.94 million in recurring funds to the
Biomanufacturing Training and Education Center ( BTEC) at NC State University. Funding was to be
used for scientific equipment and supplies and hiring administrative and research personnel. It is
recommended that BTEC be appropriated $ 2 million in recurring funds for operating support,
curriculum development and equipment. BTEC's current budget is $ 3.44 million.
Appropriation $ 2,000,000
Recommended Budget Adjustments, 2006- 07 General Fund
The University of North Carolina
50
6. Economic Development Partnership Initiative at NCSU
The Governor recommends that NCSU be appropriated $ 300,000 to support the New Business
Creation Initiative ( NBCI) to advance business opportunities of university intellectual property.
Appropriation $ 300,000
7. North Carolina in the World Project
In 2005- 06, the legislature appropriated a nonrecurring $ 200,000 grant to The Center for
International Understanding for the project '' North Carolina in the World: A Plan to Increase
Student Knowledge and Skills about the World.'' It is recommended that $ 200,000 be provided in
recurring funds to The Center for International Understanding to continue the project. The
Center's current budget is $ 492,668.
Appropriation $ 200,000
8. Salary Increases for Faculty and Staff
The Governor recommends funding in the compensation reserve for salary increases for
employees of the University of North Carolina and the North Carolina School of Science and
Mathematics ( including those supported by state funds and who are either exempt from the State
Personnel Act ( EPA) or subject to the act ( SPA)) effective July 1, 2006. For all EPA teaching and
nonteaching faculty, funds are recommended for an increase of 4% in 2006- 07 according to rules
adopted by the UNC Board of Governors. For all SPA employees, funds are recommended to
provide a 4% increase in 2006- 07. North Carolina School of Science and Mathematics teachers will
receive an increase equivalent to other public school teachers.
9. Reserve for Utility and Fuel Costs
It is recommended that $ 11,540,777 in funding be appropriated into a Utilities Reserve to
compensate for shortfalls in university utility budgets caused by higher utility rates. The shortfalls
occurred in the electrical, natural gas, fuel oil, gasoline and diesel utilities.
Appropriation - Nonrecurring $ 11,540,777
Total Recommended Expansion
Recurring
Requirements $ 133,678,157
Receipts 13,580,670
Appropriation $ 120,097,487
Number of Positions -
Nonrecurring
Requirements $ 12,707,409
Receipts -
Appropriation $ 12,707,409
Number of Positions -
Recommended Budget Adjustments, 2006- 07 General Fund
The University of North Carolina
51
Total Recommended Adjustments for
The University of North Carolina
2006- 07
Recurring
Requirements $ 133,893,684
Receipts 13,580,670
Appropriation $ 120,313,014
Number of Positions ( 91.800)
Nonrecurring
Requirements $ 3,072,896
Receipts -
Appropriation $ 3,072,896
Number of Positions -
Recommended Budget Adjustments, 2006- 07 General Fund
The University of North Carolina
52
Community Colleges ( 16800)
Total Appropriations and Positions
2006- 07
Certified
2006- 07
Recommended
Percentage
Change
Requirements $ 991,953,715 $ 1,025,531,719 3.4 %
Receipts 224,657,829 218,397,070 ( 2.8)%
Appropriation $ 767,295,886 $ 807,134,649 5.2 %
Positions 192.000 197.000 2.6 %
Appropriation Items -- Recommended Adjustments
Technical Adjustments
2006- 07
1. State Aid - Hospitalization Insurance
It is recommended that the hospitalization insurance for community college faculty and
staff be fully funded at the 2006- 07 rate. The NC Community College System's 2006- 07
request was inadvertently made at the 2005- 06 rate.
Appropriation $ 1,398,201
Total Recommended Technical Adjustments
Recurring
Requirements $ 1,398,201
Receipts -
Appropriation $ 1,398,201
Number of Positions -
Nonrecurring
Requirements -
Receipts -
Appropriation -
Number of Positions -
Recommended Budget Adjustments, 2006- 07 General Fund
Community Colleges
53
Expansion
2006- 07
Increasing Access to Higher Education
1. Enrollment Growth
The Governor recommends full funding for enrollment growth. The spring semester 2005-
06 census from the Community College System Office shows a total enrollment increase of
2,250 full- time equivalent ( FTE) students above the 2005- 06 budgeted enrollment of
190,750. The 2006- 07 budgeted enrollment is 193,000 FTE, a 1.18% increase over 2005- 06.
Curriculum enrollment increased by 1,126 FTE ( or 0.75%), continuing education
enrollment by 1,083 FTE ( or 4.77%), and basic skills enrollment by 41 FTE ( or 0.22%).
Requirements $ 8,987,043
Receipts $ 1,946,953
Appropriation $ 7,040,090
2. Multi- campus Funding
Community colleges offer courses at multi- campus sites to accommodate student
educational needs. These sites must provide student services and offer at least one degree
program entirely on- site. Funds are recommended to serve higher enrollments and to
support the operation of these multi- campus sites.
Appropriation $ 601,171
3. Enrollment Growth Reserve
It is recommended that funds be provided as an enrollment reserve to assist colleges that
experience high growth in the fall semester. The State Board of Community Colleges shall
distribute funds to colleges in which the fall semester enrollment growth exceeds 5%
above the previous fall.
Appropriation $ 2,000,000
4. Need- Based Financial Aid for Teaching and Nursing Students
The Governor recommends providing $ 500,000 for need- based financial aid. These funds
shall be targeted to NC students enrolling in programs that prepare the student for a
teaching or nursing career.
Appropriation $ 500,000
5. Course Management System and Learning Objects Repository
An enterprise course management system and learning objects repository are needed by
the NC Community College System to provide a state- of- the- art online teaching and
learning platform. These resources will support online, hybrid, and traditional instruction,
and will include online learning modules for statewide use.
1. Course Management System accessible for all 58 community colleges. 1,500,000
2. Learning Objects Repository to be hosted by MCNC 500,000
Appropriation $ 2,000,000
Recommended Budget Adjustments, 2006- 07 General Fund
Community Colleges
54
6. Virtual Learning Community Development Centers
The Governor recommends funds be appropriated to establish four Virtual Learning
Community development centers. Of these centers, three shall be devoted to curriculum
development and one shall be devoted to continuing education courses, such as public safety.
The centers will be located at community colleges and will develop online curriculum and
continuing education courses and learning modules to be shared among all 58 community
colleges.
Appropriation $ 1,025,000
7. Online Help Desk
An online help desk is recommended to meet student needs with reliable and well managed
support services that are deployed quickly, accurately, and satisfactorily and which will be
available at any time. Online assistance can be delivered at significantly reduced costs when
compared to locally supported or contracted help desk support.
Appropriation $ 740,000
8. NC Information Highway Expansion
It is recommended that funds be provided to expand the NC Information Highway ( NCIH) to
the eight community college main campuses without NCIH access. Expansion of the NCIH will
locate one videoconferencing site in each NC community college's service area. Completion of
this network would deliver real- time, multi- point ( multiple site), interactive, high quality voice,
video, and digital transmission to facilitate instruction, meetings, staff development, training,
interviews, and student services.
Appropriation - Nonrecurring $ 120,000
Quality Teachers, Quality Pay
1. Faculty and Professional Staff Salary Increases
The Governor recommends providing $ 28.2 million for a 4% salary increase for the State Board
of Community Colleges to distribute to community college faculty and professional staff. This
amount is in addition to the 4% statewide salary increase that is being recommended for the
2006- 07 fiscal year. The actual appropriation is located in the Compensation reserve section of
this document. These funds shall not be transferred by the State Board or used for any other
budget purpose by the community colleges.
Other NCCCS Initiatives
1. Tuition Receipts Adjustment
An $ 8,207,712 appropriation to replace under realized tuition receipts is recommended. These
receipts are being reduced to reflect actual receipts collected in the 2004- 05 fiscal year. This
reduction is in accordance with NC General Statutes Chapter 143- 11, as amended by the 2005
General Assembly ( S. L. 2005- 276, Section 6.4).
Re
Object Description
Description
| Title | North Carolina state budget... recommended adjustments |
| Date | 2006; 2007 |
| Description | 2006/2007 |
| Digital Characteristics-A | 1.9 MB; 222 p. |
| Digital Format | application/pdf |
| Related Items | http://worldcat.org/oclc/52073704/viewonline |
| Title Replaces | North Carolina. Office of State Budget and Management. Recommended changes to the... state budget |
| Pres Local File Path-M | \Preservation_content\StatePubs\pubs_borndigital\images_master\ |
| Full Text | The North Carolina State Budget 2006- 2007 Michael F. Easley Governor Recommended Adjustments The North Carolina State Budget 2006- 2007 Office of State Budget and Management Office of the Governor Raleigh, North Carolina www. osbm. state. nc. us David T. McCoy, State Budget Officer Charles E. Perusse, Deputy State Budget Officer May 2006 Recommended Adjustments State of North Carolina Office of the Governor 20301 Mail Service Center • Raleigh, NC 27699- 0301 Michael F. Easley Governor May 9, 2006 The North Carolina Senate The Honorable Marc Basnight, President Pro Tempore The North Carolina House of Representatives The Honorable James Black, Speaker The Citizens of North Carolina Dear Mr. President, Mr. Speaker, Ladies and Gentlemen of the General Assembly and Fellow North Carolinians: I am pleased to submit to you my operating and capital budget recommendations for fiscal year 2006- 07. This budget reflects my continued commitment to build ONE NORTH CAROLINA, where all North Carolinians have access to the educational opportunities they need to be successful in the global economy. When I took office in January 2001, North Carolina faced cumulative budget deficits that had not been encountered since the Great Depression. A national recession, the terrorist attacks of September 11 and unfair federal trade policies dealt a blow to North Carolina’s economy. Despite these challenges, together we continued to make critical investments in education and job creation strategies to promote long- term economic growth across our state. As a result of our efforts, our unemployment rate is now below the national average and is at a six- year low of 4.5 percent. North Carolina has added 68,000 jobs over the last 12 months ( a 1.8 percent increase), ranking among the national leaders in job creation. Due to our strong, transitioning economy and our commitment to conservative budget practices, we were able to report a surplus of over $ 680 million at the end of fiscal year 2004- 05. It is estimated that the surplus will total almost $ 1.1 billion at the end of fiscal year 2005- 06 and we anticipate continued revenue growth throughout fiscal year 2007. My fiscal year 2007 budget contains $ 10.7 billion in investments in education from pre- K through the university to build a skilled workforce prepared to compete in the global economy. It includes an average 8 percent pay increase for teachers in order to surpass the national average by 2008- 09. Additional funds are provided to expand the Disadvantaged School Supplemental Fund, to fully fund the Low Wealth formula, and to expand middle and high school reform programs in order to improve graduation rates. It provides increased access to higher education opportunities at the community college and university systems. Additional monies are also included for need- based financial aid, scholarships for nurses, professional training to recruit and retain quality teachers and principals, and several biotech and economic development initiatives. In addition to the General Fund increases, the new North Carolina Education Lottery will provide proceeds for reduced class sizes, additional academic pre- K slots, school construction and college scholarships for needy students. This budget makes unprecedented investments in improving our court system. Funds are included to add core court personnel, including assistant district attorneys, deputy clerks, district court judges and Location: 116 West Jones Street • Raleigh, NC • Telephone: ( 919) 733- 5811 magistrates. It also provides funds to modernize several court information programs and to operate the Custody Mediation and Drug Treatment Court Programs statewide. My budget recommendations continue our commitment over the last five years to keep spending at responsible levels, while cutting taxes by $ 220 million for hard- working North Carolina taxpayers. It caps the gas tax at current levels and reduces the state sales tax rate from 4.5 percent to 4.25 percent. The budget also recommends depositing an additional $ 324 million in the State's Rainy Day Fund, setting aside $ 50 million for future disaster- related expenses, and providing an additional $ 195 million to the Highway Trust Fund. By the end of the current fiscal year, the Rainy Day Fund balance will be $ 637 million, 4 percent of last year’s operating budget. My budget includes funds to hold several programs harmless due to federal budget cuts and reduces the waiting list for child care subsidies. Funds are provided for community capacity enhancement and the Mental Health Trust Fund to assist with mental health reform programs. Additional monies are also included for early intervention services, adoption and foster care assistance, and child welfare services. I include a recommendation for a new adoption tax credit based on the current federal tax credit. The budget solidifies North Carolina as a national leader in recruiting new business and growing existing businesses. It includes recurring funds for the One NC Fund, which has resulted in the creation of 18,875 jobs and $ 2.4 billion in investment throughout the state. The budget also provides support for new and emerging companies through investments in the Small Business Innovation Research matching grant program and in biotechnology. Sales tax refunds that would benefit the motor sports industry and a sales tax exemption on research and development equipment will help strengthen these emerging industries. The fiscal year 2007 budget proposal provides additional funds for the environment and agriculture. It includes funds to enhance well water safety programs and to protect drinking water supplies. Funds are provided for land conservation, forest development and habitat protection programs. The budget also includes funds to increase disease surveillance and detection programs to ensure a safe food supply. The budget provides funding for priority health, public safety, education and economic development projects outlined in the state's Capital Improvement Plan. Projects include constructing a new public health lab and emergency operations center, expanding facilities at the UNC Wilmington School of Nursing, UNC-Charlotte, and the NC State University Engineering Complex, adding two skilled care nursing homes for the state's veterans, and expanding the Museum of Art. I recognize and appreciate the work of our state employees and recommend a 4% cost of living increase. The fiscal year 2007 budget also provides a 3.7% cost of living adjustment for state retirees and makes another payment to the retirement system for funds that were withheld in fiscal year 2000- 01. I look forward to working cooperatively with members of the General Assembly to ensure that the fiscal year 2007 budget is fiscally responsible and meets the needs of all North Carolinians. With kindest regards, I remain Very truly yours, Michael F. Easley Table of Contents List of Figures and Tables....................................... vii Preface...................................................................... ix Introduction............................................................. 1 Executive Priorities and Budget Summary.............. 3 Major Expansion Budget Recommendations by Subject Area......................................................... 9 Fiscal Responsibility.............................................. 11 Education............................................................. 12 Health and Human Services................................. 15 Economic Development and Infrastructure.......... 16 Courts and Public Safety...................................... 17 Environment and Agriculture............................... 18 Capital Improvements.......................................... 19 Teachers and State Employees............................... 20 Economy and Revenue by Topic............................ 21 Economy Outlook for the Nation and State.................. 23 Revenue General Fund Forecast................................... 27 Highway Fund.............................................. 31 Highway Trust Fund..................................... 33 General Fund Recommended Appropriations Education Public Education ( 13510)................................ 37 The University of North Carolina ( 160xx)....... 47 Community Colleges ( 16800)......................... 53 Education Lottery Fund ( 23003)..................... 59 General Government General Assembly ( 11000)............................... 63 Office of the Governor ( 13000)....................... 65 Office of State Budget and Mgt. ( 13005)......... 67 NC Housing Finance Agency ( 13010)............. 69 OSBM - Reserve for Special Appropriation ( 13085)........................................................... 71 Office of the Lieutenant Governor ( 13100)..... 73 Dept. of Secretary of State ( 13200).................. 75 Office of the State Auditor ( 13300)................. 78 Dept. of State Treasurer ( 13410)...................... 80 State Treasurer - Retirement for Fire and Rescue Squad Workers and Line of Duty Death Benefits ( 13412)........................................................... 83 Dept. of Insurance ( 13900)............................. 84 Insurance – Volunteer Safety Workers’ Compen-sation Fund ( 13901)........................................ 86 Dept. of Administration ( 14100)..................... 87 Office of the State Controller ( 14160)............. 92 Dept. of Revenue ( 14700)............................... 93 Dept. of Cultural Resources ( 14800)............... 96 Roanoke Island Commission ( 14802)............ 100 State Board of Elections ( 18025)................... 101 Office of Administrative Hearings ( 18210).... 103 Health and Human Services Dept. of Health and Human Serv. ( 144xx).... 105 Div. of Central Management and Support ( 14410)....................................................... 108 Div. of Aging and Adult Services ( 14411).... 111 Div. of Child Development ( 14420)............ 113 Office of Education Services ( 14424).......... 115 Div. of Public Health ( 14430)..................... 118 Div. of Social Services ( 14440).................... 122 Div. of Medical Assistance ( 14445)............. 125 NC Health Choice ( 14446)........................ 127 Div. of Services for the Blind, Deaf, and Hard of Hearing ( 14450)..................................... 128 Div. of Mental Health/ Developmental Disabili-ties/ Substance Abuse Services ( 14460)......... 129 Div. of Facility Services ( 14470).................. 132 Div. of Vocational Rehabilitation ( 14480)... 133 Justice and Public Safety Judicial Branch ( 12000)................................. 135 Judicial Branch- Indigent Defense ( 12001)..... 140 Dept. of Justice ( 13600)................................ 142 Dept. of Juvenile Justice and Delinquency Pre-vention ( 14060)............................................. 146 Dept. of Correction ( 14500)......................... 149 Dept. of Crime Control and Public Safety ( 14900)......................................................... 154 Natural and Economic Resources Dept. of Agriculture and Consumer Services ( 13700)......................................................... 159 Dept. of Labor ( 13800)................................. 162 Dept. of Environment and Natural Resources ( 14300)......................................................... 164 v DENR- Clean Water Management Trust Fund ( 14301)......................................................... 170 Dept. of Commerce ( 14600)......................... 171 Commerce- State Aid to Non- State Entities ( 14601)......................................................... 175 Transportation Overview............................................................ 179 Highway Fund ( 84210)...................................... 181 Highway Trust Fund ( 84290)............................. 190 Capital Improvements General Fund ( 19600)........................................ 197 Reserves, Debt Service, and Other Adjustments General Fund ( 190xx)........................................ 207 vi List of Figures and Tables Figures 1. Recommended Appropriation for General Fund Operating Budget, 2006- 07.................................................................. 3 2. General Fund Supported Positions, 2006- 07........................ 4 3. Savings Reserve Account Balance........................................ 11 4. Average Daily Membership Budgeted................................. 12 5. Enrollment in Community College System........................ 13 6. Enrollment in the University System.................................. 14 7. Recommended Continuation Appropriations by Division, Health and Human Services............................................... 15 8. Recommended Expansion Appropriations by Activity, Health and Human Services............................................... 15 9. Recommended Capital Funding......................................... 19 10. Average Teacher Compensation.......................................... 20 11. NC Unemployment Rate Falls Significantly....................... 24 12. NC Employment Expands................................................. 24 13. Nonfarm Employment by Category................................... 25 14. State Income Expected to Exceed U. S................................ 26 15. State Maintains Employment Growth................................ 26 16. General Fund Revenue....................................................... 30 17. Highway Fund Revenue Collections................................... 31 18. Highway Trust Fund Revenue Collections.......................... 33 19. Funding Sources, NC Transportation Program................. 180 20. Appropriations, NC Transportation Program................... 180 Tables 1. Recommended General Fund Appropriations...................... 3 2. Recommended General Fund Supported Positions............... 4 3. Governor’s Recommended General Fund Budget................. 5 4. Recommended Availability and Appropriations.................... 7 5. Annual Nonfarm Employment by Category....................... 25 6. General Fund Revenue, Detailed Revised Estimates........... 29 7. General Fund Revenue, Revised Estimates......................... 30 8. Highway Fund................................................................... 32 9. Highway Trust Fund.......................................................... 34 10. NC Transportation Program............................................. 179 11. Condition of the Highway Fund...................................... 188 12. Changes to the Highway Fund Budget............................. 189 13. Condition of the Highway Trust Fund............................. 194 14. Recommended Highway Trust Fund Appropriations........ 194 vii Preface The North Carolina State Budget: Recommended Adjust-ments, 2006- 2007 reflects the work of multiple people within the Office of State Budget and Management ( OSBM), including budget administrators and ana-lysts, economists, technical staff, and paraprofessionals. The OSBM team is listed below by administrative area. This document is available online at www. osbm. state. nc. us. For additional information about its contents, please contact the appropriate administrator at the e- mail address cited below or by telephone at 919/ 807- 4700. The mailing address for OSBM is 20320 Mail Service Center, Raleigh, NC 27699- 0320. OSBM Staff David McCoy, State Budget Officer david. mccoy@ ncmail. net Debbie Young Fiscal Office Arnetha Dickerson Frances Doak Human Resources Tonya Austin Ursula Hairston Janie Johnson Katie Shearon Carolyn West Special Appropriations Julie Mitchel Charles Perusse, Deputy State Budget Officer charles. perusse@ ncmail. net Zorida Maighnath Capital Projects Jim Lora, Assistant State Budget Officer jim. lora@ ncmail. net Adam Brueggemann Chris Harder Jennifer Wimmer Department of Correction, Department of Crime Control and Public Safety, Department of Justice, Department of Juvenile Justice and Delinquency Prevention, Judicial Branch Marc Nelson Sheryl Stephens Department of Transportation Mercidee Benton Emergency Management Kevin Hutchinson Statewide Information Technology Jonathan Womer, Assistant State Budget Officer jonathan. womer@ ncmail. net Jim Dolan Community Colleges, Public Education, University of North Carolina Elizabeth Grovenstein, Assistant State Budget Officer elizabeth. grovenstein@ ncmail. net Bryan Conrad Kristen Crosson Susie Esealuka Pam Leaman Trey O’Quinn ix Departments of General Government and Departments of Natural and Economic Resources David Brown, Assistant State Budget Officer david. brown@ ncmail. net Thomas Cheek Celia Cox Donna Cox Pat Taylor Economic Forecasting, Revenue Forecasting, Revenue and Tax Issues, Economic Impact of Rules Nathan Knuffman Warren Plonk Department of Health and Human Services Daphne Lyon, Assistant State Budget Officer daphne. lyon@ ncmail. net Debbie Barnes Kari Barsness Pam Kilpatrick Pat Taylor Wayne Williams Management Tom Newsome, Assistant State Budget Officer tom. newsome@ ncmail. net Data Services Bob Coats Sue Farr Joel Sigmon Francine Stephenson Bill Tillman Information Systems Agness Gunter Paul Young Management Analysis Barbara Baldwin Donald Crooke Angela Houston Kay Radford Joe Turlington Salary and Benefits Bill Stockard Salary Control Emily Moore x Introduction The purpose of this document is to describe the Gov-ernor’s recommended state budget adjustments for the second year of the 2005- 07 biennium. These recom-mended changes are based on the certified budget for 2006- 07 approved by the 2005 session of the General Assembly. Recommendations for the General Fund, Highway Fund, and the Highway Trust Fund are included in the document, along with capital improvements, reserves, debt service, and other adjustments. Governor Easley’s priorities in budget development precede key expansion budget recommendations. De-tails of recommended appropriations by agency follow. Items of change are described under one of three categories within a department/ budget code or sec-tion: reductions, expansion, or technical adjustments. “ Reductions” denotes recommended decreases to budgets that support current operations, while “ Ex-pansion” denotes new programs, expansion of existing programs, and salary and benefit increases. “ Technical Adjustments” is a category for describing other perti-nent changes in school- age populations or Medicaid enrollments that necessitate a recommended change in the certified budget. For each item of change that is described, there is a listing of the resulting fiscal change as well as the change in number of positions, when appropriate. Fiscal changes are categorized as “ Requirements” or “ Nonrecurring Requirements.” They may also be categorized as “ Receipts” or “ Nonrecurring Receipts” to designate changes in departmental receipts. Always, “ requirements” less “ receipts” equals “ appropriation.” A summary table for the revised recommended budget for 2006- 07 is presented at the beginning of each de-partment/ budget code or section. In addition, there are summary tables for the items of change following each of the change types, i. e., reduction adjustments, expan-sion adjustments, and technical adjustments. At the end of each department/ budget code or section, there is a table that summarizes all recommended changes. A summary of recommended adjustments by depart-ment/ budget code for the entire state budget appears in table 3, “ Governor’s Recommended General Fund Budget, 2006- 07.” 1 2 Governor Easley’s priorities guiding budget develop-ment included the following: Recommending a fiscally responsible budget that replenishes the Rainy Day Fund, invests in the state’s infrastructure, and provides tax relief Continuing our investments in education from pre- kindergarten through the university system to build a skilled workforce prepared to compete in the global economy • • Executive Priorities and Budget Summary for 2006- 07 Enhancing North Carolina’s aggressive strategies for job creation and long- term economic growth Providing quality health and family services to those who can least afford them Protecting and preserving our natural heritage through land and water conservation, enforcement of our Clean Smokestacks legislation, and other environmental laws Improving the court system and public safety of our communities • • • • Figure 1 Recommended Appropriation for General Fund Operating Budget, 2006- 07 University System 13% Community Colleges 5% Public Schools 40% Debt Service and Other Reserves 4% General Government and Natural and Economic Resources 5% Justice and Public Health and Human Safety 10% Services 23% Public Schools $ 6,881 $ 7,404 7.6% 40.0% Community Colleges 828 912 10.1% 4.9% University System 2,151 2,408 11.9% 13.0% Total Education 9,860 10,724 8.8% 57.9% Health and Human Services 4,057 4,249 4.7% 22.9% Justice and Public Safety 1,783 1,917 7.5% 10.4% Natural and Economic Resources 853 866 1.5% 4.7% Debt Service and Other Reserves 588 765 30.1% 4.1% Total Operating Budget $ 17,141 $ 18,521 8.1% 100.0% Capital Improvements 55 329 498.2% Total General Fund Appropriation $ 17,196 $ 18,850 9.6% Table 1 Recommended General Fund Appropriations, 2006- 07 Compared with Authorized General Fund Appropriations, 2005- 06 ($ million) Authorized 2005- 06 Recommended 2006- 07 Change 2005- 06 to 2006- 07 Percent of Total Operating Budget 3 Figure 2 General Fund Supported Positions 2006- 07 Health and Human Services 4% Justice and Public Safety 12% General Government and Natural and Economic Resources 3% Public Schools 62% Community Colleges 6% University System 13% Public Schools 143,180 156,161 9.1% 62.1% Community Colleges 14,082 15,589 10.7% 6.2% University System 29,587 32,575 10.1% 12.9% Health and Human Services 8,991 9,244 2.8% 3.7% Justice and Public Safety 27,541 29,924 8.7% 11.9% General Government and Natural and Economic Resources 7,980 8,125 1.8% 3.2% Total Positions 231,361 251,618 8.8% 100% Table 2 Recommended General Fund Supported Positions, 2006- 07 Compared with Authorized General Fund Positions, 2005- 06 Authorized 2005- 06 Recommended 2006- 07 Change 2005- 06 to 2006- 07 Percent of Total Positions 4 2006- 07 Appropriation Appropriation 2006- 07 Net Budget Certified Supported Supported Net Recommended Position Code Function Appropriation Recurring Nonrecurring Positions Recurring Nonrecurring Positions Change Appropriation Change Education 13510 Public Education $ 6 ,579,807,097 $ ( 184,044,719) $ - - $ 196,398,197 $ 115,221,507 3.00 $ 127,574,985 $ 6,707,382,082 3.00 16800 Community Colleges 7 67,295,886 - - - 39,606,340 232,423 5.00 39,838,763 807,134,649 5.00 160xx University System 2 ,120,397,081 - ( 9,634,513) ( 91.80) 120,313,014 12,707,409 - 123,385,910 2,243,782,991 ( 91.80) Total Education 9 ,467,500,064 ( 184,044,719) ( 9,634,513) ( 91.80) 356,317,551 128,161,339 8.00 290,799,658 9,758,299,722 ( 83.80) General Government 14100 Administration 58,818,473 - - - 3,089,529 2,602,289 18.72 5,691,818 64,510,291 18.72 13300 State Auditor 10,840,918 - - - 207,564 200,000 - 407,564 11,248,482 - 14800 Cultural Resources 62,917,147 - - - 3,903,858 348,744 33.00 4,252,602 67,169,749 33.00 14802 Cultural Resources - Roanoke Island 1,783,374 - - - - - - - 1,783,374 - 11000 General Assembly 46,965,432 - - - - 238,346 - 238,346 47,203,778 - 13000 Governor's Office 5,344,528 - - - 100,000 - - 100,000 5,444,528 - 13010 NC Housing Finance 4,750,945 - - - 5,000,000 - - 5,000,000 9,750,945 - 13900 Insurance 28,110,582 - - - 555,912 41,991 7.00 597,903 28,708,485 7.00 13901 Insurance - Worker's Comp. Fund 4,500,000 - - - - - - - 4,500,000 - 13100 Lieutenant Governor 753,037 - - - 2,600 - - 2,600 755,637 - 18210 Office of Administrative Hearings 2,969,712 - - - 357,000 8,000 2.00 365,000 3,334,712 2.00 14700 Revenue 80,673,250 - - - 570,173 789,887 10.00 1,360,060 82,033,310 10.00 13200 Secretary of State 9,369,633 - - - 711,621 127,050 9.25 838,671 10,208,304 9.25 18025 State Board of Elections 5,069,307 - - - 143,279 - 2.00 143,279 5,212,586 2.00 13005 State Budget and Management ( OSBM) 5,021,795 - - - 240,438 169,500 3.00 409,938 5,431,733 3.00 13085 OSBM- Special Appropriations 5,111,429 - - - 599,000 656,000 - 1,255,000 6,366,429 - 14160 Controller's Office 10,044,511 - - - - - - - 10,044,511 - 13410 State Treasurer 8,295,843 - - - 281,784 - - 281,784 8,577,627 - 13412 State Treasurer - Retirement / Benefits 8,651,457 - - - - - - - 8,651,457 - Total General Government 359,991,373 - - - 15,762,758 5,181,807 84.97 20,944,565 380,935,938 84.97 Health and Human Services 14410 Central Administration 118,880,919 ( 66,646,653) - - 1,344,442 1,271,533 - ( 64,030,678) 54,850,241 - 14411 Aging 29,495,139 - - - 3,000,000 - - 3,000,000 32,495,139 - 14420 Child Development 267,356,799 - - - 30,453,222 12,291 10.00 30,465,513 297,822,312 10.00 14424 Education Services 34,281,895 - - - 778,548 50,000 23.00 828,548 35,110,443 23.00 14430 Public Health 150,814,496 - - - 19,889,744 416,000 203.00 20,305,744 171,120,240 203.00 14440 Social Services 190,679,285 - - - 12,399,153 2,287,393 - 14,686,546 205,365,831 - 14445 Medical Assistance 2,751,209,159 ( 150,000,000) - - - - - ( 150,000,000) 2,601,209,159 - 14446 Child Health 51,882,902 - - - - - - - 51,882,902 - 14450 Services for the Blind 9,681,220 - - - - - - - 9,681,220 - 14460 Mental Health/ DD/ SAS 602,556,655 - - - 54,133,395 35,000,000 163.00 89,133,395 691,690,050 163.00 14470 Facility Services 15,959,466 - - - - - - - 15,959,466 - 14480 Vocational Rehabilitation 42,142,193 - - - 699,856 - 4.00 699,856 42,842,049 4.00 Total Health and Human Services 4,264,940,128 ( 216,646,653) - - 122,698,360 39,037,217 403.00 ( 54,911,076) 4,210,029,052 403.00 Justice and Public Safety 14500 Correction 1,048,492,502 - ( 904,430) - 21,578,893 10,854,928 161.00 31,529,391 1,080,021,893 161.00 14900 Crime Control and Public Safety 35,153,488 - - - 3,960,741 8,000 30.00 3,968,741 39,122,229 30.00 12000 Judicial 345,760,410 - - - 18,577,456 7,581,365 249.75 26,158,821 371,919,231 249.75 12001 Judicial - Indigent Defense 88,648,414 - - - 3,591,162 2,622,438 - 6,213,600 94,862,014 - 13600 Justice 78,697,271 - - - 2,075,180 2,496,580 20.00 4,571,760 83,269,031 20.00 14060 Juvenile Justice 138,873,166 - - - 2,795,026 265,826 66.00 3,060,852 141,934,018 66.00 Total Justice and Public Safety 1,735,625,251 - ( 904,430) - 52,578,458 23,829,137 526.75 75,503,165 1,811,128,416 526.75 Reductions Expansion Table 3 Governor's Recommended General Fund Budget 2006- 07 5 2006- 07 Appropriation Appropriation 2006- 07 Net Budget Certified Supported Supported Net Recommended Position Code Function Appropriation Recurring Nonrecurring Positions Recurring Nonrecurring Positions Change Appropriation Change Reductions Expansion Table 3 Governor's Recommended General Fund Budget 2006- 07 Natural and Economic Resources 13700 Agriculture and Consumer Services 51,032,884 - - - 1,003,323 317,516 10.50 1,320,839 52,353,723 10.50 14600 Commerce 36,728,265 - - - 17,366,828 1,880,000 10.00 19,246,828 55,975,093 10.00 14601 Commerce - State Aid 47,358,087 - - - 2,000,000 - - 2,000,000 49,358,087 - 14300 Environment and Natural Resources 168,451,089 - - - 9,888,956 1,336,072 11.00 11,225,028 179,676,117 11.00 14301 Clean Water Management Trust 100,000,000 - - - - - - - 100,000,000 - 13800 Labor 14,434,925 - - - 450,000 - 3.50 450,000 14,884,925 3.50 Total Natural and Economic Resources 418,005,250 - - - 30,709,107 3,533,588 35.00 34,242,695 452,247,945 35.00 14222 Transportation - - - - - - - - - - Net Agency 16,246,062,066 ( 400,691,372) ( 10,538,943) ( 91.80) 578,066,234 199,743,088 1,057.72 366,579,007 16,612,641,073 965.92 19600 Capital Improvements - - - - - 329,453,300 - 329,453,300 329,453,300 - Debt Service 19420 General Debt Service 619,291,140 - ( 50,000,000) - - - - ( 50,000,000) 569,291,140 - 19425 Federal Reimbursement 1,616,380 - - - - - - - 1,616,380 - Total Debt Service 620,907,520 - ( 50,000,000) - - - - ( 50,000,000) 570,907,520 - Reserves and Adjustments 19001 Contingency and Emergency Reserve 5,000,000 - - - - - - - 5,000,000 - 19003 Compensation Increase Reserve 229,300,000 - - - 585,761,473 8,775,417 - 594,536,890 823,836,890 - 19004 Salary Adjustment Reserve 14,094,294 - - - 20,000,000 - - 20,000,000 34,094,294 - 19008 Retirement Payback Reserve - - - - - 30,000,000 - 30,000,000 30,000,000 - 190xx Heating/ Cooling Assistance Reserve - - - - - 10,000,000 - 10,000,000 10,000,000 - 190xx Reserve for Innovative IT Projects - - - - 3,000,000 - - 3,000,000 3,000,000 - 19028 Longevity Svc. ( Clerks of Superior Court) Definition 41,411 - - - - - - - 41,411 - 19047 Disability Income Plan 6,586,500 - - - - - - - 6,586,500 - 19047 Death Benefit Trust 12,899,200 - - - - - - - 12,899,200 - 19027 ITS Rate Restructuring Reserve ( 2,300,000) - - - - - - - ( 2,300,000) - 19040 Minimum Fair Wage for SPA employees 750,000 - - - - - - - 750,000 - 19043 Health Plan Reserve 142,728,000 - - - - - - - 142,728,000 - 19037 State Business Infrastructure Project 2,525,000 - - - 7,260,523 34,527,880 50.75 41,788,403 44,313,403 50.75 19047 Retirement Rate Adjustment Reserve 13,810,800 - - - 48,000,000 - - 48,000,000 61,810,800 - 19044 IT Initiative 5,500,000 - - - 298,826 - 2.00 298,826 5,798,826 2.00 19040 Minimum Fair Wage Reserve ( DPI) 12,400,000 - - - 8,582,073 - - 8,582,073 20,982,073 - 19024 Reserve for Contingent Appropriations 85,000,000 - - - - - - - 85,000,000 - 190xx Reserve for Lawsuits - - - - - 2,000,000 - 2,000,000 2,000,000 - 190xx Reserve- Disaster Expenditures - - - - - 50,000,000 - 50,000,000 50,000,000 - 190xx Reserve- Military Morale, Recreation, and Welfare 1,000,000 - - - - - - - 1,000,000 - Total Reserves and Adjustments 529,335,205 - - - 672,902,895 135,303,297 52.75 808,206,192 1,337,541,397 52.75 Total $ 17,396,304,791 $ ( 400,691,372) $ ( 60,538,943) ( 91.80) $ 1,250,969,129 $ 664,499,685 1,110.47 $ 1,454,238,499 $ 18,850,543,290 1,018.67 6 2006- 2007 Description Recommended Budget Availability Beginning Credit Balance Unappropriated Balance from FY 2005- 06 $ 113,386,988 Anticipated Reversions from FY 2005- 06 125,000,000 Anticipated Overcollections from FY 2005- 06 1,072,100,000 Emergency Appropriation for Department of Correction ( 15,000,000) Credit to Savings Reserve ( 324,000,000) Credit to Repair and Renovation Reserve ( 200,000,000) Anticipated Beginning Unreserved Credit Balance 771,486,988 Recommended Budgeted Revenue Tax Revenue 17,631,550,000 Non- tax Revenue 520,300,000 Highway Fund Transfer - Highway Trust Fund Transfer 252,663,009 Disproportionate Share Receipts 100,000,000 Total General Fund Revenue 18,504,513,009 Adjustments to Revenues Reduce Sales Tax Rate by .25% on October 1, 2006 ( 196,500,000) Cap Gas Tax Effective July 1, 2006 ( 23,550,300) Reduce Highway Trust Fund Transfer to General Fund for FY 2006- 07 ( 195,176,407) Sales Tax Changes ( Research and Development and Component Parts) ( 7,230,000) Adoption Tax Credit ( 50% of Federal Tax Credit) ( 3,000,000) Total Adjustment to Recommended Budgeted Revenues ( 425,456,707) Total Availability 18,850,543,290 Recommended Appropriations Original Certified Budget 17,396,304,791 Recommended Reductions ( 461,230,315) Recommended Expansion 1,915,468,814 Total Appropriations Recommended 18,850,543,290 Total Ending Balance $ - Table 4 Recommended Availability and Appropriations 2006- 2007 7 8 Major Expansion Budget Recommendations by Subject Area Fiscal Responsibility Education Health and Human Services Economic Development and Infrastructure Courts and Public Safety Environment and Agriculture Capital Improvements Teachers and State Employees 9 10 Governor Easley recommends a fiscally responsible budget that replenishes the Rainy Day Fund, invests in the state’s infrastructure, and provides tax relief. Save for the Future Deposit $ 324 million in the Rainy Day Fund, thereby increasing the balance to $ 637 million or 4.0% of the prior year’s operating budget ( see figure 3). Set aside $ 50 million for disaster- related expenses. Return Money to North Carolina Taxpayers Cap the gas tax on July 1, 2006. Reduce the state sales tax by 0.25% on October 1, 2006. Enact a state tax credit for adoption expenses. These actions will save North Carolinians over $ 220 million in 2006- 07. • • •• • Invest in Our Infrastructure Reserve $ 200 million to repair university and state buildings. Appropriate $ 329 million in “ pay- as- you- go” financing as well as $ 245 million in special financ-ing to implement the Capital Improvement Plan. Spend $ 42 million to replace and enhance the Hu-man Resources/ Payroll System. Reserve $ 195 million to replenish the Highway Trust Fund. • • • • Fiscal Responsibility Major Recommendations 0 150 267 313 637 0 100 200 300 400 500 600 700 2002 2003 2004 2005 2006 Figure 3 Savings Reserve Account Balance Rainy Day Fund June 30 ($ mil) 11 For education, Governor Easley’s budget focus contin-ues the state’s investments in education from prekin-dergarten through the university system to build a skilled workforce prepared to compete in the global economy. Public Education Provide a significant increase in teacher salaries, including a step increase plus a flat $ 2,250 ( for an overall average of 8%), while substantially increas-ing the competitiveness of North Carolina’s begin-ning teacher salary. Provide an additional $ 523 million for public schools, a 7.6% increase over 2005- 06. Continue funding for record enrollment increases, projected at 38,103 or 2.7% more than the 1,397,372 students enrolled in the 2005- 06 school year ( see figure 4). Fully fund the ABCs accountability program. More than double the disadvantaged- student supplemental funding. • • • •• Appropriate $ 42 million to ensure full funding for low wealth LEAs whose ability to generate local revenue per student is below the state average. Expand the governor’s 21st Century High School program by $ 14.1 million to ensure operating funds for 34 Learn and Earn schools and 32 small redesigned high schools to improve graduation rates, student performance, and competitiveness in the 21st century. Fund literacy coaches for professional develop-ment of faculty in 100 middle schools to ensure student mastery of 21st century skills. Appropriate $ 4 million to expand access to the NC Education Network for the state’s K- 12 public schools. Fund $ 2.8 million for the NC Virtual Public School to provide statewide access to online courses and learning opportunities. Provide $ 16.4 million for the rising cost of diesel fuel for buses. • • • • • • Education Major Recommendations Source: Department of Public Instruction, Financial and Business Services School Allotment Section Figure 4 Average Daily Membership Budgeted NC Public Schools 1,150,000 1,200,000 1,250,000 1,300,000 1,350,000 1,400,000 1,450,000 1998- 99 1999- 00 2000- 01 2001- 02 2002- 03 2003- 04 2004- 05 2005- 06 2006- 07 0 0.5 1 1.5 2 2.5 3 Percent Change ADM Percent Change 12 Budgeted FTE is the sum of curriculum, continuing education, and basic skills FTE. It is computed as the three- year average or the prior year's enrollment for each college, whichever is higher. The community colleges' enrollments are aggregated for the entire Community College System. ( The three- year average creates slight differences between budgeted and actual FTE; recently, this systemwide difference has been less than 100.) Source: NCCCS System Office Figure 5 Enrollment in Community College System Curriculum, Continuing Education, Basic Skills Budgeted FTE - 50,000 100,000 150,000 200,000 250,000 1999- 00 2000- 01 2001- 02 2002- 03 2003- 04 2004- 05 2005- 06 2006- 07 0% 2% 4% 6% 8% 10% 12% Percent Change FTE Percent Change Community Colleges Provide an additional $ 84 million for community colleges, a 10.1% increase over 2005- 06. Fully fund enrollment growth ( an additional $ 7 million) for all community college campuses ( see figure 5). Appropriate a recurring enrollment reserve of $ 2 million to assist community colleges experiencing fall semester enrollment growth of 5% above the prior year. Increase salaries for community college faculty and professional staff by an additional 4% ( total of 8%) to attract and retain highly qualified personnel. Appropriate $ 3.9 million to improve and expand distance learning opportunities, thereby increasing access for North Carolina students regardless of geography. • • • • • Approve $ 11 million to address equipment needs at community colleges, including equipment to reduce program waiting lists. Allocate $ 500,000 in financial aid to community college students enrolling in teaching or nursing programs to address the growing demand for these professionals. Fund two new regional customized industry train-ing coordinators to provide all North Carolina eco-nomic development regions with training assistance. Provide for additional student services and financial aid staffing at community colleges, enabling them to better serve growing student enrollments. Appropriate funds for the State Board of Commu-nity Colleges to direct start- up grants for new and innovative college programs. • • • • • 13 Source: UNC General Administration Budgeted FTE is calculated by converting budgeted Student Credit Hours ( fall and spring) into the measure of regular term full time equivalent students ( FTEs). Figure 6 Enrollment in the University System Budgeted FTE - 20,000 40,000 60,000 80,000 100,000 120,000 140,000 160,000 180,000 200,000 1999- 00 2000- 01 2001- 02 2002- 03 2003- 04 2004- 05 2005- 06 2006- 07 0% 1% 2% 3% 4% 5% 6% 7% 8% 9% Percent Change Enrollment Units ( FTE) Percent Change University System Appropriate an additional $ 257 million for the Uni-versity of North Carolina system, a 11.9% increase over 2005- 06. Fully fund university enrollment increases ($ 79 mil-lion for a 4.1% FTE increase) ( see figure 6). Provide $ 21.6 million to fully fund the need- based financial aid program. Approve $ 1.3 million for federally required state agricultural research and extension program match-ing funds. Provide $ 4.8 million for nurses’ scholarships and programs to address the growing demand for nurses in North Carolina. Appropriate $ 1 million for 400 additional prospec-tive teacher scholarship loans. • • • • • • Provide $ 1 million to continue the 2+ 2 E- learning initiative between the University of North Carolina system and community colleges in order to make online teacher education accessible across the state. Allocate $ 2 million for new professional develop-ment programs for teachers and principals. Appropriate $ 2 million for the DESTINY traveling science laboratory to increase access to state- of- the-art science instruction and high quality professional development for science teachers. Provide $ 11.5 million for rising electrical, natural gas, fuel oil, gasoline, and diesel costs. Approve $ 2.4 million to update information tech-nology infrastructure at the 16 university campuses. • • • • • 14 Governor Easley is committed to providing quality health and family services to those who can least afford them. His budget includes an expansion of over $ 160 million in this area, with 55% designated for mental health, developmental disabilities, and substance abuse services. Supporting the Family Continue funding quality child care services for 96,000 children currently receiving subsidies, plus provide funds for an additional 3,000 children of low- income working parents. Provide mental health and social services support to child and family teams in 100 schools across the state. Appropriate approximately $ 2 million to support pregnant women who are substance abusers or domestic violence victims. Support the nationally acclaimed Smart Start pro-gram with $ 10 million. Supporting Individuals with Special Needs Provide $ 12 million to meet the increasing needs of children receiving foster care and adoption as-sistance services. Appropriate an additional $ 7 million for early intervention for children with, or at risk for, devel-opmental disabilities. • • • • • • Continue funding services for about 5,500 people with developmental disabilities threatened with loss of support due to changes in federal policy. Approve an additional $ 58 million investment in mental health reform. Increase grants to local programs to serve frail seniors who want to remain in their own homes. Provide 23 new positions to support preschoolers and students attending residential schools for the blind and deaf. Establish an adoption tax credit. Promoting Health Provide antiviral medications for first responders in case of an influenza pandemic. Add influenza vaccine to the universal vaccine program. Appropriate $ 3.25 million to support 65 school nurses. Controlling Medicaid Expenditure Growth Reduce Medicaid funding by $ 150 million, primarily due to a higher federal match rate and savings to the state from the new Medicare Drug Plan. • • • • • • • • • Health and Human Services Major Recommendations Figure 7 Recommended Continuation Appropriations by Division Health and Human Services, 2006- 07 ($ mil) 2,751 603 267 191 151 302 64.5% 14.1% 6.3% 4.5% 3.5% 7.1% - 500 1,000 1,500 2,000 2,500 3,000 Medicaid MH/ DD/ SAS Child Development Social Services Public Health All Other DHHS Programs Total: $ 4,265 Figure 8 Recommended Expansion Appropriations by Activity Health and Human Services, 2006- 07 ($ mil) 89 30 17 13 8 3 2 8.2% 4.7% 1.9% 1.0% 10.3% 18.8% 55.1% - 10 20 30 40 50 60 70 80 90 100 MH/ DD/ SAS Child Develpment At Risk Children Public Health Early Intervention Elder Care Residential Schools Total: $ 162 15 Governor Easley remains committed to fostering long- term economic growth and enhancing the state’s aggressive strategies for creating jobs. In addition, the governor’s budget recommendations focus on restoring and maintaining the state’s transportation infrastruc-ture and promoting public transit initiatives as key components for continued economic growth. The One North Carolina Fund Provide $ 10 million to recruit new businesses or support industries interested in significantly expanding in the state. The One North Carolina Small Business In-novation Research Program Appropriate $ 5 million as incentive funding for small businesses to apply for federal innovation re-search grants. The program reimburses applicants 50% of the costs of preparing and submitting a proposal and also helps bridge the funding gap between proposal completion and initiation of an award, up to an annual limit of $ 100,000. Motor Sports Program Fund the promotion of motor sports, an industry contributing more than $ 5 billion annually to North Carolina’s economy with its 24,400 jobs. Establish a sales tax exemption for racing- vehicle components. Biotechnology Provide $ 2 million for the North Carolina Bio-technology Center to help the state remain an internationally recognized biotechnology leader. Approve $ 480,000 for community college biotech-nology programs. Appropriate $ 4.5 million for biomanufacturing research and training at North Carolina State Uni-versity and North Carolina Central University. • • • • • • • North Carolina as a Business Location Allocate $ 1.5 million to advertise and promote North Carolina as a location for business and industry in order to help stem job losses and com-pete with neighboring states and foreign countries. Establish a research and development sales tax reduction. North Carolina Housing Trust Fund Add $ 5 million in recurring dollars for the Hous-ing Trust Fund to help families secure safe, decent, and affordable homes, create jobs, increase state and local tax revenues, and leverage millions of dollars in additional business investment. Transportation Provide an additional $ 83 million ( a 44% increase over the previous year) in contract resurfacing funds to address degrading pavement conditions. Approve $ 57 million for highway system preser-vation and maintenance, including pavements, bridges, and traffic signal systems. Appropriate an additional $ 10 million ( a 29% increase over the previous year) in small urban construction funds for use statewide for economic development, spot safety, or transportation im-provement projects. Allocate a $ 9.4 million increase ( 14% over the previous year) in public transportation funding to provide access to dial- a- ride services for citizens, operating costs of fixed- route systems, and ad-ditional state matching of federal funds for public transportation initiatives. Approve a $ 2 million increase ( 15% over the pre-vious year) in state aid to assist rural airports with capital improvements critical to attracting new business and industry to local communities. Provide $ 2 million for short- line railroad rehabili-tation projects. • • • • • • • • • Economic Development and Infrastructure Major Recommendations 16 Improving the court system and community public safety are key aspects of Governor Easley’s budget recommendations. Criminal Investigation Resources Allocate $ 1.5 million for the State Bureau of Investigation to fund new field agent and crime lab positions to improve conviction rates related to identify theft, child exploitation on the Internet, and methamphetamine and other drug trafficking. Provide initial funding of $ 1.9 million for needed replacement of the Statewide Automated Finger-print Identification System, which is essential for solving crimes and conducting criminal back-ground checks. Public Safety Include $ 1.4 million to fund emergency manage-ment staff and logistics operations to improve emergency planning, response, and recovery capabilities. Provide $ 1.4 million to enable the state to monitor convicted sex offenders with Global Positioning System technology and to increase public aware-ness of offenders establishing residency in North Carolina communities. Add $ 1.5 million for additional State Highway Patrol troopers and support staff to reduce fatal ve-hicle collisions and increase enforcement visibility. Provide $ 10 million for improved communica-tions between public safety agencies by expanding the statewide interoperable voice radio network ( VIPER). Appropriate $ 2.5 million to expand prison bed capacity to meet both current and future projected inmate population needs. Approve $ 150,000 to ensure trained response teams are in place statewide to protect the public from incidents involving hazardous materials. • • • • • • • • Provide an additional appropriation of $ 620,000 for services of urban search and rescue teams and swift water rescue teams. Fund $ 1.3 million to help reduce repeat criminal offenses by substance abusers. Court System Improvements Fund a $ 9.5 million increase to expand the num-ber of prosecutors, judges, and support staff to reduce case backlogs and process child custody and criminal cases more expeditiously. Provide $ 5.5 million to support new and existing technology initiatives, including a statewide war-rant repository, electronic filing for civil cases, an electronic traffic court, and an electronic payment system for court fees. Allocate $ 5.3 million to improve overall operating efficiency by replacing outdated technology and office equipment essential for court operations. Approve $ 820,000 to expand custody mediation and guardian ad litem programs to protect chil-dren involved in custody, abuse, and neglect cases. Financial Assistance Include $ 500,000 for Operation ROTC ( Reaching Out to Children) for extended day care needed by military dependents when spouses are deployed. Provide $ 700,000 in additional funding for the Crime Victims Compensation Fund so that lost wage and hospital expense payments to victims of crime will be awarded faster. Add $ 500,000 in increased funding for commu-nity programs that reach out to delinquent and at-risk youth to continue to improve recidivism rates. • • • • • • • • • Courts and Public Safety Major Recommendations 17 Governor Easley’s budget recommendations reflect his belief in protecting and preserving the state’s natural heritage through land and water conservation and enforcement of clean smokestack legislation and other environmental laws. Water Resources Provide $ 467,000 for seven inspectors to monitor construction sites to prevent further water pollu-tion from sediment and erosion. Allocate $ 500,000 for the expansion of the Con-servation Reserve Enhancement Program ( CREP) into additional watersheds in need of riparian buf-fers and restored wetlands. Provide $ 500,000 for the cleanup of orphan haz-ardous sites throughout the state. These sites will then be converted to safe uses. Approve $ 2.9 million for the Drinking Water State Revolving Fund as a 20% state match for $ 14.5 million in federal funds. The primary purpose of the fund is to provide low interest loans for water supply infrastructure improvements. Fund $ 3.2 million to provide a 20% match as a condition of the EPA Capitalization Grants for the Clean Water State Revolving Fund programs. The funding allows local governments to address their wastewater treatment needs more efficiently and to improve North Carolina’s water quality. Provide $ 2.4 million for private well construc-tion. The funding will support the enforcement of standards for private well construction and provide incentive funds for new county well programs. Allocate $ 259,067 to support and maintain the Basinwide Information Management System ( BIMS) by establishing three additional staff positions. BIMS is the result of Water Quality Division efforts to consolidate essential regulatory agency data into one database. • • • • • • • One North Carolina Naturally Initiatives Provide $ 277,527 to establish four coastal habitat protection Compliance Coordinator positions to concentrate on permit monitoring, enforcement, and compliance activities, thereby allowing exist-ing field staff to focus on permit delivery activities. Appropriate $ 333,778 to soil and water conser-vation districts and counties to implement best management practices for water quality. Approve $ 400,000 to help agricultural producers implement best management practices on private agricultural lands to improve water quality. Appropriate $ 563,695 to encourage private wood-land owners to reforest their land after harvest and to plant trees on idle or unproductive land, thus ensuring future timber supplies while providing environmental protection to the state’s woodlands. Provide $ 375,000 to implement the Coastal Rec-reational Fishing License Program ( CRFL). Agriculture Approve $ 250,000 to fund three positions to ad-dress the threat of avian influenza, exotic New-castle disease, bovine spongiform encephalopathy, and any other emerging or potential foreign animal diseases. Provide $ 345,000 for eight positions to provide increased protection of the food supply by inspect-ing slaughterhouses and processing plants and surveying food samples. Appropriate $ 350,000 to offset deficits of state farms in transitioning from production facilities to research facilities. Approve $ 58,323 to establish an Export Certifica-tion Specialist position to provide technical help to North Carolina producers sending raw agricultural products to markets outside of the United States. • • • • • • • • • Environment and Agriculture Major Recommendations 18 Governor Easley recommends a balanced capital financing package, using a combination of pay- as- you-go and debt sources to prevent the state from an over-burdened debt capacity and critical project delays. The proposed capital budget totals approximately $ 764.2 million, including $ 329.5 million from General Fund appropriations, $ 20 million in revenue bonds, $ 245 million in special financing, and $ 169.7 million from receipts. In addition, $ 200 million is recommended for the Repair and Renovation Reserve. Education Appropriate $ 27 million to expand the School of Nursing at UNC- Wilmington. Approve $ 61 million for the Engineering Complex III at North Carolina State University to continue the relocation of the College of Engineering to Centennial Campus. Provide $ 45.8 million for a new UNC- Charlotte classroom building to house graduate and profes-sional education programs. Public Health Approve the issue of $ 101 million in special financing to construct a new public health lab and office for the Chief Medical Examiner. Appropriate $ 8 million from the General Fund to combine with a $ 16 million federal grant to con-struct two skilled- care nursing homes for North Carolina’s veterans. Justice and Public Safety Provide $ 8.5 million to construct an Emergency Operations Center within the new National Guard Readiness Center. Approve $ 151.7 million, including $ 144 mil-lion in special financing and $ 7.9 million from receipts, to build a Regional Medical Center and a Mental Health Center at North Carolina’s Central Prison in Raleigh. • • • • • • • Natural and Economic Resources Approve $ 106.4 million, including $ 18.5 million in appropriations and $ 87.9 million in federal and local matching funds, for water resources develop-ment projects. Appropriate $ 15 million for land acquisition to expand Chimney Rock State Park. Provide $ 7.5 million from the General Fund to add to $ 16.6 million in receipts to buy two new container cranes for the Port of Wilmington. Appropriate $ 1.5 million to combine with $ 1 mil-lion in gifts and grants for the Children’s Discov-ery Center to expand interactive and educational exhibits at the North Carolina Zoo. Approve $ 10 million to add to $ 40 million in gifts and grants for the Nature Resource Center, a Museum of Natural Sciences annex to engage teachers, students, and the public in interactive scientific research. General Government Appropriate $ 40 million to expand the Museum of Art to showcase new collections and programs. Approve the issue of $ 20 million in revenue bonds for a new parking deck in the downtown complex. Provide $ 50 million to construct a new building to consolidate Department of Environment and Natural Resources offices. • • • • • • • • Capital Improvements Major Recommendations Figure 9 Recommended Capital Funding 2006- 07 329.5 ($ mil) 20.0 245.0 169.7 0 50 100 150 200 250 300 350 General Fund Revenue Bonds Special Financing Receipts Total: $ 764.2 million 19 Teachers and State Employees Major Recommendations Appropriate $ 323 million as a step increase plus a $ 2,250 flat increase for public school teachers, equaling an average 8% increase. The $ 323 mil-lion includes $ 8.8 million as nonrecurring salary increases for school personnel at the top of the scale. The proposal also includes an average 7% increase for principals and assistant principals. ( See figure 10.) Provide $ 8.6 million to increase the minimum hourly or monthly salary of noncertified public education employees to the state employee mini-mum. Approve $ 244 million for a 4% salary increase for all other state employees, including community college faculty and professional staff. Provide $ 28 million for an additional 4% increase • • • • Source: 1997- 99 to 2005- 06 Highlights of the North Carolina Public School Budget February 2006, Information Analysis NCDPI. Note: 2006- 07 to 2008- 09 National projections based upon National Education Association figures. Figure 10 Average Teacher Compensation 1998 - 2009 $ 30,000 $ 35,000 $ 40,000 $ 45,000 $ 50,000 $ 55,000 1997- 98 1998- 99 1999- 00 2000- 01 2001- 02 2002- 03 2003- 04 2004- 05 2005- 06 2006- 07 2007- 08 2008- 09 Salary - 2% 0% 2% 4% 6% 8% 10% 12% Percent Change NC US NC Percent Change US Percent Change ( 8% total) for community college faculty and pro-fessional staff to attract and retain highly qualified personnel. Allocate $ 48 million for a 3.7% cost- of- living ad-justment ( COLA) for retirees of the Teachers’ and State Employees’ Retirement System. Approve $ 30 million to repay funds withheld from the Retirement System in the 2001- 02 budget crisis. This repayment is the fourth in the five- year payback period. Allocate $ 20 million to the Salary Adjustment Fund. This fund provides salary adjustments for job groups with state salaries that are not competi-tive in the market place and increases where the state is having difficulty recruiting and retaining employees. • • • 20 Economy and Revenue by Topic Economy Outlook for the Nation and State Revenue General Fund Revenue Forecast Highway Fund Revenue Highway Trust Fund Revenue 21 22 Economy Outlook for the Nation and State Review of 2004- 05 Continued strong growth in U. S. economy. After gathering momentum in 2002- 03 and 2003- 04, the U. S. economy continued to expand at a solid pace in 2004- 05. This growth was fueled by consumer spending and business investment. The labor market improved drastically after several years of minimal growth. Real Gross Domestic Product ( GDP) grew strongly during 2004- 05. The value of all goods and services produced within the U. S., adjusted for inflation, grew at 3.7%. Most components of demand that accounted for growth in 2003- 04, such as consumer spending, business investment, and exports, continued to grow in 2004- 05. Hiring picked up. Employers created roughly two million new jobs, while the unemployment rate declined to 5.1% by the end of 2004- 05 ( down 0.5 percentage point from the previous year). The service sector accounted for most of the job growth, while the manufacturing sector continued to lose jobs. Consumers continued to spend more. Despite a gradual cooling in the housing market, solid job growth and rising household incomes drove con-sumer spending. Total personal income increased by 6.3% in 2004- 05, while wages and salaries increased 2.4%. Consumer spending grew 3.7%. The federal funds rate increased. The Federal Reserve continued to move toward a neutral monetary policy stance. The federal funds rate was gradually increased to its current level of 4.75%. Overall inflation, as measured by the Consumer Price Index, increased very slightly during 2004- 05 to 3.0%. Core inflation, which excludes food and energy prices, remained in the 2% range. Solid growth in North Carolina’s economy. The North Carolina economy continued to expand as the labor market strengthened. Employers added jobs and • • • • statewide unemployment dropped significantly from its recession peak in the spring of 2002 ( see figures 11 and 12). Nonagricultural employment increased by 62,650 jobs or 1.7% in 2004- 05. The service sector fueled employment gains. Consistent with the trend in recent years ( see figure 13 and table 5), the service sector experi-enced outstanding job growth. In particular, the professional/ business and education/ health services sectors were the main drivers of this expansion. After growth of 3.2% in 2003- 04, the education and health sector gained another 4.1% in 2004- 05. Building on the 0.6% gain in 2003- 04, the professional and business services sector increased employment by 3.7% in 2004- 05. While job growth has been a bit more inconsistent in the leisure and hospitality services, the sector realized a 1.7% growth. The pace of manufacturing employment losses slowed. While the state’s manufacturing sector continued to lose jobs in 2004- 05, the 0.5% loss was the lowest since 1997- 98. Outlook for 2006 and 2007 Continued growth expected in U. S. economy. The U. S. economy is off to a strong start in 2006. The value of all goods and services produced within the U. S., adjusted for inflation, grew at 4.8% in the first quarter ( one of the strongest quarters in the recent past). The labor market also continues to grow as employers add jobs. While rising energy prices and the weakening housing market are a concern, most economic forecasts project steady growth for the remainder of 2005- 06 and 2006- 07. Highlights of this economic outlook include the following: Real GDP is expected to increase by 3.2% in both 2006 and 2007. The labor market should continue its steady per-formance, as an average of 182,000. nonagricultural jobs is expected to be added dur- • • • • 23 Source: Labor Market Information, Employment Security Commission Figure 11 NC Unemployment Rate Falls Significantly Percent Unemployed 6.8 6.4 5.6 5.1 4.5 0 1 2 3 4 5 6 7 8 March 2002 March 2003 March 2004 March 2005 March 2006 Source: Labor Market Information, Employment Security Commission Figure 12 NC Employment Expands Total Nonfarm Employment ( 000s) 2002 to 2006 3,828.4 3,776.9 3,786.5 3,879.6 3,947.1 3650 3700 3750 3800 3850 3900 3950 4000 March 2002 March 2003 March 2004 March 2005 March 2006 24 Source: Labor Market Information, Employment Security Commission Figure 13 Nonfarm Employment by Category Percent of Total 0 5 10 15 20 25 Trade, Transportation, and Utilities Government Manufacturing Education and Health Services Professional and Business Services Leisure and Hospitality Services Construction Financial Activities Other Services Other 1995 2000 2005 Category 1995 2000 2005 Trade, Transportation, and Utilities 19.6 19.1 18.8 Government 15.9 15.8 17.0 Manufacturing 23.7 19.3 14.5 Education and Health Services 8.8 9.6 11.9 Professional and Business Services 9.0 11.2 11.3 Leisure and Hospitality Services 8.0 8.2 9.1 Construction 5.1 5.8 5.9 Financial Activities 4.2 4.6 5.0 Other Services 3.6 4.1 4.4 Other 2.1 2.3 2.1 Table 5 Annual Nonfarm Employment by Category Percent of Total Source: Labor Market Information, Employment Security Commission 1995, 2000, and 2005 Percent of Total 25 ing the final two quarters of fiscal year 2006. Job gains in 2007 are expected to average 149,000 per month. The unemployment rate is projected to remain at 4.8% in 2006, while increasing slightly to 4.9% in 2007. Inflation is expected to remain near 2.5% over the rest of 2006 and 2007. Core inflation, which excludes food and energy, is expected to increase slightly over the next two years. The federal funds rate is expected to reach 5.25% by the end of June, as the Federal Reserve Bank continues to move toward a neutral monetary policy stance. After a sluggish fourth quarter in 2005, consumer spending jumped 5.1% in the first quarter of 2006. Consumer spending is expected to grow at 3.1% for the remainder of 2006 before falling below 3.0% in 2007 due to higher interest rates and a projected slowdown in the housing market. Large corporate profits and positive perceptions of the economic outlook are expected to increase busi-ness investment over the next two years. Business investment is expected to increase by 9.1% and 6.4% in 2006 and 2007. Continued expansion expected in North Caro-lina. Driven by growth in the services sector, the state’s economy is expected to expand and build on the employment growth momentum generated in 2004- 05. This growth, combined with business investment and an increase in wages, is expected to fuel North Carolina’s expansion. Economists’ projections for the state’s economy in 2005- 06 and 2006- 07 include these forecasts: Personal income is expected to outpace the U. S. in 2006- 07 after falling slightly behind the U. S. growth in 2005- 06 ( see figure 14). Employment growth is expected to remain con-sistent with that of the nation. Nonagricultural employment is forecasted to expand 1.5% in 2005- 06, followed by 1.7% growth in 2006- 07 ( see figure 15). Professional and business services employment is expected to expand 4.6% in 2005- 06 and 4.2% in 2006- 07. • • • • • • • Employment in the leisure and hospitality services sector is forecasted to grow 2.6% in 2005- 06 and 3.1% in 2006- 07. Construction employment is expected to slow in 2005- 06 and 2006- 07, growing at 2.5% and 1.2%, respectively. High- tech manufacturing is forecasted to help limit manufacturing losses in 2005- 06 to 1.6% followed by losses of 1.9% in 2006- 07. • • • Data for fiscal years 2006 and 2007 are forecasts. Source: Global Insight Figure 15 State Maintains Employment Growth Percentage Growth in Nonagricultural Employment - 3 - 2 - 1 0 1 2 3 4 FY99 FY00 FY01 FY02 FY03 FY04 FY05 FY06 FY07 North Carolina U. S. Data for fiscal years 2006 and 2007 are forecasts. Source: Global Insight, U. S. Bureau of Economic Analysis Figure 14 State Income Expected to Exceed U. S. Percentage Growth in Personal Income 0 1 2 3 4 5 6 7 8 FY99 FY00 FY01 FY02 FY03 FY04 FY05 FY06 FY07 North Carolina U. S. 26 Revenue General Fund Forecast About half of North Carolina’s total revenue originates from tax collections and other sources comprising the General Fund. The other half consists of funds from the federal government, highway funds, the education lottery, and other receipts and fees ( e. g., tuition). General Fund revenues are primarily derived from three major sources: individual income tax, corporate income tax, and the sales and use tax. Other important sources include franchise, insurance, alcohol, and other miscellaneous taxes. In addition, nontax revenues, such as earnings from investment of state funds, also sup-port the General Fund. Forecast reflects the state’s growing economy. As the North Carolina economy has expanded, Gen-eral Fund tax revenue growth has exceeded expecta-tions. Through the first nine months of 2005- 06, total General Fund revenues ( including nontax receipts and transfers from the Highway Trust Fund) rose 9.7% to $ 12,324.3 million, about $ 400 million above expecta-tions. By the end of 2005- 06, it is currently projected that General Fund revenue collections will total $ 17,890.7 million. Baseline General Fund revenue growth is expected to be 3.2% in 2006- 07. Recognizing the strong economic forecast, General Fund revenue for 2006- 07 is adjusted upward by $ 273.4 million ( net of tax cuts). Table 6 details this revised estimate for 2006- 07, adjusted for the recommended tax changes discussed below. It also shows the projected General Fund revenue for 2005- 06 and the certified budgeted revenue for 2005- 07. For each of the major categories of General Fund rev-enue, the current performance and 2006- 07 baseline forecast are discussed below, along with any recom-mended tax changes. Individual income taxes. Through the first three quarters of 2005- 06, net individual income tax receipts totaled $ 6,312.7 million, about $ 136 million above the official estimate. Individual income tax receipts of $ 9,390.4 million are expected for the fiscal year, an increase of 11.7% over the previous fiscal year. This growth is fueled by North Carolina’s strong employment gains over the past year. In particular, the professional and business services and the education and health services sectors have driven this expansion. In 2006- 07, the strong job market is expected to continue to lead growth in individual income tax collections. Baseline growth is expected to be 3.2% in 2006- 07. Tax changes will also affect individual income tax col-lections. The Governor recommends that the General Assembly enact a state tax credit for adoption expenses, effective January 1, 2006, based on the existing federal tax credit. The state credit would equal 50% of the federal adoption tax credit claimed in the tax year. Families who adopt children would save an estimated $ 3 million from the credit. Adjusting for the tax change, growth in individual income tax collections is expected to be $ 295.2 million in 2006- 07. Sales and use taxes. Sales and use tax collections exceeded the official forecast by $ 143.5 million in the first three quarters of 2005- 06. By the end of 2005- 06, growth in total sales and use tax collections is expected to be 10.8% above 2004- 05. For 2006- 07, baseline growth in sales tax collections is expected to equal 4.1%. The following changes are also expected to affect col-lections from sales and use taxes. Sales tax rate reduced by 0.25%. To provide relief to taxpayers, the Governor recommends reducing the state sales tax rate from 4.5% to 4.25%, effective October 1, 2006. There is a commensurate reduction of 0.25% in state taxes on telecommunications and satellite television. This reduction is expected to save taxpayers $ 196.5 million in 2006- 07. 27 Motor sports exemption. The Governor recommends refunding $ 3.2 million in sales taxes to professional motor sports racing teams for racing- vehicle parts and equipment. This refund will help increase the state’s leadership position in building its $ 5.9 billion motor sports industry. Sales tax reduction for research and development. To support and encourage research and development, the Governor recommends reducing the sales tax on equip-ment used for research. This reduction is expected to save taxpayers $ 4 million in 2006- 07. Adjusting for these tax changes, collections of sales and use taxes are expected to be $ 4,972.6 million in 2006- 07. Corporate income taxes. Corporate income tax receipts for 2005- 06 reflect the strong business climate in North Carolina. Through the first quarter of 2006, corporate income tax receipts were up 7.7%, exceeding the official estimate by $ 132 million. Recognizing the historical volatility and cyclical nature of this revenue source, baseline corporate income tax receipts are expected to decrease 6.2% in 2006- 07. 28 2005- 06 2005- 06 2006- 07 2006- 07 Certified Revised Certified Revised Budgeted Estimate Budgeted Estimate * Tax Revenue Individual Income $ 8,839,760,000 $ 9,390,400,000 $ 9,399,150,000 $ 9,685,600,000 Corporate Income 905,940,000 1,137,600,000 910,870,000 1,067,200,000 Sales and Use 4,692,700,000 4,972,400,000 4,915,325,000 4,972,600,000 Franchise 493,800,000 480,100,000 520,450,000 506,750,000 Insurance 441,700,000 451,400,000 485,600,000 490,400,000 Tobacco Products 161,274,000 169,900,000 231,171,000 232,000,000 Beverage 195,950,000 196,900,000 202,550,000 203,000,000 Inheritance 137,900,000 138,600,000 139,300,000 139,300,000 Licenses 46,300,000 42,500,000 47,500,000 43,700,000 Mill Machinery 16,600,000 11,400,000 40,000,000 32,400,000 Piped Natural Gas 35,500,000 32,800,000 35,900,000 33,200,000 Gift 20,000,000 15,700,000 22,500,000 18,200,000 Freight Car Lines 540,000 200,000 540,000 200,000 Miscellaneous 560,000 300,000 560,000 300,000 Total Tax Revenue $ 15,988,524,000 $ 17,040,200,000 $ 16,951,416,000 $ 17,424,850,000 Nontax Revenue Investment Income 74,800,000 114,200,000 78,700,000 108,700,000 Judicial Fees 161,725,771 155,700,000 168,605,271 162,600,000 Disproportionate Share Receipts 100,000,000 91,200,000 100,000,000 100,000,000 Insurance Department 49,889,013 52,400,000 51,543,813 53,000,000 Miscellaneous 188,801,932 182,200,000 202,719,921 178,307,275 Total Nontax Revenue $ 575,216,716 $ 595,700,000 $ 601,569,005 $ 602,607,275 Transfers Highway Fund 2,200,000 2,200,000 - - Highway Trust Fund 252,558,117 252,558,117 252,663,009 51,599,027 Total Transfers $ 254,758,117 $ 254,758,117 $ 252,663,009 $ 51,599,027 Total General Fund Revenue $ 16,818,498,833 $ 17,890,658,117 $ 17,805,648,014 $ 18,079,056,302 Table 6 General Fund Revenue Detailed Revised Estimates for 2005- 06 and 2006- 07 Totals may differ from the sum of their parts due to rounding. * Net of tax cut proposals 29 Figure 16 General Fund Revenue Revised Estimates for 2006- 07 Individual Income Tax 53% Corporate Income Tax 6% Sales and Use 28% Franchise 3% Insurance 3% Other Tax Revenue 4% Highway Trust Fund Transfer 0% Nontax Revenue 3% Percent Change 2005- 06 2005- 06 2006- 07 2006- 07 2005- 06 to Budget Revised Difference Budget Revised Difference 2006- 07 Individual Income Tax 8,840 9,390 551 9,399 9,686 286 3.1% Corporate Income Tax 906 1,138 232 911 1,067 156 - 6.2% Sales and Use 4,693 4,972 280 4,915 4,973 57 0.0% Franchise 494 480 ( 14) 520 507 ( 14) 5.6% Insurance 442 451 10 486 490 5 8.6% Other Tax Revenue 615 608 ( 6) 720 702 ( 18) 15.5% Nontax Revenue 575 596 20 602 603 1 1.2% Highway Trust Fund Transfer 255 255 0 253 52 ( 201) - 79.7% Total Revenues 16,818 17,891 1,072 17,806 18,079 273 1.1% Unreserved Credit Balance 771 Total Availability 18,850 Table 7 General Fund Revenue Revised Estimates for 2005- 06 and 2006- 07, ($ mil) Totals may differ from the sum of their parts due to rounding. 30 The Highway Fund receives its support from three pri-mary sources: ( 1) three- fourths of the motor fuel taxes collected by the Department of Revenue, 2) licenses and fees collected by the Division of Motor Vehicles, and 3) interest earned from investments of the High-way Fund cash balance held by the State Treasurer. In 2005, the North Carolina General Assembly autho-rized an increase in many of the licenses and fees col-lected under the Highway Fund. Some of these licenses and fees were last adjusted in 1981. The certified rev-enue increase from the Highway Fund fee package was $ 105.78 million for 2005- 06 and $ 144.64 million for 2006- 07. As of March 2006, revenue collections from the fee package exceeded projections by $ 15.3 million. As for motor fuel tax collections for the same period, revenues were up 1.2% or $ 9.4 million over budget. The increase in motor fuel tax collections resulted from higher motor fuel prices at the pump. For 2006- 07, total Highway Fund revenue is expected to reach $ 1,767.1 million, an increase of 4.1% over the amount certified for 2006- 07. Demand for fuel is expected to remain strong in 2006- 07, despite high fuel prices. Consequently, motor fuel tax collections are expected to increase 5.9%. Licenses and fees are expected to show a slight decline of 2.5% in total collections for 2006- 07. The increase in the rate of growth in the motor fuels tax for 2006- 07 is the result of the rising wholesale price of motor fuels and increas-ing the variable component of the motor fuels tax rate in 2005- 06. For the period, investment income will be flat at $ 8.0 million. The decline in licenses and fees is a result of slower than expected revenue collections in staggered registration. The transfer of $ 17.6 million from the General Fund to the Highway Fund is to hold the Highway Fund harmless from a freeze in the variable component of the excise tax on motor fuels at the January 2006 base rate. Revenue Highway Fund Total excludes transfers to or from the General Fund Figure 17 Highway Fund Revenue Collections 2006- 07 Other Licenses and Fees 2.7% Investment Income 0.5% Truck Licenses 6.6% Motor Fuel 67.1% Gasoline Inspection and Highway Usage Registration 0.9% Staggered Registration 12.2% International Registration Plan ( IRP) 3.8% Driver Licenses 6.3% 31 2005- 06 2006- 07 2006- 07 2006- 07 Source Certified Certified Adjustments Revised Motor Fuels Tax Motor Fuels $ 1,087,640,000 $ 1,107,180,000 66,147,275 $ 1,173,327,275 Gasoline Inspection 15,000,000 15,450,000 ( 150,000) 15,300,000 Highway Use Reg. 160,000 160,000 - 160,000 Total Motor Fuel Taxes 1,102,800,000 1,122,790,000 65,997,275 1,188,787,275 Percent Change 13.10% 1.81% 5.9% Licenses and Fees Staggered Registration 214,098,050 236,607,067 ( 23,667,067) 212,940,000 International Registration Plan 62,256,816 67,809,104 ( 1,579,104) 66,230,000 Driver Licenses 107,762,811 119,416,209 ( 8,376,209) 111,040,000 Truck Licenses 87,487,148 95,555,438 19,184,562 114,740,000 Other Licenses and Fees 45,115,175 47,762,182 ( 22,182) 47,740,000 Total License and Fees 516,720,000 567,150,000 ( 14,460,000) 552,690,000 Percent Change 21.04% 9.76% - 2.5% Investment Income 8,000,000 8,000,000 - 8,000,000 Percent Change - 16.35% 0.00% 0.0% Total Highway Fund Revenue 1,627,520,000 1,697,940,000 51,537,275 1 ,749,477,275 Transfer from General Fund * 17,662,725 17,662,725 Total Highway Fund Availability $ 1,627,520,000 $ 1,697,940,000 $ 69,200,000 $ 1,767,140,000 Percent Change 15.30% 4.33% 4.1% * Transfer from General Fund to hold Highway Fund harmless from capping variable component of Motor Fuels Tax at the January 1, 2006 rate for 2006- 07. Table 8 Highway Fund Recommended Budget Adjustments, 2006- 07 Revenue Availability 32 Established in 1989, the Highway Trust Fund receives support from four primary sources: 1) one- fourth of motor fuel tax collections, 2) highway use tax collec-tions from the sales of motor vehicles in excess of the amount transferred to the General Fund, 3) title fees and various registration fee collections, and 4) interest earned from investment of the Highway Trust Fund cash balance held by the State Treasurer. In 2005, the North Carolina General Assembly autho-rized an increase in the fees collected under the High-way Trust Fund. The fees were last adjusted in 1989. The certified revenue increase from the Highway Trust Fund fee package was $ 13.37 million for 2005- 06 and $ 18.27 million for 2006- 07. As of March 2006, revenue collections from the fee package were down $ 34.7 million over projected collections. For the same period, motor fuel tax collections were up $ 2.8 million or 1.1% of budget. The greatest decline in Highway Trust Fund revenues occurred in the highway use tax, where revenues were down $ 28.3 million or 6.2% of budget. The decline in highway use tax collections resulted from slow vehicle sales. Highway Trust Fund revenue is expected to total $ 1,100.6 million in 2006- 07 or 3.1% less than the amount certified for 2006- 07. In spite of higher fuel prices at the pump, the motor fuels tax collections are expected to increase by 6.2% due to continued fuel consumption. As a result of declining auto sales, highway use tax collections are expected to decline 8% from the previously certified amount for 2006- 07. Revenues from title fees are expected to show little change. Interest on investments is expected to show a significant decline as a result of decreases in cash bal-ances. The transfer of $ 5.8 million from the General Fund to the Highway Trust Fund is to hold the trust fund harmless from a freeze in the variable component of the excise tax on motor fuels at the January 2006 base rate. After a reduction of $ 195.2 million in transfers to the General Fund, the available balance in the Highway Trust Fund is expected to be $ 1,043.1 million. Revenue Highway Trust Fund Total excludes transfers to or from the General Fund Figure 18 Highway Trust Fund Revenue Collections 2006- 07 Interest on Investments 0.2% Miscellaneous Title Fees 1.6% Certificate of Title Fees 8.5% Highway Use 53.9% Motor Fuels Tax 35.7% 33 2005- 06 2006- 07 2006- 07 2006- 07 Source Certified Certified Adjustments Revised Motor Fuels Tax $ 362,590,000 $ 369,170,000 $ 21,942,425 $ 391,112,425 Highway Use 611,090,000 639,810,000 -$ 49,410,000 590,400,000 Certificate of Title Fees 95,801,827 101,193,164 -$ 7,613,164 93,580,000 Miscellaneous Title Fees 17,248,173 19,266,836 -$ 2,116,836 17,150,000 Subtotal 1,086,730,000 1,129,440,000 - 37,197,575 1,092,242,425 Percent Change 8.95% 3.93% - 3.3% Interest on Investments 6,500,000 6,500,000 - 4,000,000 2,500,000 Percent Change 0.22% 0.00% - 61.5% Total Highway Trust Fund Revenue 1 ,093,230,000 1 ,135,940,000 - 41,197,575 1,094,742,425 Transfer from General Fund1 - - 5,887,575 5,887,575 Total Highway Fund Availability 1,093,230,000 1,135,940,000 - 35,310,000 1,100,630,000 Percent Change 8.90% 3.91% - 3.1% Transfer to General Fund2 252,558,117 252,663,009 - 195,176,407 57,486,602 Balance Available $ 840,671,883 $ 883,276,991 $ 1,043,143,398 2 Transfer required by G. S. 105- 187.9 ( Includes reduction of $ 115 million to allow for repayment of outstanding loan balance from 2002- 03). Revenue Availability Table 9 Highway Trust Fund 1 Transfer from General Fund to hold Highway Trust Fund harmless from capping variable component of Motor Fuels Tax at the January 1, 2006 rate for 2006- 07. Recommended Budget Adjustments, 2006- 07 34 Recommended Appropriations General Fund Education General Government Health and Human Services Justice and Public Safety Natural and Economic Resources 35 36 Public Education ( 13510) Total Appropriations and Positions 2006- 07 Certified 2006- 07 Recommended Percentage Change Requirements $ 7,652,962,737 $ 7,909,034,556 3.3 % Receipts 1,073,155,640 1,201,652,474 12.0 % Appropriation $ 6,579,807,097 $ 6,707,382,082 1.9 % Positions 507.200 519.200 2.4 % Appropriation Items -- Recommended Adjustments Technical Adjustments 2006- 07 1. Average Daily Membership Positions, textbooks, instructional equipment, and supplies allocated to the public schools are budgeted on the basis of average daily membership ( ADM) of students in the classroom. The revised ADM estimate for 2006- 07 is an increase of 18,363 over the 1,417,112 ADM in the continuation budget, and a 38,103 increase over 2005- 06. This recommended appropriation supports the ADM increase and includes a 2,000 ADM reserve due to military base closings. Receipts from the Highway Fund for the Driver Education program are adjusted by $ 457,971 due to a projected increase in ADM in the ninth grade. Requirements $ 76,757,787 Receipts $ 457,971 Appropriation $ 76,299,816 2. Average Annual Salary Adjustment An adjustment is recommended to revise budgeted average annual salaries using actual 2005- 06 sixth pay period salaries as the base. This adjustment is made annually after reviewing budgeted salary projections for all certified personnel. Typically, because of turnover in these positions, the actual salaries are lower than budgeted salaries and a reduction is made accordingly. This recommended adjustment does not reduce teacher salaries. Appropriation ($ 56,180,428) Recommended Budget Adjustments, 2006- 07 General Fund Public Education 37 3. Reprogram Class Size Appropriation It is recommended that $ 127.9 million of the 2006- 07 budget for class size be reprogrammed to lottery proceeds, consistent with legislation establishing and directing the use of proceeds from the NC Education Lottery. The General Fund money that has been fronted for this purpose is redirected to pay for increased public school teacher salaries. Requirements - Receipts $ 127,864,291 Appropriation ($ 127,864,291) Total Recommended Technical Adjustments Recurring Requirements $ 20,577,359 Receipts 128,322,262 Appropriation ($ 107,744,903) Number of Positions - Nonrecurring Requirements - Receipts - Appropriation - Number of Positions - Expansion 2006- 07 Quality Teachers, Quality Pay 1. Teacher and Administrator Compensation Funds are recommended in the Compensation Reserve for employees paid on the teacher salary schedule or the principal and assistant principal salary schedule in schools operated by local boards of education, the Department of Health and Human Services, the Department of Correction, the Department of Juvenile Justice, and the North Carolina School of Science and Mathematics. These funds will provide for movement on the salary schedule based on years of experience, and will increase the salary schedule base by $ 2,250. Teachers will receive an average increase of 8% and administrators 7% in 2006- 07. Employees at the top of their respective salary schedules and who therefore do not receive a step increase shall be paid a one- time bonus. The funds for this are shown in the Reserves Section of this document. Recommended Budget Adjustments, 2006- 07 General Fund Public Education 38 2. School- Based Incentive Awards Under the ABCs Program The ABCs initiative directs that each year a school must assure that students receive a year's worth of education for a year of instruction. Nonrecurring funds in the amount of $ 90 million are recommended for awards earned in the 2005- 06 school year and awarded in fall 2006. This recommended appropriation will maintain the current incentive levels based on the implementation of the new growth model. Appropriation - Nonrecurring $ 90,000,000 Recruiting and Retaining Quality Teachers 1. Online Professional Development Resource Center The Online Professional Development Resource Center is a web portal that catalogues professional development opportunities available to teachers and administrators. The portal includes searchable databases of professional development providers and criteria for determining quality of professional development offerings. A $ 100,000 nonrecurring appropriation is recommended for placement in a reserve in the NC Professional Teaching Standards Commission budget. Funding for the IT project will be released upon approval of the State Budget Director and the Chief Information Officer. The Professional Teaching Standards Commission will report to the State Board of Education no later than March 15, 2007. Appropriation - Nonrecurring $ 100,000 Investing More Resources and Demanding More Accountability 1. Full Support for Low Wealth Supplemental Funding The Low Wealth Funding Formula provides supplemental funds based on a county's ability to generate revenue to enhance the instructional program and student achievement throughout the state. This appropriation increases the funding to local education authorities ( LEAs) with below state- average ability to raise local revenue for public schools. The use of the funds distributed through this formula is restricted to those items described in 2005 Session Law, Chapter 276, Section 7.6 ( b). Local boards of education are required to report annually to the State Board of Education on funds used for this purpose. This recommended appropriation fully funds the Low Wealth Formula. Appropriation $ 41,893,391 2. Disadvantaged Student Supplemental Funding ( DSSF) The Governor recommends an appropriation increase of $ 26,697,440. This appropriation increases the current budget of $ 22,500,000 allotted in fiscal year 2005- 06 to the sixteen pilot LEAs and supports the distribution of funds to all 115 LEAs. Funds appropriated for Disadvantaged Student Supplemental Funding ( DSSF) shall be allotted based upon a teacher to student ratio for the eligible DSSF population using the following formula: ( 1) LEAs in counties with wealth greater than ninety percent (> 90%) per the low wealth supplemental formula shall receive one teaching position per 20.5 DSSF population, ( 2) LEAs in counties with wealth between eighty and ninety percent (> 80% and < 90%) shall receive one teaching position per 20 DSSF population, ( 3) LEAs in counties with less wealth than eighty percent (< 80%) per the low wealth supplemental formula shall receive one teaching position per 19.5 DSSF population, and ( 4) LEAs receiving DSSF funds in 2005- 2006 shall receive one teaching position per 16 DSSF population based on county wealth. LEAs receiving DSSF funds in 2005- 2006 shall receive no less than the DSSF amount allotted in 2005- 2006. LEAs are encouraged to reduce class size and/ or hire additional instructional support personnel, such as counselors, social workers, and nurses. Appropriation $ 26,697,440 Recommended Budget Adjustments, 2006- 07 General Fund Public Education 39 3. Evaluate Effectiveness of DSSF and Low Wealth Initiatives A key component of the Disadvantaged Student Supplemental Funding initiative is that local boards of education that are eligible for this fund are to submit plans to improve student performance by following specific strategies prescribed by the State Board of Education. To determine the effectiveness of these strategies, a third- party evaluation independently reviews the strategies being used to determine which ones lead to improved student performance. These funds also make it possible to evaluate other reform initiatives, including the high school reform programs and the impact of fully funding the Low Wealth Formula. The department received a nonrecurring appropriation of $ 150,000 in 2005- 06. This recommended appropriation provides recurring funds to evaluate the extent to which LEAs use DSSF and Low Wealth supplemental allotments to improve outcomes for students at risk for school failure and the extent to which the Department of Public Instruction supports the LEAs in using DSSF and other supplemental allotments efficiently and effectively. Appropriation $ 750,000 4. 21st Century Literacy Coaches This recommended appropriation would support hiring 100 school- based literacy coaches to be placed in 100 middle schools ( or other public schools with an eighth grade) starting with the 2006- 07 school year. Coaches will provide research- based teaching practices and job- embedded professional development to assist teachers in the development of curricula that enable students to develop mastery of 21st century skills. Funds for training the coaches are in the University of North Carolina budget. Appropriation $ 4,767,400 5. Director of High School Turnaround The Department of Public Instruction is currently contracting with an individual to coordinate assistance activities in school districts. Funding is recommended to continue this initiative. The responsibilities of the director will be to plan, organize and implement activities that focus on improving the performance of designated high schools in medium and small districts that have performance composites below 60%. The current contract salary is based on an annualized salary of $ 94,000 plus benefits of $ 17,350, totaling $ 111,350. The recommended expansion amount supports the current costs plus $ 11,000 for operating expenses such as supplies and travel. Appropriation $ 122,350 Number of Positions 1.000 21st Century Schools 1. Learn and Earn High School Initiative A key element of the Governor's 21st Century High School Program is the Learn and Earn initiative, created in 2004 to better prepare students for college and the workforce. The Governor recommends an increase in appropriation to expand the Learn and Earn program from 13 to 34 high schools in 2006- 07. The funds will support program staff in each school and operating expenses to support students in preparing for the workforce and college. The recommended nonrecurring appropriation provides funds in the amount of $ 210,000 for start- up costs, $ 800,000 to support 20 planning grants for schools that will become operational in academic year 2007- 08, and $ 523,360 to support the cost of four months principal's salary for each Learn and Earn planning site prior to becoming operational in the 2007- 08 academic year. Appropriation $ 8,232,388 Appropriation - Nonrecurring $ 1,533,360 Recommended Budget Adjustments, 2006- 07 General Fund Public Education 40 2. New Schools Project High Schools As part of the Governor's 21st Century High School Program, this program was funded to create small specialty schools- within- schools at eight existing high schools. This recommended appropriation will fund one additional principal, guidance counselor, and two clerical staff at 11 new sites, resulting in 21 new redesigned high schools in 2006- 07, bringing the total to 32. A nonrecurring appropriation is recommended to support 10 planning grants in schools where the instruction is specifically redesigned around the following curricula: science, technology, engineering, and/ or math ( STEM). Nonrecurring funds recommended also include $ 261,680 to support four months principal's salary for each planning site prior to becoming operational in the 2007- 08 academic year. Any implementation grants for STEM schools shall come from non- state sources, such as private and other public sources. Appropriation $ 3,805,970 Appropriation - Nonrecurring $ 661,680 State Board of Education Initiatives 1. State Board of Education Operating Support The Governor recommends that the current operating budget for the State Board of Education be increased by $ 50,000 on a recurring basis. Appropriation $ 50,000 2. Virtual High School This recommended appropriation provides funds to the State Board of Education to support 2006- 07 implementation of North Carolina Virtual Public Schools ( NCVPS) initiatives identified during the pilot phase conducted in 2005- 06. This amount includes the cost of seven full- time positions for administration and support functions; course reviews, acquisition, and/ or development; the cost of 22 positions for three months for instructional staff in preparation for 2007- 08 academic year; and marketing and operational costs including rent, office supplies and furniture. Appropriation $ 2,588,722 Appropriation - Nonrecurring $ 189,132 Number of Positions 7.000 3. School Connectivity The Governor recommends an appropriation to support the NC Education Network and expand the number of the state's K- 12 public schools to use technology as an instructional tool to prepare students for the demands of the 21st century workforce. Appropriation - Nonrecurring $ 4,000,000 4. Increase Noncertified Employee Pay This recommended appropriation of $ 8,582,073 supports a salary increase for noncertified personnel who are currently paid less than the minimum monthly or hourly state employee wage. These personnel include bus drivers, custodians, and teacher assistants. These funds are shown in the Compensation Reserve. Recommended Budget Adjustments, 2006- 07 General Fund Public Education 41 Agency Administrative Improvements 1. Civil Penalty and Forfeiture Fund Session Law 2005- 276 directed a reduction of $ 120.5 million in appropriation in 2005- 06 and $ 125.5 million in 2006- 07, to be replaced with receipts from fines and forfeitures. Actual collections did not reach the projected amounts in fiscal year 2005- 06 leaving the department with a shortfall. The recommended recurring appropriation is necessary to correct for actual collection experience. Appropriation $ 30,000,000 2. Reserve for Utility and Fuel Costs Due to the increase in diesel fuel costs, the State Public School Fund experienced a shortfall in the 2005- 06 fuel budget. A nonrecurring appropriation is recommended to support actual diesel fuel cost projections for fiscal year 2006- 07. Appropriation - Nonrecurring $ 16,361,485 3. Legacy System Migration and Upgrade This recommended nonrecurring appropriation brings the Department of Public Instruction's information technology applications into compliance with statewide architecture requirements. Funds will be placed in a reserve in the Department of Public Instruction. These nonrecurring funds may be carried forward into 2007- 08. Funds not expended for this project will revert to the General Fund June 30, 2008. Appropriation - Nonrecurring $ 2,000,000 4. Network Tool Replacement The Department of Public Instruction currently relies on a network tool that will no longer be supported by Information Technology Services ( ITS) effective June 2007. This recommended nonrecurring appropriation will support the cost of migrating to the tool that will be supported by ITS. The migration needs to occur in 2006- 07 to meet the June 2007 deadline. Appropriation - Nonrecurring $ 375,850 5. Information Technology Security Analyst A recurring appropriation of $ 40,000 is recommended to support a half-time IT security analyst position. The position will assist in the development of a security program and the execution of the department's security charter to ensure compliance with federal regulations and state statute. The recommended appropriation includes salary and benefits in the amount of $ 38,467, plus operating costs. Appropriation $ 40,000 Number of Positions .500 Recommended Budget Adjustments, 2006- 07 General Fund Public Education 42 6. Business Continuity Planning Analyst This recommended recurring appropriation supports a half- time business continuity planning analyst position. Currently the department does not have any FTE dedicated to continuity planning for the agency. The department has not fully addressed the business continuity planning function within the organization and requires additional staff to perform functions that will improve the agency's score on the security assessment. Appropriation $ 42,500 Number of Positions .500 7. Purchasing Agent II A purchasing agent II position is recommended for the Department of Public Instruction to meet workload demands to ensure that all contracts requiring bids are processed accurately. The position grade is a 69 and position cost including benefits is $ 58,220. Appropriation $ 58,220 Number of Positions 1.000 8. Facility Electrical Engineer III A facility electrical engineer III position is recommended for the school planning section. This position requires advanced electrical engineering work in the review of designs, installation method, ease and economy of maintenance and repair of electrical systems. This review is required by G. S 115C- 521 for all school construction regardless of the scope of work. This position also functions as the electrical engineering advisor to the staff of local school systems. The position is a grade 80 with a salary of $ 82,179. Total cost of the position is $ 101,925 including benefits and $ 4,000 of operating support. It is recommended that this position be funded from Public School Building Capital Fund receipts. Requirements $ 101,925 Receipts $ 101,925 Appropriation - Number of Positions 1.000 9. Business Technology Applications Analyst This recommended position would serve exclusively on the Exceptional Children's ( EC) project team, which consists of five business units with 82 information technology systems. Critical functions performed by this position include collecting business requirements, conducting business process analysis, writing functional specifications. The EC delivery team is responsible for seven software systems in addition to the large, statewide technology system for exceptional children ( CECAS). Project risk is high without exclusively dedicated staff trained in Exceptional Children Division business specifications. The total cost of the position is $ 72,647 including benefits. This position would be supported with federal receipts. Requirements $ 72,647 Receipts $ 72,647 Appropriation - Number of Positions 1.000 Recommended Budget Adjustments, 2006- 07 General Fund Public Education 43 Expansion Pass- Through Funds 1. Communities in Schools This recommended recurring appropriation expands the current 2006- 07 certified budget of $ 607,500 by $ 750,000. The program connects at- risk students and their families with resources to assist in school success and dropout prevention. Services include tutoring and mentoring. Appropriation $ 750,000 2. NC Network NC Network provides training for school- based management teams to improve the capacity of local administrative units. LEAs may contract with this agency using allotments that can be expended for professional development. The current budget is $ 312,625. This recommended recurring appropriation will expand the current budget by $ 100,000. Appropriation $ 100,000 3. Teach for America The Governor recommends a recurring appropriation of $ 200,000 for the Teach for America ( TFA) program. These funds will support TFA's efforts to recruit teachers to North Carolina. Teach For America is the national corps of outstanding recent college graduates of all academic majors who commit two years to teach in urban and rural public schools and become lifelong leaders in ensuring educational equity and excellence for all children. Currently over 200 TFA corp members are teaching in North Carolina. Appropriation $ 200,000 Total Recommended Expansion Recurring Requirements $ 120,272,953 Receipts 174,572 Appropriation $ 120,098,381 Number of Positions 12.000 Nonrecurring Requirements $ 115,221,507 Receipts - Appropriation $ 115,221,507 Number of Positions - Recommended Budget Adjustments, 2006- 07 General Fund Public Education 44 Total Recommended Adjustments for Public Education 2006- 07 Recurring Requirements $ 140,850,312 Receipts 128,496,834 Appropriation $ 12,353,478 Number of Positions 12.000 Nonrecurring Requirements $ 115,221,507 Receipts - Appropriation $ 115,221,507 Number of Positions - Recommended Budget Adjustments, 2006- 07 General Fund Public Education 45 The University of North Carolina ( 160xx) Total Appropriations and Positions 2006- 07 Certified 2006- 07 Recommended Percentage Change Requirements $ 3,044,371,616 $ 3,181,338,196 4.5 % Receipts 923,974,535 937,555,205 1.5 % Appropriation $ 2,120,397,081 $ 2,243,782,991 5.8 % Positions 32,055.420 31,963.620 ( 0.3)% Appropriation Items -- Recommended Adjustments Technical Adjustments 2006- 07 1. Restore NC A& T's Library Book Inflation Increase The universities received library book inflation increases for both years of the 2005- 07 biennium. NC A& T's library book increase for 2006- 07 was accidentally removed from the continuation budget. It is recommended that NC A& T's library book inflation increase be restored. Appropriation $ 145,491 2. Restore NC A& T's Utility Inflation Increase The universities received utility inflation increases for both years of the 2005- 07 biennium. NC A& T's increase for 2006- 07 was accidentally removed from the continuation budget. It is recommended that NC A& T's utility inflation increase be restored. Appropriation $ 17,786 3. Correct NCSSM's Textbook Increase The North Carolina School of Science and Math ( NCSSM) received funds in the continuation budget for textbooks for 2006- 07. However, after the continuation budget was finalized, NCSSM reported they had requested an insufficient amount. It is recommended that NCSSM's 2006- 07 textbook budget be increased. Appropriation $ 52,250 Recommended Budget Adjustments, 2006- 07 General Fund The University of North Carolina 46 4. Building Reserves As a result of adjustments to schedules in constructing or renovating facilities at constituent institutions of the University system, changes are recommended for funds that had been appropriated for 2006- 07 for building reserves. Some campuses have buildings for which scheduled completion is later than the original date for which building reserves were approved. The budgets for the monthly operating costs are being reduced or increased according to the updated anticipated activation. A second adjustment is for replacing one- time appropriations lost during the 2005 session when some building reserves were moved from 2005- 06 to 2006- 07. These one- time costs include initial police officer supplies, equipment, moving costs and initial cleaning supplies. Appropriation - Nonrecurring ($ 9,634,513) Number of Positions ( 91.800) Total Recommended Technical Adjustments Recurring Requirements $ 215,527 Receipts - Appropriation $ 215,527 Number of Positions ( 91.800) Nonrecurring Requirements ($ 9,634,513) Receipts - Appropriation ($ 9,634,513) Number of Positions - Expansion 2006- 07 Increasing Quality Teachers Across the State 1. UNC and NC Community College System 2+ 2 Joint E- Learning Initiative UNC and the NC Community College System are already working closely to develop 2+ 2 programs online. The Governor recommends recurring funding be provided to continue this 2+ 2 joint online initiative that began in 2005- 06 with nonrecurring funds. This funding will be used to continue to build online capacity, teacher education courses, and accessibility for students in 2+ 2 teacher education programs. Appropriation $ 1,000,000 Recommended Budget Adjustments, 2006- 07 General Fund The University of North Carolina 47 2. UNC- Chapel Hill DESTINY Traveling Science Lab It is recommended that funds be provided for the DESTINY mobile science lab at UNC- Chapel Hill. These funds will support an additional mobile laboratory as well as the personnel and other costs associated with the program. Besides providing additional laboratory space, DESTINY will expand its subject area focus beyond high school biology, to extend collaborative partnerships with schools, local school administrative units, and other external organizations, and enhance its ability to provide teachers with science curricula and professional development. Appropriation $ 1,650,000 Appropriation - Nonrecurring $ 350,000 3. PEP Initiative to Improve the Management and Leadership Skills of Principals in High Need Schools The Governor recommends that recurring funding be provided to the Principals' Executive Program ( PEP) to provide focused support to eligible high schools based on criteria set by the State Board of Education. PEP shall provide a customized professional development program and a coaching/ mentor component that provides assistance at the school level. Important components of this overall initiative are teacher recruitment and retention, as reported through the Teacher Working Conditions Survey, and data driven decision making. Appropriation $ 250,000 4. North Carolina Teacher Academy Training of 21st Century Literacy Coaches Funds are recommended for the North Carolina Teacher Academy ( NCTA) to train 21st Century Literacy coaches, as chosen by the State Board of Education, who will each be assigned to a middle school ( or school containing an eighth grade) to provide professional development in 21st Century Literacy skills. NCTA will use appropriated funds to design, develop, and implement face- to- face training for these coaches. Additional online training modules will also be developed. Training will begin in the summer of 2006. Appropriation $ 1,675,000 Appropriation - Nonrecurring $ 225,000 5. Prospective Teacher Scholarship Loan The Governor recommends recurring funds to provide an additional 400 Prospective Teacher Scholarship Loans ( PTSL). The PTSL program currently awards $ 2,500 annually to undergraduates working on teaching certification. Each year, over 900 qualified student applicants are unable to receive funding. Priority for the additional awards shall be given to students seeking teacher licensure in middle and high school mathematics and science and students participating in 2+ 2 teacher education programs. Appropriation $ 1,000,000 Increasing Access to Higher Education 1. Enrollment 1. Enrollment Growth for UNC Campuses The 2005- 06 budget funded 172,245 full time equivalent ( FTE) students, an increase of 6,736 FTE, which represented an increase of 4.07% over the 2004- 05 levels. UNC campuses are projected to experience additional enrollment of 7,110 FTE or 4.13% for 2006- 07 bringing the total FTE to 179,355. Full funding for enrollment growth is recommended by the Governor to support the student growth at UNC institutions. 92,573,799 Recommended Budget Adjustments, 2006- 07 General Fund The University of North Carolina 48 2. NC School of Science and Mathematics Enrollment Growth The Governor recommends $ 240,000 in enrollment growth for 12 new students at the NC School of Science and Mathematics. Funds will provide staff positions and student- related costs for food, medical coverage, textbooks, and furniture. 240,000 Requirements $ 92,813,799 1. Enrollment Growth for UNC Campuses 13,580,670 Receipts $ 13,580,670 Appropriation $ 79,233,129 2. Need- Based Financial Aid Full funding of the UNC System's need- based financial aid request is recommended to address the system- wide enrollment growth as well as to hold needy students harmless from any tuition and fee increases approved for 2006- 07. The program currently serves 30,000 needy resident undergraduates and was fully funded at $ 67,248,016 from Escheats Fund receipts in 2005- 06. Appropriation $ 21,587,990 Nursing and Health Care Programs 1. Temporary Space for the Pharmacy Program at Elizabeth City State University A nonrecurring appropriation is recommended until additional budgetary data are made available to the Office of State Budget and Management's Capital Section in order to manage accurately the project's budget in accordance with S. L. 2004- 179, Section 1.1. Appropriation - Nonrecurring $ 43,000 2. Nurse Scholars Program Recurring funds are recommended to expand the maximum scholarship loan award from $ 5,000 to $ 6,500 per year, as well as to increase the number of scholarships available from 450 to 750. Appropriation $ 2,750,000 3. Graduate Nurse Scholarship Program for Faculty Production The Governor recommends recurring funding to create a graduate nurse scholarship loan program to provide $ 15,000 for up to two years for master's candidates in nursing education, or three years for doctoral candidates. Within 7 years of graduation, each recipient is required to teach in a public nursing education program in North Carolina for 12 months for each year they receive a scholarship loan or they must repay the loan. Appropriation $ 1,200,000 Recommended Budget Adjustments, 2006- 07 General Fund The University of North Carolina 49 4. New Bachelor of Science in Nursing Programs It is recommended that Fayetteville State University ( FSU) and the University of North Carolina at Pembroke ( UNCP) receive funds to support two new Bachelor of Science in Nursing programs, and that Appalachian State University ( ASU) receive funds to support its new RN to BSN program. The new programs can be established more rapidly if initial funding is made available for faculty hiring, equipment and other necessities. FSU and UNCP will each receive $ 300,000 and ASU will receive $ 250,000. Appropriation $ 301,368 Appropriation - Nonrecurring $ 548,632 Other UNC Initiatives 1. Judicial College at UNC- Chapel Hill It is recommended that recurring funding be provided to expand the Judicial College program at UNC- Chapel Hill to provide ongoing training to judicial officials throughout the State. Appropriation $ 750,000 2. Information Technology A recurring appropriation for campus level information technology is recommended. Campuses are encouraged to use these funds for Banner implementation and disaster related costs, where applicable. Banner is a replacement of the legacy system; it has modules for finance, human resources, financial aid, student services, and advancement. Appropriation $ 2,400,000 3. NC A& T State University Matching Funds The Governor recommends that NC A& T receive $ 1,300,000 in mandated matching funds. The campus match of federal funds was increased from 90% to 100% for agricultural research and extension programs as mandated by the Agricultural Research, Extension, and Education Reform Act of 1998. The funds are appropriated to the School of Agriculture and Environmental Science. Appropriation $ 1,300,000 4. Biomanufacturing Research Institute and Technology Enterprise ( BRITE) at NCCU In 2005- 06, the General Assembly appropriated $ 2 million in recurring funds to the Biomanufacturing Research Institute and Technology Enterprise ( BRITE) at NCCU. Funding was to be used for scientific equipment and supplies and hiring administrative and research personnel. It is recommended that BRITE be appropriated $ 2.5 million in recurring funds for operating support, curriculum development and equipment. BRITE's current budget is $ 2.5 million. Appropriation $ 2,500,000 5. Biomanufacturing Training and Education Center ( BTEC) at NCSU In 2005- 06, the General Assembly appropriated $ 2.94 million in recurring funds to the Biomanufacturing Training and Education Center ( BTEC) at NC State University. Funding was to be used for scientific equipment and supplies and hiring administrative and research personnel. It is recommended that BTEC be appropriated $ 2 million in recurring funds for operating support, curriculum development and equipment. BTEC's current budget is $ 3.44 million. Appropriation $ 2,000,000 Recommended Budget Adjustments, 2006- 07 General Fund The University of North Carolina 50 6. Economic Development Partnership Initiative at NCSU The Governor recommends that NCSU be appropriated $ 300,000 to support the New Business Creation Initiative ( NBCI) to advance business opportunities of university intellectual property. Appropriation $ 300,000 7. North Carolina in the World Project In 2005- 06, the legislature appropriated a nonrecurring $ 200,000 grant to The Center for International Understanding for the project '' North Carolina in the World: A Plan to Increase Student Knowledge and Skills about the World.'' It is recommended that $ 200,000 be provided in recurring funds to The Center for International Understanding to continue the project. The Center's current budget is $ 492,668. Appropriation $ 200,000 8. Salary Increases for Faculty and Staff The Governor recommends funding in the compensation reserve for salary increases for employees of the University of North Carolina and the North Carolina School of Science and Mathematics ( including those supported by state funds and who are either exempt from the State Personnel Act ( EPA) or subject to the act ( SPA)) effective July 1, 2006. For all EPA teaching and nonteaching faculty, funds are recommended for an increase of 4% in 2006- 07 according to rules adopted by the UNC Board of Governors. For all SPA employees, funds are recommended to provide a 4% increase in 2006- 07. North Carolina School of Science and Mathematics teachers will receive an increase equivalent to other public school teachers. 9. Reserve for Utility and Fuel Costs It is recommended that $ 11,540,777 in funding be appropriated into a Utilities Reserve to compensate for shortfalls in university utility budgets caused by higher utility rates. The shortfalls occurred in the electrical, natural gas, fuel oil, gasoline and diesel utilities. Appropriation - Nonrecurring $ 11,540,777 Total Recommended Expansion Recurring Requirements $ 133,678,157 Receipts 13,580,670 Appropriation $ 120,097,487 Number of Positions - Nonrecurring Requirements $ 12,707,409 Receipts - Appropriation $ 12,707,409 Number of Positions - Recommended Budget Adjustments, 2006- 07 General Fund The University of North Carolina 51 Total Recommended Adjustments for The University of North Carolina 2006- 07 Recurring Requirements $ 133,893,684 Receipts 13,580,670 Appropriation $ 120,313,014 Number of Positions ( 91.800) Nonrecurring Requirements $ 3,072,896 Receipts - Appropriation $ 3,072,896 Number of Positions - Recommended Budget Adjustments, 2006- 07 General Fund The University of North Carolina 52 Community Colleges ( 16800) Total Appropriations and Positions 2006- 07 Certified 2006- 07 Recommended Percentage Change Requirements $ 991,953,715 $ 1,025,531,719 3.4 % Receipts 224,657,829 218,397,070 ( 2.8)% Appropriation $ 767,295,886 $ 807,134,649 5.2 % Positions 192.000 197.000 2.6 % Appropriation Items -- Recommended Adjustments Technical Adjustments 2006- 07 1. State Aid - Hospitalization Insurance It is recommended that the hospitalization insurance for community college faculty and staff be fully funded at the 2006- 07 rate. The NC Community College System's 2006- 07 request was inadvertently made at the 2005- 06 rate. Appropriation $ 1,398,201 Total Recommended Technical Adjustments Recurring Requirements $ 1,398,201 Receipts - Appropriation $ 1,398,201 Number of Positions - Nonrecurring Requirements - Receipts - Appropriation - Number of Positions - Recommended Budget Adjustments, 2006- 07 General Fund Community Colleges 53 Expansion 2006- 07 Increasing Access to Higher Education 1. Enrollment Growth The Governor recommends full funding for enrollment growth. The spring semester 2005- 06 census from the Community College System Office shows a total enrollment increase of 2,250 full- time equivalent ( FTE) students above the 2005- 06 budgeted enrollment of 190,750. The 2006- 07 budgeted enrollment is 193,000 FTE, a 1.18% increase over 2005- 06. Curriculum enrollment increased by 1,126 FTE ( or 0.75%), continuing education enrollment by 1,083 FTE ( or 4.77%), and basic skills enrollment by 41 FTE ( or 0.22%). Requirements $ 8,987,043 Receipts $ 1,946,953 Appropriation $ 7,040,090 2. Multi- campus Funding Community colleges offer courses at multi- campus sites to accommodate student educational needs. These sites must provide student services and offer at least one degree program entirely on- site. Funds are recommended to serve higher enrollments and to support the operation of these multi- campus sites. Appropriation $ 601,171 3. Enrollment Growth Reserve It is recommended that funds be provided as an enrollment reserve to assist colleges that experience high growth in the fall semester. The State Board of Community Colleges shall distribute funds to colleges in which the fall semester enrollment growth exceeds 5% above the previous fall. Appropriation $ 2,000,000 4. Need- Based Financial Aid for Teaching and Nursing Students The Governor recommends providing $ 500,000 for need- based financial aid. These funds shall be targeted to NC students enrolling in programs that prepare the student for a teaching or nursing career. Appropriation $ 500,000 5. Course Management System and Learning Objects Repository An enterprise course management system and learning objects repository are needed by the NC Community College System to provide a state- of- the- art online teaching and learning platform. These resources will support online, hybrid, and traditional instruction, and will include online learning modules for statewide use. 1. Course Management System accessible for all 58 community colleges. 1,500,000 2. Learning Objects Repository to be hosted by MCNC 500,000 Appropriation $ 2,000,000 Recommended Budget Adjustments, 2006- 07 General Fund Community Colleges 54 6. Virtual Learning Community Development Centers The Governor recommends funds be appropriated to establish four Virtual Learning Community development centers. Of these centers, three shall be devoted to curriculum development and one shall be devoted to continuing education courses, such as public safety. The centers will be located at community colleges and will develop online curriculum and continuing education courses and learning modules to be shared among all 58 community colleges. Appropriation $ 1,025,000 7. Online Help Desk An online help desk is recommended to meet student needs with reliable and well managed support services that are deployed quickly, accurately, and satisfactorily and which will be available at any time. Online assistance can be delivered at significantly reduced costs when compared to locally supported or contracted help desk support. Appropriation $ 740,000 8. NC Information Highway Expansion It is recommended that funds be provided to expand the NC Information Highway ( NCIH) to the eight community college main campuses without NCIH access. Expansion of the NCIH will locate one videoconferencing site in each NC community college's service area. Completion of this network would deliver real- time, multi- point ( multiple site), interactive, high quality voice, video, and digital transmission to facilitate instruction, meetings, staff development, training, interviews, and student services. Appropriation - Nonrecurring $ 120,000 Quality Teachers, Quality Pay 1. Faculty and Professional Staff Salary Increases The Governor recommends providing $ 28.2 million for a 4% salary increase for the State Board of Community Colleges to distribute to community college faculty and professional staff. This amount is in addition to the 4% statewide salary increase that is being recommended for the 2006- 07 fiscal year. The actual appropriation is located in the Compensation reserve section of this document. These funds shall not be transferred by the State Board or used for any other budget purpose by the community colleges. Other NCCCS Initiatives 1. Tuition Receipts Adjustment An $ 8,207,712 appropriation to replace under realized tuition receipts is recommended. These receipts are being reduced to reflect actual receipts collected in the 2004- 05 fiscal year. This reduction is in accordance with NC General Statutes Chapter 143- 11, as amended by the 2005 General Assembly ( S. L. 2005- 276, Section 6.4). Re |
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