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House | July 29, 2015 | Committee Room | Appropriations

Full MP3 Audio File

Members will take their seats, and individuals in the back if you have extraneous conversations please take those outside. We have a number of people who have indicated an interest or signed up that we have, interested in speaking today so we will work to make sure to accommodate as many of those individuals as possible. If you will preliminarily want to mention our Sergeant-at-Arms who are with us today Young Bae, Jim Moran, Bill Morris, Joe Austin, Martha Gadison, Reggie Sills, Marvin Lee, Joe Crook, Warren Hawkins and David Leyton and we appreciate their service to the committee, expert service to the committee as always. We also have Pages with us this afternoon Lance Landerman from Mecklenburg County sponsored by Representative Yarborough. Troy Reed from Davidson County sponsored by Representative Watford. Kennedy Washington from Cumberland County, sponsored by Representative Glazier, and we have two honorary pagers with us. I believe sitting over here, Myles Pedis from Wake County sponsored by Representative Pierce, and Julian King of Wake County are also sponsored by Representative Pierce, so we appreciate you two young gentlemen being with us as well. So with that, our first item item on our agenda is house bill 904, and this has a PCS, and Representative Brisson moves that the PCS be properly before the committee, without objection are ordered. Representative Waddell if you can explain the PCS. Thank you Mr. Chair, and thank committee, and thank you Mr. Chairman for allowing this bill to come forward. PCS, basically ladies and gentlemen of the committee, this PCS is a study to determine how to address some of the drainage problems that we've got in the Eastern part of the state. As many of you well know that are certain inhabitants and live in the Eastern part of North Carolina. We don't have the follow along the from the Piedmont and from the mountains so we have a lot of problems from the beavers, and just drainage districts that haven't been addressed. And this study commission is going to try to get a group together to try to figure out a way to solve those problems, and and I stand ready for any questions. Representative Floyd? At the appropriate time, Mr. Chair. Alright if you'll hold that. Representative Cleveland. Thank you, Mr. Chairman. I have curiosity that is killing me here. In our original bill we were worried about areas with an elevation less than 125 feet and in the PCS we're worried about elevations less than 124 feet. What did that foot-difference to that foot make? Thank you for the question there Representative Lee. Basically we are looking at delineating a line just east of 95, and basically that's where the number came. Alright, Representative Lewis? No? Alright, seeing no other hands, Representative Floyd you're recognized for a motion. Favorable to the PCS was it original where did it go from here? You've heard the motion all those in favor of the motion please signify by saying aye Aye. Oppose no. The ayes have it and the bill is passed, thank you very much. Thank you Mr. Chair. The next item that will move to and this should already be passed out to you. This is just a very kind of a very brief high level item that we put together talking about some of the differences between the House budget and the Senate version of the budget, and we wanted to just maybe go back and just refresh your recollection, and once we are going to go through this document very quickly and then we are going to move on to presentation with respect to education and have

some focus today on education as well, some other issues that come from it. And the House approach to the budget this year, if you see there in those initial bullets, you'll see the major areas that, we're the focus for the house and that was to ensure that we are fully funded the mandatory items that must be funded Medicaid, the enrollment growth, public schools, university enrollment growth, those areas of the budget. We did work as everyone has agreed, there's a need to increase our state land reserves, as we have come off some very difficult times, we addressed that in house budget, we addressed teachers in correction, staff pay needs, as well as other state employees as well or all state employees I should say. We funded a retiree COLA, and again as I mentioned, provided a pay increase for all state employees. We addressed some key spending issues and some key needs in the states and we'll go over those in just a moment. We funded economic development and job creation. We believe that's probably the number one issue that we all seek to address both short term and long term and that is to give North Carolina a competitive edge and keep our economy growing and creating jobs for now and for our children and grandchildren in the future. We've addressed capital needs and state infrastructure needs, and I think there's probably going to be more coming on that shortly, and in our version of the budget we certainly and in the House I'd work to keep policy to a minimum in the budget. In terms of growth of spending, the House does invest 5.1%, 6.3% if you look at some of the other statutory items and earmarked items, and these are to cover those mandatory items that we mentioned as well as the largest pay increase for all State employees since the recession hit us several years ago. The Senate's budget if you count in all the statutory items as well is at 2.6%. In terms of tax changes, and these are obviously not the detail that they've been going into in the finance committee, but the House Budget does allow for the full implementation of the 2013 tax cutss which included an automatic corporate rate tax card as well as the personal income tax reduction in the course we put the trigger on the corporate tax rate because of growth in revenues and that totals over $500 million for the biennium the house also next budget restores the medical expense deduction which we all quite a bit of and maintains a cardinal allowance for charitable giving, the senate proposes additional major tax changes certainly in a number of areas and there's items that are actually taxed increases on a number of individuals but again under the finance committee has covered that in quite a bit of detail in the last couple of weeks in terms of reserves the house increases savings reserve by $200 million. The House also put in place a $50 million reserve for Medicaid contingencies. As you know the last two years we have finished on a cash basis in the black in Medicaid, and that's pretty commendable record both for the General Assembly and for the administration given all the trouble that we inherited in 2011. We've made tremendous progress on resolving those issues, and everyone here is to be commended for your role in that. On the back, in terms of salary and benefits as it was discussed, the House budget provides 2% COLA for our retirees and a 2% across the board increase to all State employees, and of course, I'm sure that some speakers are going to discuss the importance of this today, but from the House perspective it's important to be able to keep up, try to be competitive in an ever more competitive job

market for the skills that we need, for the quality of people that we want to provide State services and for the efficient operation of government. If you want a good job done you've got to have good, sharp, quality people that are employed that you can keep and to do those jobs. The State budget does not fund increases for most state employees and does not provide a retiree color. The house funds projected increase needs for the state health plan that is a critical item, there was discussion in the program evaluation division. There report that was produced this week on the long term liabilities and the State Health Plan and the House believes that being sure that we fund that appropriately and be looking to the future about more things that we need to do, the Senate did not provide. The Senate's plan also eliminates retired medical benefits for future State employees, I know that there have been a lot of questions about that. Other key areas, spending areas and initiatives, that was just to remind you of them, most of you know them. The House continues to invest in teaching assistants at the 14/15 year level, obviously the Senate proposes to reduce those by 50% and further reduce them in the second year probably about 3/4 in the second year. The house budget expands mental health funding by 30 million dollars the senate cuts $166 million out of mental health which is I think a very major concern that all of us have with respect to mental health funding and what we need to do in that area, and how critical that is in so many aspects of our lives and culture today making sure that we appropriately fund mental health and have the right initiatives particularly with a lot of our young people. The House proposes to continued driver education we've had a lot of discussion, I believe there're some people signed up, they want to speak of that as well. The Senate proposes no funding for driver education and would eliminate the requirement for it as a prerequisite for the learners permit. SSo that is certainly a major concern that we've been hearing quite a bit about. The House also makes major investments in economic development, job creation, as well as previous bills that the House has passed, and the House passed Bill 372 which authorise as a provider-led medicated reform, the senate put their plan in the budget and again we try to keep as much policy out of the budget as possible and make sure that both chambers can fully weigh in on major policy issues standing on their own merits. In terms of infrastructure again the house has made major investments in state infrastructure by appropriating and authorizing $519 million dollars in capital improvements and planning for a number of key university buildings, science and engineering again as well as health care again very much job focused also some key investments with respect to how we put training facilities which many of you're aware is way way substandard as well as the medical examiner laboratory which is important. The senate puts in 300 million in R&R, and again there's going to be more in terms of capital, I would imagine coming out hopefully next week. Representative Arp and others are working on those, so we look forward to that. These are some of the major areas we thought would be useful for you as members with all of the discussions of the budget, sort of have this as a handy reference, and I'd be happy to answer any questions otherwise we'll move on to education. But Representative Torbett? Thank you, Mr. Chairman. Is this the appropriate time that if we want to express some concerns? I looked on the agenda, I didn't really see the mention of concerns that we might have, just addressing some very simple common issues. Would this be an appropriate time to bring those or mention those? Concerns with regard to? For example, the need for a market adjustment pay increase for highway patrol officers. There is that concern that a lot of us hold deeply that needs to be addressed.

The second one of course is the Driver Ed that you touched on, and if I may just for a moment Mr. Chairman. Yes sir. I think it would be for the hopes of transparency for all the members of this session's Appropriations Committee to understand that Phil, or Representative Shepard and myself were, I guess you could say blasted some aspect to serve in this same capacity last session. And it was determined there at the conference period that we understood the wish of the Senate to, which was the wish of the House was to no longer have that funding mechanism come out of the Highway Fund. Now bear in mind not the Trust Fund but the Highway Fund. And so with hard work of staff and our chairs, we actually found a mechanism that would continue funding for drivers no longer coming out of highway funds. So that issue the senate was concerned about was resolved, gone. And now I find it quite back to the point that perhaps their concern has risen to another level, now they just don't want to have drivers ed. So I just wanted to let the whole committee know that we actually addressed the issue from the last session that our Senate counterparts heard about the funding mechanism, the funding for Driver Ed would this going forward no wrong would come out of the highway fund or the highway trust fund, it was met through another means, and now it seems like there's just another feeling towards the Drivers Ed, and I hope we will have ample opportunity to address that in full depth and breath Mr. Chairman, Thank you. Yes sir, thank you very much. Representative [xx]? Thank you Mr. Chair, just a comment and a question I guess after the presentation you did on the house budget pretty much shows how we chose to spend the money and try to meet the needs of the state. The total dollars for half the spending and the total dollars of the Senates actual spending, do you have those? Let me, I'll refer to staff, we'll get that answer. Or just the difference between, I mean I think it's certainly, we have selected in the, certainly, I strongly support the half size the budget but I think it's important for folks to know that I don't remember but I don't think it's there's very much difference in the total money spent, so it's not like we're saving all these dollars difference between two budgets, just that we've chose to put it in the right place as I think so. Well, I would certainly agree with you about investing it in the right places. The bulk of the, we'll get you the exact number in just a moment I can't get that back into my head at the moment, but the bulk of it is in education as well in salary and benefits. And our salary and benefits, and this also goes to part of what Representative Torbett was saying about a moment ago, we have our salary and benefits team here and we're looking to get to them in the agenda to talk about the differences, and a number of very specific areas where the Houses were to address some longstanding problems as well as some other issues. Representative Michaux. Mr. Chairman, I don't want to try to put you on the spot, but I think there's a question that many of us are seeking some semblance of an answer to an idea how close are we to winding this thing up? Well, Representative Mitchell, we I don't, know if you were the senior chair at the time or just one of the chairs when it went to what December? Yes sir, but you remember we had a bunch of items coming in between now, like special sessions, but. We're going to try not to break your record, we're going to do our best. Can you be a little more specific sir. I think that's pretty specific. I don't want to play Santa Claus here. No. You'll be home for Christmas. Representative Glazier? This is just a follow- up comment if I can on what Representative Michelle said, if I might Mr. Chair. Yes, Sir. I think patience is a value, and a good thing and the goal is to get it right, and that doesn't always happen regardless of who's in charge. Representative Michelle is right. So long as has been made. I think the House is showing admirable patience in negotiating and working towards I hope what will be a

good deal for the public, and I'd encourage that continued level and patient negotiation and I'd echo and expound upon that. What's most important in a budget is you go through a process, and however long that takes, and however tortured it might be, what you want to keep in mind and I'm sure everybody here is of the same mind and that is to make sure that we have a budget that best serves the needs of the citizens of North Carolina, that's responsible, that's balanced and that meets those needs and is responsible Certainly, that's the appropriate goal at the end of the day, as the gentleman expounded on. With that I'd like to go and move into a sort of brief presentation on comparing the spending items and this gets it. I believe representative Briston, part of your question and it's my understanding that the spending difference between the two chambers is $685, 000, 000. I believe that's the number I've got. With that, if Mr. Madison and Mr. Nodstrum, come forward. We have two items to pass out, so if you'll just wait patiently for a moment, we get those out. Thank you, Mr. Chair. Good afternoon. I'm Brian Madison. I'll be presenting with Chris Nodstrum. We're both members of the education team and the physical research division. We've been trying to get through a brief overview for you of the high level differences on the health and centered education budget, as well as a little bit more details on the difference. This contained within the public schools budget. So I'll be starting and walking you through kind of this overview sheet that you have in front of you. It's a portrait size sheet. One sheet with two sides on it. We'll start out on FY2015-16, just to walk you through it the full tested you, a few different types of comparisons, so I'll walk you through that initially and then we'll see the different totals and I'll try to explain what they mean. So first of in 1560 and you see under public schools a general fund comparison, a comparison of lottery funding for current operations in public schools as well as the total general fund plus lottery. Then additionally what the amount was appropriated within the public schools for salaries and benefits considerations, and I think we may be getting a little more detail on that later in this meeting, and then lastly a total for public schools without salaries and benefits. So the comparison you might see looking at your money reports that accompanied the budget bills would be the general funds line item where you see the House at 625 billion for public schools under general funds basis, and for the Senate 8.282. All told that's $343 million gap between or difference the two bills. When you have lottery into that mix the senate had a higher number for K12 operating have ever lottery and then to the house, so you see a $48 million dollar increase there as compared to the house the senate level that it is and then we have a total there $294 million difference between the housing senate public schools budget then as the chair's asked also for us to do a card like without salaries and benefits, see a difference there, house provides about 94 million more in public school, salaries and benefits, appropriations and as the senate budget so our total if you back out that 94 million you see a public schools total without salaries and benefits of a difference between of about $200 Million between the federal in the house so that 8.67 Billion is compared to the 8.47 Billion, community college a comparable comparison community colleges don't receive direct lottery support or at least through the community college budget, so they're just a general funds

comparison, a $35 million difference between the house and senate budgets for community colleges, backing out the salaries and benefits in each area 29 and 21 million, reduces that difference by about $8, 000, 000, you see a total comparison in the community colleges without salaries and benefits of about $27 million difference there between the house and senate. Similarly for UNC I think you get the picture and structure of this table, $71 million difference the house over the senate in general funds, appropriations and two budgets, lottery is comparable. Then you see a significant difference in the UNC salary and benefits total, the house is 64 million over the senate UNC budget, excuse me. So lastly salaries and benefits from the UNC appropriations in the house and senate budgets, you see a difference of only about $7 million between the two bills then ultimately taking all three and looking across the entire spectrum of what you'd call the education budget, seeing a general funds comparison basis, there's a $450 million difference between the house and senate, a $400 million difference when including the lottery, and then lastly about $235, 000, 000 difference when looking at the general fund and lottery, and backing up their salaries and benefits. So really for page two, I think to sort of get the point here so I just wanted to show you we prepared this as well. On the back of your sheet, for 16 and 17 you see those differences, let's just go down to the bottom and the totals, differences of about 391 million on a general fund basis between the two budgets and the second year of the biennial. 329 million dollar difference when factoring in a lottery as well as the general funds, and then again backing out salaries and benefits that last line item at the bottom of that table on the back of your sheet the difference in the second year is about 171 million. So with that Mr. Chairman if I could I would like to turn it over to Chris to go through some of the K12 detail. yes and before you get in to your presentation this is sort of back to Representative Brisson question if you look on the front page for the 2015, excuse me, for the 15/16 budget with the salaries in there, the salary and benefits in there the differences is a shade over $400 million and so with the the previous figure, you're getting close to 2/3 or so of the difference between the house and senate budget is house investment in in education including obviously salary and benefits. thank you, Chris North from Physical Research. Turn your attention now to the legal size document that details some of the individual differences in the public schools budget between the House and the Senate budgets. I'm going to walk though the 10 largest differences between the two budgets you can see these handout contains all of the differences. I'm going to do walk through the top 10 but I'm certainly willing to answer questions you have on any of the items on the handout. Start at the top I have number one, the K-12, Salary and Benefits Adjustments. Lenear[sp?] and David are coming up soon to walk through the details but just to give you a preview on that one, the teacher salary plans from a total appropriations size are very similar between the house and senate budgets where the differences really occur are the treatment of non-instructional employees in the house budget, the house budget provides a 2% increase for non-instructional employees, additionally the house budget includes appropriations for increased benefit contributions for the retirement and health plans. Number two is teacher assistants, it's important to note on these different sheets we're showing the differences in general fund appropriations, the house budget also includes about 49 million in lottery funding for teacher assistants. So the total difference in funding between the house budget and the senate budget is 195 million in the first year, and 304 million in the second year. Moving on to item three, K3 class size, the senate budget contained a proposal to move class sizes, decrease class sizes in grades K through three decreases the allotment ratio for teachers in grades one through three, from 1-17 ratio to a 1-15 ratio over two year period, and also reduces the allotment ratio in kindergarten

from 1-18 to 1-17 in the second year the biennium that adds 1, 361 classroom teacher positions in year one, and 3, 285 classroom teacher positions in year two. Number four is driver training that's been touched upon earlier just to recap. The House provides funding in the first year via General Fund Appropriation, and the second year funding will be provided by a new registration late fee. The Senate does not provide that funding but does uncap the fee that school districts would be allowed to charge students and eliminates the requirement to pass driver to get a licence. text books and digital resources, again this is one where it's important to know some of the non-general funds sources here. You see from the general fund the House provides additional 19.3 million in the first year compared to the Senate budget, and 14.5 in the second year. It's important to know that the Senate budget also includes $6 million from the Indian Gaming Fund, it will be directed towards textbooks, the House takes that 6 million from the Indian Gaming Fund and distributes it to school districts for school technology. Number six school connectivity, the House only item that provides $12 million to wire classrooms across the state. Number seven, digital learning plan activities of $9 million, another House only items. Of that amount $4 million would be used to support regional technical support organizations and $5 million would be for professional development. Number eight is the NC Elevating Educators Act of 2015. This is a House only item, it provides 200, 000 in the first year, 10 million in the second year, and this program would provide salary supplements to teachers who are taking on additional classroom responsibilities. Number nine, this is a Senate only item for the Excellent Public Schools Act. This is to fully fund the requirements of the Excellent Public Schools Act or the Read to Achieve program. There are no new requirements added with the Senate budget, this is just to fully fund the existing requirements of the program. Finally the one I'll end off with here today is number 10, the DPI Operating Budget. The Senate included a reduction to DPI's operating budget of approximately 10% and with that I'll be happy to answer any questions. Any questions? Representative Avila. Thank you Mr. Chairman. I've not been on the education discussion so excuse me if I'm asking you to repeat stuff, but in number three when we talk about the K-3 class size reduction, how does that look in the real world? If you have a school that has maybe three or four third grade classes and you're reducing it by one that's not a full class. Do you expect growth to fill that up so that you would have a full class for reduction or how does that work in the real world? Thank you Representative Avila. What I describe with the allotment ratios, the way the money goes out the door. The other ratio to keep in mind is the actual average class size ratios that the districts must adhere to currently in grades K-3, the school districts have to have an average class size of 1:21 so even though they're allotted at 1:18 for kindergarten and 1:17 for grades 1-3, they are only required to keep an average class size of 1:21, and that's to provide them some flexibility, to take into account that students don't come in blocks of 18 or 21. It additionally allows districts to provide additional teachers for things like art, PE. So moving forward, the difference between the allotment ratio and the average allowable class size ratio would decrease under the Senate budget. In Year 2 of the Senate budget, the difference between the allotment ratio and the average allowable class size would be zero so school districts would have to adhere to an average district-wide class equal to the allotment ratio. Other questions from the committee?

Alright. If not, we have several folks who had signed up to speak to us on education, including teachers, principles, superintendents and teaching assistants and some others, and what we'd like to do at this time is to hear from a number of those individuals. And I believe we have set our time at no more than three minutes per speaker, If you can keep it to that. Mr. Chairman? Representative Torbett? Thank you and I do apologize. Will there be opportunities should concerns or statements come up for us to ask them follow ups or anything during this part of the committee meeting? We will see how that runs. You were talking about to ask the speakers from the Torbitt questions? That's correct. Correct. At your discretion, sir. I just wanted to throw that one out there. Thank you so much. Okay, I think the first three individuals that we had were wanting to sort of do this as a group. Julie Voight, I believe. First grade teacher from North End Elementary in Parson County. Sherrita Fuller from northern elementary and Person counties who is the principal, as I understand it, and Donna Henderson[sp?] is a teaching assistant from North End Elementary and Person County, are they here? I'm sorry, he may not have been here before, if you would come up to the mic back there to the direction of the sergeant at arms, and please state your name for the, for the record, and then if you would give us your remarks. Good afternoon Mr. Chair and members of the committee, My name is Sherita Fuller and I'm principal at North End Elementary a title 1 school in Roxboro. As principal, I'm responsible for the daily operations at my school, I decide what resources to purchase, I create class schedules, I write volunteer policy, I even open car doors for children who come in each morning from the however in my opinion, my most important duty is to serve as the instructional leader in my building. Apart from insuring a safe environment, my number one priority is student achievement. As we already know, students achieve when they receive sound, research based instructions, on a daily basis. I am here today to hopefully convince or at least challenge the mindset of those who are in the position to determine the future of teacher assistant allotment. So rather than listing all the pros of having a teacher assistant, I will try to paint a picture that will linger in your mind, as to why our teacher assistants are necessary, for the success of our children, and our schools. Let me begin by describing the typical day of Miss Donna Henderson teacher assistant and bus driver at North End elementary. As a bus driver, Miss Henderson starts her day at 6:40 each morning, driving and monitoring approximately 60 students to and from school, it's just one of her duties. Once at school, she reports directly to first grade classrooms. Here she gathers the resources needed to conduct her morning reading groups, and her afternoon Math groups. Serving now as a teacher, she provides explicit instructions to several small groups each day. Miss Henderson is also assigned to fourth grade to support their instructional needs. She conducts novel study as part of the enrichment program me, student write, use graphic organizers, conduct presentations, and completes projects. She also serves as a substitute in classrooms once a month to provide teachers time to meet. During this time the Teachers are able to dis-aggregate data and group children as needed. By using Mrs. Anderson, she can carry out the instructional needs of in the classroom without interrupting the normal routines. Well, Donna is one example,

of an effective instruction assistant who is helping to support our district's mission of preparing students for successful world. Donna is but one example, of the approximately 55 regular ad and east ETA's in our district and of the thousands of TA, s in our state. Teacher assistants do make a difference, thank you. Good afternoon Mr. Chair and members of the committee. My name is Julie Foe and I'm a first-grade teacher at North-end Elementary School to say that teacher assistants are an asset to the classroom is an understatement, coming from a title one school, teacher assistants are a crucial part of each child's education. Our assistant start their day off with school bus with the highly important task of getting our students to school safely. From the moment assistants walk off the busses, their work in the classroom begins. I do not mean filling papers and doing secretarial things I mean actually teaching. For example, this past school year our assistant Miss Anderson, started her day doing guided reading groups with the first grade. During the groups she targeted specific learning needs that each group was struggling with. She would carry out a full guided reading lesson and then continue on pulling different groups each with different learning needs. The assistant have gone through the same training that we as teachers do to ensure we are conducting effective guided reading groups. Once she finished guiding reading with our class, she immediately went to the upper grades and worked with them during their meeting as well. One group she pulled, she did a book study with a novel hatchet. She had the students against a high order thinking questions about each chapter and do research based projects that they shared with their group. After she finished with the upper grade she came back to the first grade and she performed guided math groups. During the math group she again worked with students on specific learning needs. During the she was able to identify children's additional learning needs and communicate them back to the teachers so we can go back and re-teach anything that students still hadn't mastered. With instructional time in the classroom and being so important, we need each teacher assistant to be able to ensure every child is receiving the education they need. In my profession opinion I believe that without my assistant my students reading and math skills would not be as strong as they are today. She was able to fill in specific apps that students lacked while I was working with small groups. I was able to give her detailed objectives that students need help with and be confident knowing the students will receive the exact skill set they need to master each objective. Removing assistants form the classroom with detrimental to our children's education. It is my hope that you will see how vital assistants are the success of our students. Each one is truly an important part of our team, thank you. Good afternoon, Mr. Chair and members of the committee? I'm Donna Henderson, teacher assistant from North and elementary. Thank you for allowing me to speak on behalf of all the North Carolina assistants. Reducing class size is a wonderful idea, but not at the cost of losing teacher assistants in the classroom. We are not just assistants, we are teachers. Unfortunately the reduction in the number of teacher assistants over the last seven years has resulted in more teachers without adequate assistance during the school day. We work with students every day all day. As more and more teacher assistants are let go our duties have increased tremendously, at my school we have only three teacher assistants. We start in and everyday driving the school bus. As an assistant of a title one school, we are needed in the classroom to conduct small reading groups as well as mass groups. Checking papers and putting up bulletin boards are a thing of the past, we work with struggling students in a small group setting while the teacher move ahead with the rest of the class. We don't stay in one classroom, we go where we are needed. We also conduct reading groups of children upper grades, result is needed often with no more pay, as a teacher assistant in the classroom, if there is a behavior issue, emergency, or child needs more detailed instruction, the assistance can handle whatever the situation may be at at the moment and the teacher can continue teaching, with standards so high teaching time is sacred time, I ask you today not to cut teachers assistant in the budget. The children of North Carolina are our future, we need to prepare them for the future, cutting teacher assistant will not help our children but will certainly hurt them, thank you. Thank you for your comments. Representative Yarborough? I would like to come in and thank this ladies for making the trip down to Raleigh, they're, they teach at one of the poorest schools in the report district and I certainly dedicated to the job, and I know what they're are talking about. Thank you very much. Representative [xx] Yes Mr. Chairman thank you, I also wanted to add to that if we lower the

classroom size think of the cost is going to be school systems to have to build new schools that houses classrooms so it's a two end sword Thank you next up if we could have a teacher and a superintendent from, I apologize, Representative Faircloth? Thanks Mr. Chairman if I could ask the question of the principle's book? Yes, if you would come forward? Ms. Fuller? Thank you Principal Fuller. My question has to do with, I noticed that your T. A. Would start driving bus, then they come in and help teach or teach and then they end the day driving the bus.yes.is this a particular arrangement with your school system where you're having a transportation function and a teaching function combined, or is that something across the state? Do you know it? In Parson County, all teacher assistants that is a part of their contract when they sign on is that they are will be best drivers as well as the instructional assistants in the classroom. Thank you. I knew somebody from Cumberland County would raise their hand on that. Rep. Glazier. Thank you, Mr. Chair and follow up to Rep. Faircloth's question, in Cumberland, for example, that's a requirement as well that the TAs drive, and I think it would be safe to say in the vast majority but at all school districts, the bus drivers on frontend and backend are the teacher assistants. Further further questions? Thank you very much and let me, thank you. Thank you. Let me move on to our next thing, we have a teacher from here in Raleigh, Lacy Elementary, Lesley Wade who's a third grade teacher at Lacey elementary here in Wake County and then if superintendent Dr. Jim Meryl[sp?] can be in the queue as well to speak after Miss Wade and then after Superintendent Male, we'll also have Dr. Mary Ellison[sp?] who is the superintendent of public schools in Union County so Ms. Wade if you would introduce yourself Good Afternoon, my name is Lesly Wade, I'm currently a 3rd grade teacher at Lacey Elementary School in Raleigh, I've been a public school teacher in North Carolina for the past 20 years. I want to thank you for the 2% increase you have in your budget for teachers and school employees and for your support of our schools. I appreciate the opportunity to speak with you today about the Read to Achieve Program. The special provision included in your budget to make changes to Read to Achieve can make a huge difference for our students. As a third grade teacher I see first hand how the Read to Achieve Program affects the children, and what it looks like being implemented in the classroom. There're definitely positive aspect of the program. The goal of every child showing proficiency in reading is wonderful. The opportunity for students to attend a free summer or Track Out Camp is commendable. However, even with the positive and important intent of the program, there're modifications needed in order for the students to truly benefit in the way intended. One of the biggest frustration they face this year as the third grade teacher with the amount of standardized testing my student's experience. Third grade students in North Carolina take a beginning of the year test, Case 21 test at the end of each quarter, CogAT and Iowa testing for AIG placement, the EOGs, and the Read to Achieve test. While standardized tests are important the students are overwhelmed with the amount of testing they face in one year. Hours of instructional time are being lost due to the number of testing. Currently in order to complete the Read to Achieve portfolio requirements, a student must show mastery of each of the 12 standards 3 times. The reality for many students is that they are testing 3 times per week for around 45 minutes per test. While they are testing they're losing valuable instructional time that other the students are receiving. By simply modifying the requirements from three demonstrations to two, you will be allowing for a much better balance between instructional time and evidency mastery of the standards and since proficiency is a goal, the best way to reach this goal is give students the time with their teachers to be instructed and practiced skills.

It is unfair to our children to constantly over test without the opportunity for the maximum amount of instructional hours. The amount of testing is overwhelming and unnecessary for children as young as eight years old. Again, I thank you for including this provision in your budget and as a third grade teacher, I support modifying the Read to Achieve Portfolio Requirements from three demonstrations of mastery per standard to two. I'm confident that with the instructional time the student will gain, we will increase in reading proficiency which is the ultimate goal, thank you. Thank you, Miss Wade, Dr. Meril? Good afternoon Mr Chairman, members of the committee, thank you for the opportunity to speak with you this afternoon. I'm Jim superintendent of the Wake County Public Schools. I know I speak for many, many superintendents and educators in North Carolina and thanking you for a budget that showed that you listened dear folks at home, when you built a budget that addressed the state's critical needs, thank you for that. Before talking about specific proposals, I want to offer a couple of data points that address the scale in our school system in wake. My intent is to make clear that really there's no such thing as a little cut in a district that serves more than 156, 000 students. Our district employs almost 18, 000 people of whom more than 10, 000 are classroom teachers. 2306 are serving as teacher assistants and they play an invaluable role in allowing our teachers to spend more time with every student every day and reducing the doctor student ratio. About 90% of our district's operating budget is spent directly in classroom. Teachers, teaching assistants, supplies, materials and so on. 59% of our annual operating budget or about six of every $10 comes from you in the form of state revenues. So there's really no aspect of our work that is not affected by the current budget negotiations in progress. There is another part of our story that's critical to understand in the context of a budget, about 50000 students in our districts attend school on staggered year round schedules primarily to make better use of our public facilities in a rapidly growing metro area. Those teachers, teaching assistants, supplies, classroom needs are in place today, right now. Our students can not wait for the various level of government to conclude a budget negotiation. Let me be clear about this, this means you are currently debating whether to provide money that's already been spent on tens of thousands of students we simply can't unspent that money once negotiations and the final budget is decided. I just mentioned the value of teaching assistance in the early grades have benefit that most obvious to us in the early latency goals that we all share, 753 teacher assistance are already working today in our year round schools and another 1850 are employed for the traditional school years, our teachers who are increasingly difficult to retain made their plans for the current school years assuming they have assistance in the early grades currently all schools systems have the option of exchanging teacher assistance for teachers if they wish, that need for conversion varies greatly from school to school and district to district this flexibility we already have is not broken and does not need mandatory fixing more over in a growing district the size of WaKe County reducing class size in return for eliminating teacher assistance is gift we look the early cannot afford to take this is because our schools are already so full that reducing class size as described in the senate budget would mean adding 145 teachers to which we had no room, drivers education is critical and have gotten the red sign, we serve over 12000 students a year compensation is equally critical, and I would say that if we must wait till September and October hang tough make it worth our wait thank you. Thank You Dr. Meril. I could have said that by my self actually. Dr. [xx]? Good afternoon my name is. I'm sorry, Representative Stan? [xx] 145 teachers [xx] equates to say how many elementary schools, what would be just a nearest billion, I mean million what would be the additional construction cost for Wake County alone to house 145 teachers presumably 145 classrooms? One estimate made by the Wake County Taxpayers Association approximated $100 million additional.

Mr. Chairman Representative Stan. We've got fiscal notes from everything. Do we get fiscal notes from the budget that would show what the cost to the alleyways would be for construction if that provision in the senate budget were actually implemented? We can talk about that later. Okay. We'll look into that. Thank you. Dr. Alice. Good afternoon. Thank you, Chairman and thank you ladies and gentlemen. It is indeed my honor to be here today, I'm a North Carolina girl now for 57 years and I take great pride in working in the state in which I was born. It I come to you today with an attitude of gratitude you need to know that. Thank you for the stand you are taking for the children of North Carolina. That means a great deal to me as the mother, I have three children, as a grandmother, I was a bus driver, a teacher, a principal assistant principal and a superintendent and a Union public school systems, first off I want to talk with you about teacher assistants. We started out with over 400 we are down to less than 200 and how many of these do you have? You've got one set of them right? For a child who's living in poverty, and over 30% of our children are, and they've never been in a sociaizedl setting and they come to kindergarten, it takes more than one set of this, for the number of children that you put in a classroom. And you guys and ladies are talking about making the number exact, if you do class size, oh please dear God, sweet Jesus, don't do that! Children don't come in nice neat packs of 24, 23 27 and you inadvertently take away the flexibility. Those of us who've done this forever will be glad to talk with you about that, please don't do that. our teacher assistants in kindergarten will use them to socialize students into work. Grades one and two we use them for our leveled literacy intervention, they're working on reading and Math only and in Grade three we're working with the read to achieve legislation, a fantastic piece of legislation, I echo the sentiments of the third grade teacher from Wake County, but children also don't come, they're not widgets, they don't all come with the prefunctory 110 IQ. And a child with an IQ of 80-85-90 is going to struggle much more than a child with an IQ of 120, 130, 140. So please, please protect our teacher assistants. Fight the good fight. I echo [xx] Dr. Mirrell[sp?] in saying that. Also, I ask that you continue your fight for drivers education. And I want to tell you about a little fight I'm having in drivers education. We in Union County have done an innovative thing or two in times past, and we have developed an online module that one person can oversee for 3000 9th graders, or for 12000 9th graders. I've asked Department of Public Instruction, they've said well DMV won't let you do it. Talked with DMV they said Department of Public Instruction won't let you do it. I need you guys to write the law jam for me. We've got the module we will give it to everyone of the 115 LEAs in North Carolina, and every child can be provided online classroom work and I've got lots more to say but this man is getting ready to stop me. This is my 37th year in public instruction, and children are children they are not widgets. Thank you for fighting for our children, and please let us who fight the fight everyday of the week help you. You can ask any question, you might not like the answer, but we will answer you honestly and with integrity. Thank you and see you did not have to say stop. Thank you. Mr. Chairman. Representative Horn. Thank you Mr. Chairman. Please excuse my rather scratchy voice but I could not help, but to commend, our Superintendent Dr. Ellis for coming all the way over here and expressing her sentiments which reflect the sentiments of our delegation and of our county, and how proud we are of our superstar in education. Dr. Mary Ellis thank you very much. Thank you, Representative Torbett. I think it'll be reminisced if we didn't take the lady at her word that she had something to do about a module and DMV, perhaps if we could access that information and get further in-depth study of that. I think would appropriate for us to do that. Did you have further question for Dr. Ellis on that? Yes. Hi, doctor? Hey. I'm going to, since we get to talk and I can't get with you and you've given the information so I can get better back in time you will see it singing sir and you can the whole shooting match. Copy that, thank you very much. Representative Arp. Thank you Mr. Chairman if I would, may I ask Dr. Ellis if I could ask a question. This is the physical education part of the curriculum.

I excelled at that in high school. Thank you Dr. Ellis. First of all I'd like to say how proud I am of the system that we have in Union County and it's due to the fine leadership, the teachers, the administrators and the actual personal bind that we exhibit, and if we can just multiply that across the state it's fantastic. But more to the particular question, what I have enjoyed about the Union County is the innovative approach and you started to speak to that. So I wanted to clarify the kind of savings, this is not innovation just to do it in house, this actually results in real savings. Can you explain that a little bit about the savings that the locals would achieve from being able to offer this online. Absolutely. Currently, we had appropriated $993, 000 in some change for drivers education, and we have to pay a certain rate for drivers education teachers. We feel that we've done the math and we can save between $200-250, 000 every year of the States' money by doing the online modules. I find it curious that the Department of Public Instruction and the State, as a whole, has dispersed public, non-public, charter, virtual whatever virtual education, yet we can't do a virtual module for our children. We're doing it everywhere else in our own virtual school in Union County. Thank you for your innovation, and if you'd just hold right there and make sure we don't. Representative Floyd. Thank you. I just want to ask you a question. I was sitting back here maybe I didn't hear it all correctly but Could you go once again with what you've started from, and where you are now because it seems to be that you are a voice that we should be willing to listen to. Could you just do that. Yes, Sir. I'm a farm girl first of all. I live and work on an operational farm in Union County. I'm very proud of my farm here in teach. I was a bus driver and a teacher, and a coach- basketball. Thank you. Assistant Principal, Assistant Superintendent, Deputy Superintendent for instruction and now Superintendent, but my claim to what love is the 18-year sustenance in middle of high school English teacher. You've got to love what you do and it's got to show and I've listened to these folks, the teachers and staff, and they exude that and the minute we quit exuding the passion, we need to run from whatever it is so other fads can do it but that's me. Ms. Tia that's why we your fight for our teachers. Further questions? Right, the next, we have two more individuals that we're going to call on at this time and then we are going to have a presentation by our salary and benefits team that's going to give you pass out some papers and give you an overview, and then we are going to get to the balance of number of speakers plus we have some other speakers that are here from last time touching on a few other issues and some finance issues as well, I believe, but two I would like to call on this time before salary and benefits team come up. Steve Phillips from triple A carolina can safety manager with AAA identify themselves? Sure, my name is Steve I want to thank Mr. Chairman and the committee members for letting me speak today on drivers education. My job duty consist of training educators providing online driver education. Triple A is considered an expert in the driver training, locally and nationally and has always been an advocate for the safety of the drive in public, that is why I address you here today. I'm here today to talk about epidemic. Here are some facts, the leading cause of death for our teens is traffic crush. It's not cancer, it's not guns it's not sharks, while cancer is gone and even sharks are scary and dangerous, car crashes are the teen epidemic and is what killing our children, period. We have seen that states with graduated drivers license in conducting with drivers ad have 10-30% teen crash fatalities rate reduction for our kings, meaning that saves lives. Keen drivers have three times more chance to be killed than any other and that's fact. In the early 2000s, we were ranked 5th in the nation, state of North Carolina, and have improved to 13 but North Carolina still has a way to go. The latest research done from a study, shows that driver's education does work when done right, lowers traffic citations reduces collisions

and teens score higher on DMV test scores. AAA acknowledges that the members of the house have worked tirelessly on funding for driver education and I thank you for that because it is important. But we do recognize that driver's ed is not perfect in the state and that there are areas of improvement that are needed today. That is why we recommend that driver''s ed continues to be funded for this year and a task force is needed to be created to fix the current problems of driver's ed next year and the future, not another committee that evaluates it but fixes it. We do not want to be the wild, wild west of drivers education like some of our neighbors states and I have seen that happen. AAA wants to be part of the solution. We do not want to have unqualified people teaching our kids in the same way we don't want qualified doctors performing surgery. This will stop any progress we made dead in our tracks. Any strides we have made in reducing that's in North Carolina will be hurt immensely by not funding driver's education. Bottom line is if we do not fund driver education and fix the current issues with the state program, we will reverse any progress that we've made, not fix the issue but create another mess for commercial driving schools with no standardization of curriculum no delivery method approval, no training for parents that will have to carry the driver education teaching burden with no tools to even assist them. We can be the state that is part of the solution and not the state that will contribute to the epidemic that is killing our kids, which again, I'm going to remind everybody is car crashes. Let's not play politics with our teens lives. Let's come up with solutions. I thank you for letting me speak here today. Mr. Philips, you may have already done this and maybe I may not have seen it in my email cube, but if AAA has not done this, if you could put those statistics and the gist of the information that you are providing today in an email format. I'll even link the article to the study that's on there as well, Mr. Chairman, so that will at least be able to show you what we're talking about as far as facts. I believe the members would greatly appreciate it. I appreciate that as well. Thank you. Yes sir. Thank you very much. Next we have Dr. Bob Shackleford who is president of Randolph Community College. and I understand you're also President of the Communal College Presidents' Association. That's right. I'm Bob Shackle, President of Randolph Community College. I'm speaking today in my role as President of the North Carolina Association of Community College Presidents, and I appreciate, Mr. Chairman, the committee, the opportunity to be before you and to be with our County's great representatives, Rep. Pat Hurley and Allen McNeill and many others I see in the room who are wonderful friends to the critical mission of the community colleges. I learned in my years as a military chaplain, they teach you when you're doing presentations give the bottom line upfront. Bottom line upfront, community colleges don't want drivers' training and I can give you some reasons. Number one, we don't have the infrastructure to offer it. We don't have the equipment to offer it. We don't have the people to offer it. We don't have the money to offer it. It will be a critical version from our core mission of closing skills again and helping prepare college transfer students for the university and when we think about the money for it, we can not operate any cheaper than the public schools can offer however it's funded in fact it will cost us more because the students from the hospitals industry and the outlying communities of Rendolf county are goign to send their students to Rendols community college, we will have to send cars instructors all over the county to provide these instructions. So it's going to cost us more than having the centralized drivers training at the schools and so we don't think that it's a good idea that when they're discussing cutting funding for driver's training, let's cut the funding and give it to the community colleges, they can do it. Actually it's a diversion from our mission and we don't think it's a very good precedent if something is not working out well give it to community colleges. we're prone to do our mission and we're working very hard to do it and this is not a part of our core mission and it's not the solution we think is reasonable for our state. I think you're very clear in your remarks. Rep. Torbett? Thank you. I've just got one question for the young man. Do you think there's a presumption there that they're going to drive

to the community colleges to take drivers' ed? Some probably will. But we don't think it's a good idea. Other questions from the committee? If not, thank you very much. Again at this time, we will move to our presentation from Salary and Benefits and I believe there's a handout. If the Sergeant-at-Arms could pass that out please. Mr Chairman? And then we will come back and get the balance of our speakers after this presentation. Yes, Rep. Stein? Thank you, Mr. Chairman. I just wanted to say to the folks from the education community that were here on behalf of all the members here in the appropriation committee, we really do appreciate you being here and sharing what your take on the budget. It's been something that the finance committee has already done and will continue to do but as we do kind of error out and figure out the differences in the budget, really do appreciate the folks that have made the trip. And I was also going to ask Representative Hall a question, but he wasn't here for the presentation, so I'll reserve that question. Alright, if Representative Hall shows up we'll come back to you Representative Stein. Thank you Mr. Chairman. Okay, I believe we're close to having everybody, I have to get one to Representative Ford over there. So our two presenters for this are Lena McRae and David van Duin, right? I got it right? Miss McRae. Hi, am Lena McRae for the Fiscal Research Division. David van Duin and I will be flowing over a brief comparison over the salary and benefit items in the two proposed budgets. we're going to look at salaries as well as worker's compensation, the state health plan, retiree medical, and the retirement system. In your manual reports for both bills, these items are through out the money report showing up in each of the departments in the budget. The provisions can primarily be found in section 9 and section 30 of the bill. So jumping right in, you'll find the presentation full of charts is to show you what's included in the House and Senate proposals. For most state employees the House Budget includes a 2% across the board salary increase, most state employees will include your state agency employees, your university employees, community college employees and in this case we'll be talking about non-instructional personnel and the local education agencies, the Senate Budget does not include that across the board increase. The House Budget includes a 2% increase, cost of living adjustment for retirees which is not included in the Senate. Both of the budgets provide the step increase to your State Highway Patrol, your assistant deputy clerks and the magistrates they also have different but market-based adjustments for different groups of people, the largest who are in the Senate Budget, there's $21.4 million included for community college instructional personnel. Increase will be determined by the community colleges for structural personnel and in the house budget there's an increase for the highway patrol of $3.7 million for a market based adjustment. There're also miscellaneous house adjustemnts and the house budget for certain market adjustments. Both budgets also include funding for the new salary structure that OSHR which is the human resources is implementing. This structure is taking all of the state personnel that are under the human resources commission and looking where they're paid relative to the market and developing a range of pay that is appropriate for those positions. The funding provided would allow OSHR to increase pay to the minimum of that market range, both of the budgets include that. You'll notice if you look closely theres a different amount but that's because the target and the amount that OSHR has identified as needed has changed between the budget process over time.

The Senate budget appropriates funds to the salary adjustment fund which will be allowed to be used for market based adjustments for positions, so a lot of those positions that I noted here as miscellaneous other on the prior side could potentially be funded through the salary adjustment fund in the Senate budget. The salary adjustment fund has existed for many years, it's been funded by the legislature to address those market based needs for interstate agencies. This fund could be used by state agencies except for UNC, it's also not available to community colleges or to local educational agencies. The funds could only be used, are restricted in the Senate budget, to only be allowed to be used for job classes that don't receive an increase somewhere else in the budget. So the magistrates or the highway patrol would not be eligible for an additional salary increase through this fund. The House budget provides five none expiring bonus days to all state and state funded local employees, so that includes your educational employees, instructional and non-instructional support, and all state employees. That is not included in the Senate budget. The last item that is in agreement here between the House and the Senate budget is the beginning of implementation for a custody level pay for correction officers. This pay plan was reviewed by officers that stayed here in the Resources Committee and approved early this year, and it would adjust the salary grades for correctional officers based on the custody level of the institution which they work. Currently regardless of what level of custody you work and you're paid at a salary grade of 62 which has a starting pay of $30, 856. This would increase the starting pay for all correctional officers and differentiate it bu custody level. Salary grade 63 has a starting pay of 30, 856. The 62 has the starting pay of 29, 800. So it is minor increase, it's small increase, but a substantial increase and important differentiation between the different custody levels. I know that is the beginning of the implementation, there is $25 million appropriated in the second year for this pay grade change, but about 50 million or more is needed to fully implement the entire plan that the department of public safety and OSHR has put together. Moving on educators, Chrish and Brian have already gone over some of this, but both budgets include increase in starting pay from $33000 a year to $35000 a year, that's the number we always talk about, that is the starting pay for a teacher pay on a bachelor's scale that was the line of the salary schedule, both budget also adjust the salary schedule, the house to about 2% so the salary schedule is six tiers represent five steps, and the house budget are just by 2% except except for first year which goes for 33 -35 which is just over 6% the senate budget varies the amount increase by tier and their is no increase at the six tiers of the steps 25 and above. Both budgets fund step increase which is the increase of paying receives when they gain over your experience the step increase right now when you switch and that is funded in both budgets also continue $1000 bonus that was provided last year for anyone who did not receive a salary increase under the adopted budget, those individuals primarily at the the top of the scale proceed a $1000 non operating bonus and that's made recurring in both budgets finally the house budget add the for individuals payed on the school philologist lane of the salary schedule. The school psychologist lane includes speech psychology and others who have a masters degree their lane actually start at the step five pay level for the masters lain and so when the tier schedule was created they lost out because they already starting at five which is the beginning of tier two of the schedule. I can provide additional detail if you need that's a little bit complicated to explain. The next slide just gives you the comparison of the salary schedules under the current plan the house and the senate proposals, as you can see they both increase starting pay to 35 and you can see the difference and the distribution of the increase. Like Chris and Braynt said the amount of money actually spent on teacher pay is actually very similar between the house and the senate but the way those funds are distributed across the tiers does vary.

In the senate the increases range from 0 to 6% for the first year and 4.8% for the second year. Moving on to school based administrators, these are your assistant principals and principal, the house and senate budgets are quite similar here except for the 2% increase that's provided in the house. Both the then provide a step increase the school base administrator schedule still primarily allows a step increase on every year of experience, they both continue the bonus that was received last year, they both include provision that ensures that no assistant principal who becomes a principal would have a decrease in pay. There's currently a provision that says any teacher who becomes an assistant principal would not receive a decrease in pay, and with the change in the schedule last year that was an increase by common occurrence. Now because of that, assistant principals maybe didn't pay as teachers and when they become principal, could see a drop on pay, and this remedies that predicament. And finally both of them include sentiments that the school base administrator schedule should be changed next year. If you look in your budgets at the school based administrator schedule is quite complicated. It's based on years of experience as well as number of teachers supervised enrollment in the school. So the house budget includes a study to be completed by AD Oversight while the Senate budget just says that it intends to change the schedule next year. Finally before turning over to David, I'll go over to workers compensation. The house budget creates a joint legislative workers compensative study committee to make recommendations on workers comp administartion policies. The makeup of that committee is in the house budget in section 30. The senate budget addresses workers compensation in a different manner. It budgets workers compensation in each agency at the average of the actual workers compensation expenditures for fiscal year 12/13 and 13/14. It also establishes a $5 million non recurring reserve that can be used by the officers state human resources and OSPN to settle existing workers compensation claims, it budgets a $10 million recurring saving becoming in second year of the dinam take the count for closing of those claims and them efficiency at the department and the governor I believe will be able to be achieved by consolidating workers compensations administration within OSHR, and lastly a director to the department of administration to re-classify three vacant positions into workers com-divisions within OSHR to assist in the administration and other new responsibility for the department to the office. With that alternative Dr. David ti talk about benefit. So I'm David van Duin form the physical research division and we'll be covering the benefits items in the house in the senate budgets, starting with the state health plan. As mentioned previously the house budget sets aside the requested funds for the state health plan in one form or another for both years of the biennium the senate budget does not. Both budgets encourages the board and the state treasure to reduce the growth rate of future expenditures they do that suing different mechanisms but I think the spirit of two budgets in that regard is somewhat similar. as mentioned early the senate budget eliminates retirey medical benefits for new hires after 2015 so anyone hire on or after January 2016, new hires will still have the same coverage as current employees during the working years it doesn't change that active employee coverage. It also does not affect the retiree medical benefits for current employees incur with retirees as long as they don't withdraw their contributions. The two budgets differ a little bit in how they fund the retirement systems. The house budget exactly funds the annual required contribution reflecting the benefit and some other minor enhancements. They set a budget funds a bit more than that funds that annual require contribution after a reductiion interest rate assumption of five basis point per year. This shifts contributions from long into the future into the near terms so that we increase the next year's contribution by 45 million, but that really just a shifting of long term contributions into the near term in order to reduce the longer term contributions. And then we just have an overall comparison of the budget here the amount spent in the House and the Senate on state employee salaries, educator, and school based administrator salaries, and

on benefits, and the total differences are shown for both years also. Okay. Questions and let me start out Representative Speciale. Just want to ask she gave the salary on the correctional officers for 62 was 29,800, 63 was 30,856, is that correct? do you have by any chance what 64 and 66 is? Mr. Chair Yes, Please The starting pay for the salary grade 64 Is 31, 904 and the starting pay for a 66 is 34, 190 that's a minimum of each of those salary grades and that is not including any obviously any increase that might happen this year. Thank you Representative Pendleton Yes sir, Mr. Chairman, on page five on workers comp, I do believe that the senate has come up with a couple of good items in there that we have to take a serious look at, follow up. Follow up. Okay, the next one on page six is retiring medical, that is something that should have been done along time ago. It's unheard of in the insurance people to allow recruit to stay on the health plan. Follow up. Proceed And then on retirement at some point we're going to have to do the same thing I hope we do to medical and say anyone hired after xyz date is going to have a 401 [xx] plan, not a defined benefit plan, very few places even offer them anymore, it's a good thing for the employees and it's a good thing for state government, thank you. Representative Michaux? Thank you Mr Chairman, only salary for education I think it's slide number seven, I'm looking at tier six, 25+ years, is that the max are there a person who teaches more than 25 years in the system, what is the situation? In other words you grow up to is there any increase after 25 years? Pursue! Representative Michaux, currently the top pay is for a teacher moving into his 26th year of experience would be $50 000, the legislator has historical adjusted the salary schedules every year. In the past if there was a 3% increase for state employees the salary schedule adjusted accordingly and teachers recieved both the stepping grid and the percentage across the board increase. That's up to you as the makers of the schedule and the budget to determine each year. At present, $50,000 is the top pay. There are individuals who are employed in 13/14 who were held harmless because they were already making more than $50,000. And both of these budgets continued that whole [xx] so if you were an educator paid more than $50,000 in 13/14, your pay does not drop down to $50,000. It remains at the level you're being paid then plus the $1,000. Can I follow up on that? Follow up. If then those who were held harmless, their pay would increase, from what I'm hearing from you, based on whatever the increase is for overall state of employees an average 2% a mere increase to 2%. It would go up on that basis. Is that what I'm hearing? Representative Michaux, that would depend on how the legislature implements the salary increase. Historically it has been implemented such that any cost of living or legislative salary increase adjustment did apply to the salary schedule. There may have been years in the past when it did not, but that has been the action of the General Assembly typically. But it would be up to the General Assembly to make that decision. Representative Glazier Quick comment, Mr. Chair and again the follow the presentation comment. So at least it appears to me that the House is moving towards continuing the trend of trying to increase the upper range as we go year to year and the Senate proposal does not. That would seem to me to be what's happening at tier six? I think that's fair to say with the numbers and I think the concern that came out of the budget last

year, there was a concern along that line about teachers with greater seniority and we were certainly attempting to address that and how what the salary for teachers in this years budget. Rep. Faircloth? Thank you Mr. Chairman. On page, I guess it's page two, the bottom graph where it speaks about market-based adjustment f I get some clarification, market based adjustment, is the market used for that computation, other governmental jobs in our area or nationwide, or does it also include the private sector? Representative Faircloth, it would depend, there are certain job classes that don't really have a private sector equivalent, but in other cases in the studies that the upper resources does when bench making a state job against a job includes both public and private sector. There's really not a private sector for correctional officers for example, they include both local government, state governments and private sector in their analysis. A lot of what goes into these adjustments also is recruitment and retention problems for a position. If an agency has a significant challenge in recruiting and retaining employees in a particular job class, that is part of the analysis that goes into these decisions. Further questionsat this time for the salary and benefits team, Representative Hall Thank you Mr. Chairman Glad to have your with us My pleasure, I was just consulting with Representative Saine about this very issue, so I appreciate you making an opportunity for me to ask this question and it's for staff I guess about the TAs and how we funded them in the budget last cycle and are they going to be affected by the continued resolution we have in place now or does it over them so they still get funded even though that 24 million was non-recurrent. Well 2.1 we covered teaching assistants earlier in the presentations but to answer your question with the current continuing resolution, it continues the budget and the funding from 2014/15, so there was no reduction in, to my knowledge, it was no reduction in the allocation to the LEAs. Whether it be teachers or teaching assistants, [xx] and blocks of money, and if the education team is here, they can probably explain much better than I can, but it was funded in the CR at 100%. Quick follow up.? Yes, sir. Is there someone on the education team you can identify for me and I will follow up with them to clarify, make sure there's no confusion about that? Brian Madison with the Ed team. Thank you, Mr. Chair. To the point about the current CR which the state is under no It essentially funds the base budget for the upcoming cycle with a few adjustments such as ADM Growth however it does also not include the $24.8 million non-recurring money as well as other non-recurring monies that were made available on the last budget and so in a sense the money available for key currently under the CR is 351, whereas last year it was 376. Now certainly there's also a great deal of work yet to come about what that final level obese, maybe you're certainly the folks in your local school district might be better abattoirs of or in a better position to tell you what they're expecting and how they're planning with respect to TA hiring a few of the districts touched on that earlier. And let me just mention, thank all you very much, appreciate it also get other questions will go back to the public comments. I do want to make. sure that, I mentioned one thing from the salary and benefits and the other, is that the view of the house and certainly the view of the full Chairs and I believe a host of other folks that, what needs to be looked at is total compensation. If you just make a change, saying hey you could save some money here, and you're not looking at the total compensation package. You're not necessarily getting the

full picture and so, we're certainly cognition of that, with that I know there are a number of people who want to speak on a number of different issues, but I would like to start out with those that I know probably are focused on salary and benefit issues and sets on our minds at the moment and with that I would call on Ardis Watkins who'd signed up with the Stadium Police Association. Thank you Mr. Chair, members of the committee, I'm glad to be here today. My name is Ardis Watkins, Director of Government Relations for the State Employees Association of North Carolina. I think first of all, and most importantly what we would like to say to you as an association on behalf of our members both active and retired is thank you. Thank you for as a body recognizing the need for an active employee and retired employee increase in this budget. I think a lot of you have gotten our cards that looks somewhat like this from one of the members of our lobbying team, and the most striking thing about it, it goes back over the last five years and it shows if you compare what state employees and retirees have received in terms of a pay raise for actives and a for retirees compared to the CPI, the cost of goods and services. You'll find that over the last five years, state employees who are active have gone behind by 6.9%, that's how much ground they're losing, and retirees have lost 8.4% ground. And there are times that's going to happen, because the economy is just so bad. But this year the house took a step and said, we've made some real inroads here and we've done some repair to the budget and that state's fiscal house and we're going to do something to reflect that, we certainly appreciate that. The house did this in part though, it's our contention, due to the sacrifice in part of state employees and retirees over not just these past five yeaes but forever when the state has had to look somewhere to sacrifice they have generally looked to the employees and the retirees, and that's just saying it like it is. This year instead of a $400 million surplus like we all thought, word came I think yesterday, or maybe today, we're looking at 445 million. Things are just better and better. The situation we are in makes the House proposal, in our opinion, even better than it looked before. The Senate proposal is radical, and as we've told them, we believe it is out of touch with North Carolinians, not just state employees. Again not only do we thank you on behalf of state employees, but we thank you because the House budget also preserved state services. In lowering tax rates while lowering the amount of services you get doesn't get you anywhere as a taxpayer. The House budget we believe is a perfect mix, and it also recognizes that the money and the checks of state employees and retirees goes back to this economy right here in North Carolina. So we'd love to talk to you Representative Pendleton about why that total compensation package that Representative Dollar just mentioned is key? Thank you all for your time today and thank you for your budget. Thank you and let's have a Mr. Jack Cozod[sp?] representing the retired government employees, and then Pam Diego for Louise representing they retired school personnel. Thank you Mr. Chair and members of the committee I'm Jack Cazod, I represent North Carolina Retired Governmental Employees Association. The 55 thousand members of that association thank you the members of the house in particular for two things that you included in the budget, one, 2% COLA, as you've heard there hasn't been many COLAs over the last 10 years for retirees. We know that funds were short and it was tough to do that, and this year when you had funds available you did include a COLA and we're very, very grateful for that, and we hope you will stick to your guns in the negotiations with the Senate and keep that call up in the budget. We also want to thank you for restoring the medical expense deduction for seniors in the House Budget, that's very important to the retirees and we're very

grateful to you for those two matters that you've included in your budget. Thank you. Thank you. Ms. [xx] Mr. Chairman, members of the Appropriation's Committee my name is Pam Dierdoff[sp?] and I represent the North Carolina Retired School Personnel Association. I too first, I want to thank you for what you've done with your continued support for our North Carolina retirement system and for funding the annual required contribution, or the art as you have done Well as recommendation for 2% COLA for retirees. My association of retired school personnel does represent over 11,000 members who are retired teachers, principals, sport personnel including those people who work in cafeterias, teachers assistance, and that sort of things. So as retirees, we're very much appreciative your recommendation, and do want to encourage you to please try and maintain that 2% COLA. Keep in mind that a lot of our members, a lot of our retirees retired from government years ago, their salaries were much lower at that point, so consequently their pensions now are much lower than you would imagine. In fact, the average retirement pension for teachers, and state employees is only about $20,650 a year, $20,000 a year that these people are living on. So 2% Cost Of Living Adjustment for these people would average about $34 a month, that would go a long way that when helping them keep up with some of these inflation cost and the artists and some of the other effects we've talked about, with inflation's. So we do hope that you would stay firm with your commitment to 2% COLA for retirees, and do appreciate with your continued support, thank you so much. Thank you very much. We'll move into some of the other individuals who have signed up from, I think Dr. Nelson's Hymen and prior a variety of different areas, the first one I've got is David Hyman, close vice president for republic policy in advocacy for the North Carolina senate for non-profits. Thank you Mr. Chair and members of the committee David Hyman with the North Carolina senate fro non-profits. Non-profits have a number of concerns about the senate budget being generally as a sector there two main concerns and they're both the tax provisions in the budget. The first is debate including the charitable deduction in the $20,000 cap and itemized deductions Chairman Daley you mentioned that at the beginning of the House full protects that. That effectively eliminates the state tax incentive for charitable giving. We saw Hawaii is one of the states that's done something similar, they did this in 2011. There was a measurable the turn effect on charitable giving and as a result the Hawaii state legislature went back in 2013 and reinstated the full charitable deduction took it out of the cap and state itemized deductions we've looked at what happened in Hawaii and then we're able to extrapolate for North Carolina and we estimate that the senate proposal would reduce charitable giving by anywhere between 60 million and $900 million a year among North Carolinian's, which should be a huge affect on non-profits throughout the state at a time when 60% of non-profits can't fully meet needs, and a recent study found that 20% of people served by non-profits. When the non-profit can meet there needs they're going to turn for government for those services that means that that's going to be further pressure on the state on the assembly to fund more government services, and have government pick up the slack the non-profits are missing and the second provision, the non profit are very concerned is lowering the cap on non-profit sales tax refund. The Senate proposed a pretty drastic reduction and lets face it, it seems like this is something that only they've done profits but care about but in fact for a few reasons almost all non profit are very concerned about it. For one, it really is a significant step down and with that there's a real concern among non-profits that all non-profits could be taxed in the near future and in fact just last week the Senate passed a different tax bill that would create new limits on sales tax refunds for small non-profits. Non-profits they collaborate with bigger Non-profits they're are also concerned that many programs that they do like preventative health care programs would be lost. Churches and YMCAs are also concerned that it would affect their building programs. And finally as apart of

that lowered cap, it shifts sales tax refunds from semi-annual to annual meaning that non-profits would essentially loan the State their tax money for an additional six months. So again, we're very appreciative of the House for standing with non-profits on these provisions in the budget and thank you. Thank you. I want to pick up on one of the individuals who was here from last time, we were not able to get to him, Mark Zimmerman, with I believe the North Carolina, I believe the Realtors if I'm not mistaken, Incor[sp?] Thank you, Mr. Chairman, members of the committee. My name is Mark Zimmerman, a realtor and a small business owner in the Triangle Area who is serving as the Chair of the North Carolina Association of Realtors Legislative Committee this year. I want to thank you all for this opportunity to speak on behalf of the 3 million plus homeowners in communities across this great State. I want to bring to your attention a few budget items that affect housing in North Carolina. First, we want to thank you for including in your budget reinstatement of the Historic Preservation Tax Credit. This is one example of government investment that reaps solid returns financially and improves the quality of our communities. When we have a program that works, we need to work to retain it. Second, we want to thank you for your continuing support of the Leaking Petroleum Underground Storage Tank Cleanup Funds. This is so important to so many families needing to sell their homes and of course, has environmental benefits as well. Finally, we need your help. To stop a threat to one of the linchpins of the state support of home ownership, the ability of families to deduct their mortgage interest in property taxes from their sizable tax bill. Two years ago, a $20, 000 cap was placed on deductions for mortgage interest and property taxes. While we disagreed with this, from a policy and principal standpoint its impact would at least initially be limited. We were worried however that this was a slippery slope, our worries seemed to be justified. The budget proposed by your colleagues in the Senate would shoehorn all federal schedule a tax deductions into that $20, 000 cap essentially eliminating defective deduct-ability of home ownership interest in taxes. And by the way it's worth nothing that this impact would be much worse if the Senate's concerning tax scheme that redistributes sales tax revenues forces local governments to increase the already heavy property tax burden on home owners we hope you continue to oppose that measure to, I don't have to explain to you the importance of home ownership is the cornerstone of our communities and the backbone of our economy in North Carolina property owners pay for more than half the cost of local governments that's why from over a century generations of lives policy makers have promoted home ownership through mortgage interest and property tax deductions. We want to thank the house we are leaving that cap unchanged in your budget this year and we ask that you continue to stand with North Carolina hard working home owners and rejecting at the senate proposal to turn the home owners cap into a legislative land field for their unwanted deductions. Thank you very much. Thank you. We have a group I know we have a group with us, members of I guess excutives from chamber of commerce and I am going to call your name out and if you could sort of come out as a group when maybe I want to make sure each one of you has an opportunity to say something but if you can kind of Stager your remarks their are not necessarily repetitive, I don't want to lose members before they have an opportunity to be heard but I have on the list David Braidly from the state full chamber where my in-laws are, Nataly English from Charlotte Chamber, Emily Atkinson from the Raleigh Chamber, Josh [xx] from the [xx] Chamber, Dave from the [xx] chamber I'm sorry [xx] chamber corrected by the representative from Cabarrus County. And I believe Jill[sp?] Swane[sp?] the Jonesville chamber. Thank you Mr. Chairman, I'm Natalie English with the Charlotte Chamber of Commerce, I'm here to thank you for some of the work that you've done, not just in the budget but before that and now it's all tied up in the budget debate starting with House Bill 117, thank you for passing that as early as you did in session. It's really critical for us to move forward for us continuing

to attract jobs to this state, in fact right now we have our headquarters potential relocation to Charlotte that if they relocate to Charlotte they will also consider a $300 million investment at another location in the State of North Carolina it's a bid deal, those kinds of locations here lead to more investments. So dealing with the Job Development Grant Program quickly and sooner than we have so far it's really important so thank you for what you've done and I ask you to stand your ground on that as you negotiate with the Senate since they decided to put it in their version of the budget. And then secondly I'd like to speak about the redistribution of sales tax proposal that the Senate included in their budget. We are opposed to that. We believe that there are reasons why the distribution is set up the way it is. They've been negotiated over years. There is debt tied up in that revenue in our counties and if we lose that revenue to pay off that debt, then we risk losing credit rating and those being downgraded, and it also impacts our ability to continue investing in our infrastructure which leads to again job creation because that's what companies are looking for. They are looking for communities who are willing to invest in their infrastructure. So thank you for what you've done so far, and I just ask you to stand strong as you negotiate. Question for Rep. Torbett? Thank you. Rep. Tine, remind me, I may be nearing my limits so when I get there would you let me know, Mr. Chairman? I have a question for Natalie if I could please. Natalie, there seems to be two schools of thought up her. The first school of thought relative to economic growth is that, and a lot of us believe this but we don't believe it's the only reason, but there's a school of thought up here that this is North Carolina and people just want to come to North Carolina. And the other school of thought is that, businesses that are looking to grow currently residing in North Carolina or expand and businesses looking to relocate to North Carolina are looking for the place that they can find the strongest workforce and it presents the best bottom line for profitablity. So if you had choice one that people want to come to North Carolina just because they want to come to North Carolina or choice two, can you give me perhaps a perspective of what you think might be the best choice as far as what people are really trying to do? I'm sorry, Representative Torbett, I can't. It is the combination of things and that combination is different for every single company that looks at North Carolina. Workforce is critically important, our climate is critically Important, our investment in our transportation infrastructure is important, and an incentives package is important. None of us likes them. We all say if we'd all stop doing we would all stop doing them, but until somebody tells us all we have to stop doing them, we've got to do what somebody else says. Thank you Ms. English. Thank you Mr. Chairman. Step please. Hi. I'm Emily Atkinson. I'm the Vice President of Government Affairs for the Greater Raleigh Chamber of Commerce, and I come to you today as a representative of the Wade County business community and a North Carolina native. I want to begin too by thanking the House for your leadership thus far in the legislative and budget process, what you've done for the economic incentive programme as well as protecting our sales tax structure, there are numerous concerns, I will briefly I highlight a few for time, Wake County for year 2020 stands to lose $40 million per year if the redistribution plan goes forward, and the issue is that that creates an undue burden on Wake County a our one million residents. 120,000 of which are already below the poverty line. If we have to increase our taxes, they don't have the ability to deal with that increased burden. We can have a severe reduction in services or both increase taxes and reduction of services which all would occur during a period of continued growth. These options don't go well as they lead to a decreased quality of life in Wake County and our region and that can impact the quality of life in North Carolina as well. Additionally the proposal the one that economic incentives for major market communities will have even more of an impact.companies located in Wake County don't just benefit Wake county, they benefit the entire community. They benefit the state. In addition, anyone receiving a grant located in Wake County, they contribute 25% of that grant award to the utility fund which goes for structure investments in rural counties. Over the past three years, $121 million has been added to this fund. That's significant money to support rural counties. If our grand program is not soon renewed, North Carolina will continue to lose out on major projects. We've already seen a decline in our economic activity, as [xx] holdings have crossed us off the list. Since I've been in this meeting, our economic team who's in New York city right now meeting with site, consultants emailed me and said there was a 1000 job mega project that North Carolina was not are considered for, because of the uncertainty in our state

right now, otherwise we would've been top on their list. That's significant investment that we need to think about, so right now we're not in the game, we're sitting on the sideline, we're watching our neighboring states score project after project. We've got to do something to get back in the game and remain competitive. We look forward to working with you, to get us back in the game, and again thank you for your leadership. Please continue to stay steadfast in your position throughout the rest of the budget negotiations thank you Thank you Mr. Chairman, I'm Josh Bass[sp] from the [xx] Chamber of Commerce, and I thank you all, appropriations committee for allowing us time to speak today. The [xx] is opposed to the sales tax planned redistribution in the senate budget and thanks the house for standing strong on this and hope we can count on the house to continue in the fight against this. Curry [xx] County is kind of a strange player in this coalition because we are a small rural county. It's been billed as something that helps the large urban counties, we're a county with less than 25, 000 people, but the senate plan affects [xx] budget and would hurt us in terms of sale tax [xx] is the net provider to the state and that we give more sales tax back to the state than we take in this is designed to help small rural counties like [xx] the only reason we're included is because we've miles of beach and during the summer time all population more than doubles, and we must services to meet that larger population in terms of [xx] and sales department, most of our businesses are small one or two employees mostly family via own businesses this tax is generated by those businesses and we feel that for those businessi are the generate this generate the sale tax in [xx] county one that should benefit from, we bring new tax dollars into the state, this are as been said in the senate for [xx] these are not counties people coming to surrounding counties and shopping with, this are visitors from other counties Pennsylvania, Virginia, New york coming to vacation so these are new sales tax dollars that we're bringing in to the state, and again we must provide services for this visitors so thank you again for allowing time to speak on us today and thank you for the house leadership on that Thank you Good afternoon Mr. Chairman and members of the committee thank you my colleague have done s merciful job finding a lot of the points that I have, but let me just chime in and support them in a couple of ways. The [xx] regional chamber believes that the general assemblys' intent is to build prosperity throughout the state, and that's a noble cause and I think we can all get behind that cause. Building prosperous community across the state is not accomplished with the stroke of a legislative pen, it's accomplished through hard work over time. But that's what North Carolina's known for, that's probably why a lot of people want to come. We have a good work ethic. A good work ethic and commitment and why else would our state be growing at the rate it is with companies from all over the world flocking to our communities, and therein lies the answer. We believe the characteristics and uniqueness of our community should be used and leveraged to build prosperity across the state. In [xx] county we're blessed to be home of Charlotte Motors Speedway, Nascar, and several Nascar race teams and we leverage that uniqueness to bring new companies in in the area is motor sports automotive component manufacturing and even air space, but Cabarrus County also has areas that need redevelopment. For instance, our town of Mt. Pleasant, all the male there are no longer operational. So we are working with local officials together to recruit right anchors for those buildings, and we also have a significant tourism industry and we think Mt. Pleasant and it's picture estate would be perfect for that. So that same approach can and should be applied across the state. As an example, Scotland County can leverage it's available land and plentiful water supply to companies who need those estates, but they may not need to be on an interstate, and coastal communities can work with NC State to leverage the wind, sun, and strength of the ocean to create research and development facilities around alternative energy. Redistributing sales tax revenue will not build sustainable prosperous communities infarct it puts Counties that are sale tax generators, as has been mentioned, such as Conveyors County at a further disadvantage. Conveyors County and its communities insistently invest in our roads, water, revenue, and schools to serve the businesses in their employees, generating that sales tax revenue into serve and to serve the hundreds of thousands of tourist that come. The proposal for sales tax distribution we do not think it's the answer, it would hinder Countys ability to tax revenue in the future, it would raise taxes to maintain

and build infrastructure and it would not accomplish our goal of building prosperity throughout the state. North Carolina should use our assets to build prosperity in areas that need it. We shouldn't simply shuffle revenue from one county to another, and the Cabarrus Chamber definitely willing to help other counties in our region and across the state to leverage their strengths and build sustainable economies. Thank you Thank you very much. Jill Swain Mayor of Huntersville, Representative Jitter[sp?] wanted to come up here with me but I told him I wanted to make an impact on you today. Well what you really meant to say is you want to make a positive impact. Absolutely right, when he was on my town board he sat, he sat to my left and he was in charge timing so I don't, I'm very uncomfortable with him being behind me. So I'm mayor Jilll Swain I'm Huntersville Mayor and I currently serve as the Chair of the Metro Mayors Coalition, I spoke to you last week I've missed you so much I wanted to come back and I thanked you last week for your inclusion of additional transportation revenues in the budget. Today however I want to address the topic of Sales Tax Redistribution and I know very well that the House Finance Committee has spent time I'm hearing testimonies on this topic, but I think it's also very important that the Appropriations Committee also hear testimony on it as well since you're part of the committee that's tasked with negotiating all the terms in the budget. I'd encourage you all to read the School of Government March publication on the topic of Sales Tax Redistribution. In that paper it was noted that of the 38 states that have local option sales taxes, North Carolina is the only state in which any of the revenue is distributed on a per capita basis. Currently we sent 25 cents of very dollar collected to other counties. Now the authors analysis additionally finds that when you consider the population of a county and it's residents medium income among other factors, rural counties received $16 more per capita in local sales tax than suburban counties and $11 more than urban counties. The Metro Mayors Coalition wholeheartedly agrees that they're parts of this state in deed that are struggling to build and operate schools with the current subsidies in place. We support an effort to identify an economic development strategy for small poor counties that will provide them the opportunity to grow as we had and attract jobs for the residents without harming the tourism, urban and suburban economies of this state, we support expanding economic incentives such as JDIG, historic tax credits and other efforts to help attract jobs to all parts of our state and we look forward as always to working in partnership with you on this important effort. I want to thank also the realtors, I want to thank the chamber of commerce, chambers of commerce for speaking on this, we all agree on this issue, and I think it's important that you note that all of these entities stand together on it. Thank you all very much for what you do. Representative Brawley. Thank you, Mr. Chairman. I just wanted to add a little aside of some of the sales tax discussion, and I was glad to hear several people talk about the desire to help the counties that are a little more stressed economically. I wish we could box up a bunch of prosperity from Mecklenburg County and ship it to a county that need it, but we can't. And I now understand they're trying to do the thing with the sales tax, but I've been doing an examination that I wanted to share by modelling what happens under the new plan for a new business, the dynamic changes that are created by the change in sales tax. And I used as my base the Super Walmart in Conover, North Carolina. It generates about $70, 000 a year in property tax, around 75 million in sales, it does $1.5 million in local sales tax. Currently 1, 125, 000 of that goes to Catawba County, 375, 000 is redistributed per capita around the State. The reason that's important particularly to Conover is a super Walmart requires the full time equivalent of a police officer just to deal with the incidents generated by a super Walmart. Without that sales tax distribution,

most of which does not go to Conover but stays within Catawba County, the other infrastructure cost of that Walmart are paid and there isn't net benefit to the local economy. After the change, the sales tax distribution would mean that Catawba County would retain 300, 000 a year in local option sales tax and one would be redistributed. At that point, Conover[sp?] loses money on adding a super Walmart even counting the gains and employment because all of the sales taxes basically go away. That would mean our smaller economies like Conover would be better off to have the new retail in an adjacent county not in their own. And we would have small town town councils feeling pressured to refuse to rezone for development simply because the new punitive tax structure would mean they would lose money on the very prosperity that we want to attract to the poor counties, and so I think we got to find the answer for the poor counties but setting out a punitive tax structure is not going to do it. And I was really appreciative to hear that we're going to have support for doing things that may actually address economic competitiveness but unfortunately I just can't box up some prosperity from Wake and ship it out. Thank you, Mr. Chairman. Thank you, Chairman Brawley. Let me just say real quick, Rep. Insko, and I apologize for skipping over you much earlier. I want to get to Rep. Insko. I'm probably only going to be able to get to a couple of more people. We're going to have to cut this off. I've actually sort of been overtime with some people needing to get to some conference committees here. I do want to get to Mayor Moritz of the City of Conover who is from out of town and Dr. Sheila Davies from Dare County Public Health since those two individuals are from out of town. First let me recognize Rep. Insko Mr. Chairman, thank you. I just want to make a general statement so I'm happy to wait until the other speakers speak if that would be better or I just have just a brief statement that I'd like to make. Let's see if those speakers are still here. Is Mayor Moritz still here from the city of Conover? OK, if not Dr. Sheila Davis from Dare County Public Health please. Good afternoon. Let me do one other thing, is Ernie Pearson still here? Ernie are you still here? OK there you are since, Tommorrow? Well, you're the last one on economic development so after this, we'll hear from from Ernie, Mr. Pearson and Rep. Insko and we'll, that's as much time as we've got. We will likely meet sometime next week and we will certainly pick up on anybody that had signed up that we were not able to get to and we got some other subjects to cover, Dr. Davis. Thank you so much, well I'm with the department of Public Health in Dare County, I'm hear today wearing the hat as the mayor of the town of Kill Devil Hills and I also I'm here to speak in opposition of the sales tax redistribution as being presented in the Senates version of the budget. Being from Kill Devil Hills, tourism is what drives our economy. We have approximately 7, 000 year round residents that work to provide a variety of services to our seasonal population that expands to approximately 40, 000 during our summer months. This same picture happens across Dare county where we have a year round population of 34, 000 which expands anywhere to 250 to 300, 000 during our seasonal tourist season. With this type of population during the summer. Local governments have to provide a higher volume of services than they would if we were just providing services to our year round population the sales taxes generated in our town and throughout the county helps our local governments pay for the added fire, police, EMS, ocean rescue, water, trash the essential services that are required and the infrastructure that it help then takes to convey those services. [xx] county in our neighboring town the town of Culible[sp?] Hills serves as a donor county under the current sales tax distribution formula. Currently 78% of the sales

tax collected in their county goes back to the state, for perspective over the past 10 years that's $80 million that's going back to the state. The proposed redistribution would send 94% of the sales tax back to the state resulting in a projected annual revenue loss of anywhere between $9 -12 million in our community. As an elected official, I made a commitment to my constituents to consider the unintended consequences before making any decision. Too often votes are cast and decisions are made without thoroughly evaluating all of the potential impacts of a decision. While on the surface the proposed sales tax redistribution may seem like a good idea to help counties in need. However I urge you to consider and deeply evaluate the potential unintended consequences in [xx] hills we cannot shift this tax burden which between the town and the county would result in a nearly 38% [xx] in tax increase. We can not do that to the working class in our town, so we will be forced to cut services. Those services are the same critical services that keep our tourism industry thriving. An unintended consequence is people may shift their purchase decision going on vacations is choice in the purchase decision to an area that can provide better for them if we have to take dramatic cuts in the services we can provide. I've never heard of a successful outcome when you rob Peter to pay Paul. In these cases, eventually both Peter and Paul lose. Please don't allow this to occur in North Carolina. I applaud your commitment today in standing in opposition to this, and I hope through these negotiations you will as well. I thank you so much for your service to our great state and complete my comments, thank you very much. Thank you Mr. Chairman. I'm sorry Representative Tine. With your permission just one quick comment on the heels of what she said, and that's just we said it in the Finance Committee, they were kind of enough to let me speak there but I just want everyone to understand because I've heard it said many times in the legislative building that Dare County is currently somehow getting something from this plan that we have, we're getting all sorts of money. As she stated it's $80 million over the last 10 years that Dare County has given back, that's to the State. So we are actually a donor county, and I just want to make sure that that record is stated properly because I've heard many say that we're somehow a receiving county which is not accurate. Thank you, Mr. Chairman. Thank you, duly noted Representative Tine. Mr. Pearson. Thank you, Chairman. Appreciate this and I appreciate your time, I know you're all tired. My name is Ernie Pearson, I live here in Wake County. I'm currently President of the North Carolina Economic Developers Association, the members are the frontline people involved in the economic development around this State. I want to rise to speak to you just about a couple of matters. You folks have been great supporters of economic development through the years going back to when I was at Commerce under the Governor Martin, this General Assembly has always been a good supporter of economic development. In the last few years you all have done some great things, righting the workers comp. Situation who have more reasonable rights getting the unemployment debt paid off was a monumental task, all this it adds up, but I rise to speak to you about two things that are very very important in this budget battle and in this current conference process. Number one, it is absolutely urgent that you hang on to getting the Job Development Investment Grant Program passed this year with a good cap increase such as in your proposal and with an extension of the sunset. Respectfully to the Senate, some of the ideas they have about changing it will not work and they're not necessarily good, we're not going to get into all the other matters you have between you because we think there's some good ideas out there for other economic development initiatives, but if this gets caught up with other issues Please pull the JDIG cap increase out and act on it independently. I can tell you, and some of you I know personally, I can tell you and give you my word we are losing projects to this State that are impactful in jobs, impactful in capital investment. There are consultants who will not come to this State because of lack of JDIG. Number two, House Bill 108 you guys passed it with a big margin. There's some 36 sponsors of it in this Body, it was led by Representative Stam. This is a bill to create a low to no interest loan program to develop business parts[sp?] in shell buildings.

This is the key for the rural areas and the urban areas, but mostly the rural areas, this is the key to attracting industry. You have to have product to sell. You passed it. You put $400, 000 in the budget this year to do a professional study of the needs for buildings and in this state. Please get this out for us. This is very important, and if you can't get the bill out, stick to that 400, 000. I want to again tell you, this State has been a leader economic development, we have got to get back at that leadership position at this point in time, I hate to tell you we're not. But I'm confident with what you're leadership and your members have supported economic development. If you pay attention to those two things, and a lot of other good ideas, single white terror cells factor good you pay attention to those two things, that plus the new organization we have we'll get back to a leadership position. Thank you Mr. Chairman, I know everybody is tired, I'd be happy to answer questions to take comments if anyone desires. Thank you. Any questions for Mr. Pearson at this point? I think he was and on point thank you Mr, Pearson, Thank you sir. Let me just, I think representative [xx] was going to say something with the County Commissioner's Association, I had overlooked you had been on the list last time and we were trying to get everybody from the list last time. If you want to make you statement now, you can do it or save it for next week either way. Thank you very much Mr. Chairman and I can be brief. I am Joan Reese with the Association of County Commissioners and there are a number of things in the House Budget that are going to help counties and I wanted to point this out to you. The increased mental health funding is such a high priority for our counties right now, the House Budget provides some substantial assistance in this area, and provides increases for additional community hospital psychiatric beds. This gets behavioral health patients out of the emergency rooms and into some facilities where they can get more appropriate help. And to complement this, there are some additional beds that are funded for development for a state-wide crisis bed registry to help identify where these beds are across the state and get patients to those. And there are also some additional positions and therefore additional beds at central prison health facility and this helps to address the mental health problem at that facility also and get the appropriate help for those inmates. In the area of economic development, the increases in the One North Carolina Small Business Fund and the Rural Economic Development Grants, these are critical to help struggling areas. And the film incentives and Historic Preservation Tax Credits are very important to a number of our members. I just echo the comments made earlier on the drivers education. We've got a number of counties who have halted these programs waiting for the budget to be passed and are anxious to get those started back out, so thank you for that funding. And finally, the lack of broadband access is a challenge, a real challenge for our students in the rural areas and that is something we've been working on overall, but specifically the support for the School Connectivity Initiative that you have in your budget will provide broadband in all the public school buildings and help address this roadblock to learning and provide the access for those students. Thank you very much Mr Chairman. Thank you Miss Reese, and in our apologies for not getting to you sooner. Representative Insko. Thank you Mr Chairman, I'll just make a brief statement maybe say more next week. First I really appreciate this information it's been very helpful. I appreciate the opportunity for people to speak, I agree with all of them. I want you to give up any negotiate I don't want you to give up on any of these things. I want you to keep all the funding for education, I want you to keep the economic development, I want you to keep the mental health funding, I want you to take care of retirees, you've done a this budget, it's clear that we support this budget. There are some other things we don't want to give up either, and I hope that we'll talk more about this next week. We feel just as strongly about the Medicaid issue and we support the House version of the Medicaid proposal, well it's not in the budget but we support that position so stand strong on all these things. I said it to health and human services committee, this wasn't a 50/50 negotiation as far as we are concerned. 90-10 is closer to it hang in there. Thank you very much and I want to appreciate I believe I counted 39 members that were able to hang in for two and half hours meeting next week we won't run this long, but I thank all the members and certainly want to thank all the people who came and spoke to the committee today and with that, we are adjourned.