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Joint | March 21, 2013 | Committee Room | Appropriations

Full MP3 Audio File

Every body grab seats, so we can get started we have a full agenda. While everybody is grabbing seats I’d like to thank our Sergeant in Arms for being here today Carlton Adams, Bob Rossi, Young Bay, Joe Crooke, Antwone Marshall from the House. Kent Lewis, Ernie Sherylls, Steve Wilson, Ken Kirby from the Senate. We also have as Pages Zachary Taylor, Shelby Latent, Addison Starnes and Lydia Cuener from the Senate and I think we got some House, Issac Weatherhill, Steven Adreas, Hanna Darrell and Deidra Logan, we appreciate all of your service. Obviously, the item on the agenda today is the presentation of the Governor’s recommended budget. I’d like to call on the State Director Art Pope please. Members what I would like you to do is hold your questions, until after the presentation is over we’ll take them at that point in time. Thank you. [SPEAKER CHANGES] Mr. Chairman, members of the Joint Appropriations Committee for the House & Senate and members of the public and for citizens of North Carolina who listening in. I am Art Pope the State Budget Director for the Governor Pat McCory. It is my honor and duty to present the budget recommended by Governor Pat McCory. We hope that this provides a solid blueprint, any state budget at any point in time is a snap shot in time. So, there is information in here that was up to date as of last week, some it may have changed this week and as more information is gathered and as the General Assembly goes through its deliberative process changes will be made in the State Budget. In fact, Governor McCory will recommend changed in the State Budget because as we get more information changes in revenue, changes in state needs, we need to act on that more and better information. Governor’s budget is based on the 3 E’s, efficiency, education and economy and those are all interrelated and mutually supporting. As we have a more efficient government, will our savings make our governments better operating, then we could provide more support for education, and it’s not just how much money we spend on education, that of course is important in our State Budget, but its how well you spend it, how efficient that is. In turn, the better state government operates, the better education opportunities, for both our young and for our adults seeking better employment or seeking employment after they lost a job, then the economy will improve and if the economy will improve, then we’ll have resources, more state revenue for education. It becomes an upward spiral, rather than a downward spiral. This budget does start the rebuilding process, it provides a foundation, the General Assembly and the previous administration, you faced harsh short falls in revenue which has caused you to cut back in operating budget from the operating budget first. That has been spending down on the states financial reserves and postponing repairs and renovations, capital expenditures and other needed projects. We’re now in a very modest recovery, modest revenue growth, so it’s now the time we start building those financial reserves, investing in repairs and renovations and infrastructure foundation of the state, that’s what this budget does, It maintains and enhances reserves in excess of $900 million. It will allow North Carolina to continue to hold its AAA bond rating and it leaves an un-appropriated balance of $131 million unspent at the year 2013-2014 and while the next year is always more speculative it leaves $332 million for second year of the biennium. That’s only a very small margin of error, only 0.6% for change in revenue or change in expenditures at $123 million out of a 21 billion budget, so that’s another reason to have those reserves. This budget authorizes no new debt and it authorizes no tax increases. It almost authorizes no fee increases, but there are few specific fees through out the budget, for example on Marine Fisheries, but there’s no major fee increases. Fee is not used as a major source of revenue in the general fund. The budget spends 9% less per capita than 5 years ago, when state the population has grown over 560,000. The budget grows responsibly [consistent] from [inflation] 1.5%

below the overall economic growth anticipated for this coming fiscal year 2013. This is a budget that both lives within its means, pays down its debts, and literally sets asides funds for the next rainy day. With the general fund availability, this General Assembly wisely set aside $213.4 million and unappropriated funds from last year that’s carried over this year’s beginning credit balance. We anticipate over collections from this year of $102.6 million and that was based on the forecast there would be more revenue received come April 15th because a great deal of income was accelerating into 2012, people realized, bonuses, dividends, capital gains, accelerated earned income into the lower tax year 2012, lower federal tax year which will realize more income at the beginning this year. But that was an acceleration so actually anticipation was going to be less income next year than it would have been otherwise. Even though we’ll see an increase in revenue in April, this incorporates that projection, and of course you’ve got to start the budget sometime, so there may be more money in April 15th, but you know you don’t want to wait until April 15th to get the state budget. This anticipates reversions of 2012-13 of $125 million. That is a realistic number that we’ve been using for about a year. One of the reasons we need that is for the Medicaid funding require for over expenditures and access of the authorized budget for Medicaid this year which, with adjustments during the current year, applying rebates and refunds received from the federal government from applying additional funds that we do have, that still leaves a shortfall of $123 million which needs to be address by that appropriated funds and other funds. Now, that $123 million incorporates a number of $100 million for this current Medicaid budget being over. The Health and Human Services and State Budget Office briefed the General Assembly about two weeks ago. The HHS committees and Appropriations committees, that the range for the Medicaid overage in excess of its budget will be a minimum $70 million and up to $130 million. We’re using the middle number now of $100 million and that was based upon how much over budget the Medicaid expenditure in what’s called the check write was actually here today. That number may go up to $130 million, it may fall back to $70 million, but we hope it stays within that range, but we have the financial ability to accommodate even if its higher. Again, this is where we’re working on a snapshot. You will have more information as you go through the Appropriations process and before we enact the bill exactly what the final dollar amount is going to be. We transfer to the savings reserve account $200 million, now that remaining beginning credit balance. We’ll talk more about that later. Then transfer the balance to repair and renovation of $117.9 million. Now later, you’ll see when we talk about reserves, we have the repair and renovation fund at $150 million and if you look at the second column for fiscal year 2014-15, you’ll see only $130 million for transfer to savings reserve account. This budget is so committed to the savings and reserve account and the repair and renovation that below the line appropriate money for the general fund to bring that up to $200 million for both years for savings and reserve account and $150 million for both years of the repair and renovation. You’re only seeing the part coming out of the beginning credit balance. We do those allocations to make up for the Medicaid shortfall, the credit balance actually comes down to zero. We then start with the revenue base on the existing tax structure, that’s $20,567,000,000, that’s based on the consensus forecast, we’ll see more details on that. That does include conformity and decoupling, partial conformity, partial decoupling with the internal revenue code based on changes at the end of 2012. Where revenue changes, we do incorporate and repeal of the estate tax, which is legislation moving through the General Assembly and the governor does endorse. There’s other funds in transfer which we will address later in the presentation. And then we have repeal the transfer for the public school building capital fund. Some of you know who were here in 1985, that’s the first year that a portion of the corporate income tax was allocated to the public schools facilities fund rather than going into the general fund, but every single time, there’s been a decrease in revenue or a great expenditure and that money’s been retained to the general fund. The last four years in a row, for the last two previous sessions of the General Assembly, that money has been kept in the general fund under Governor Perdue in the previous General Assembly votes.

This makes that retention that RICO permanent and also mismatch occurs in the Journal autobio building revenue for this year's budget compared to last sessions such for the ones with the changes this is revenue neutral as for any proposed action form at all, about my presentation on this is Lahti falls thing before and probably have in your briefings earlier discussions does not change very much a half our income comes from the individual income tax and the sales and use taxes are supposed not changed very much is calls probably right amount individual income tax state requires all that the proposal for any tax reform from the governor will be revenue neutral for this coming year we don't see the about change is coming fiscal year and also any tax reform for income tax usually takes effect on January the following year 2014 positive attributes of fiscal years this break with the status quo with my major tax reform of document you increase revenue or decreasing the revenue forecast for 2013 for two years by human Jerks modest rose 3.6% consensus forecast mostly also sponsor the management and the physical research lab please note that Raymonde Wright also will see in North Carolina's income from work tax revenue is recalls that volatility that while we do need to build up our right very forms things reserve account when we have the ability to do so while really budget reform and while the tax reforms are is a steady growth, grows with Kalmadi I have met Wrightsville or volatile and here's Walter for into the budget transfers more responsible general form the governor's recommendations here is based on the general principle the budgeting process the transparent and major decisions for sale Norcross remain through the government recommended module in this body Journal; preparation process rather than funds going directly to third parties nongovernmental entities the major portals from retention of the goldleaf Farms that $65 million forces that have and retain already all abortions the master settlement black so already been retained by the Gen. assembly for the briefly with the health wellness correspondence back across following the this continues the process and recommendation is to make this part of this is the only thousand more all these groups is about more because allocating signify many laws are year hundred million dollars yearly goldleaf Democrats vote for officer is about $40 reprobation is the state government your personal budget process this body outlaws our checkout moneygrubbing about Bernhardt's outlook is holy sprucing up dedicated Fonz from for example the matters trust fund Parks and Recreation trust on online transfer the ghost of them about the all budget every single year's responsible general on these rudimentary kind of a job on that later when he civic agency budgets Multilateral economic resources committee music Parks and Recreation trust fund reallocation report raised 15.5 billions without be a decision by the this volume of blood in a relaxed budget. All those negative point 5 billion or 27.5 million in that decision should be 95 general assembly of the government Portrush process of the All-American all budget out one night on the master settlement agreement also there is arbitration in an escrow account is beautiful islands there's been a settlement reason that foobar the arbitration panel steel chassis very set-aside obligation or bill and the has to go through and all the process and see just how much money we realize recover about North Carolina woman escrow fund that all is not expected to include labels or think so we do not include any recovery Fonz on the escrow account and as your comments site for this year's budget was found in the bowels that she forgot she unit formation you will have have asked him are partly abuzz it was partly policy recommendations to address recommend repealing North Carolina campaign fun and helpful towards financing bonds is sweeping that money is already in those accounts into the general form is great for is a greater need

The public money be spent for public purposes or the teachers for employee pay raises for the Medicaid increasing calls Raven for political campaigns and political partisans very straightforward there's a part of small amount money of these accounts simply campaign fun is not from tax revenue from attorney fees for judicial races this court rulings that money must be used for judicial are voter guides and other used for campaign purposes know will be appropriate for the general fund sizzles I specifically for specific purpose that money is not included in here or the general fund appropriations these are just major categories of software it includes $275 million in the first year for the major just premeditate revise of higher education enrollment that goes of the $668 million in second year although specific errors we addressed by the presentations will also committee topics very briefly that breaks out to hundred $19 million for school enrollment in the first year and 246 million for school enrollment second here early million for humans the University enrollment increased first year 57,000,004 usually rompers let's year and 180 file name was called Medicaid replace this coming year and $390 million were second-year or total five and $75 million increase for the growth medically what this does includes was call the woodworking of but for those whom have not utilized medicated in the past old special be forced to inform here at one recement jump is mainly in second year of the woodworking fractals start until 2014 at the beginning of the fiscal year anyone hear more about math in the social presentations the fiscal responsibility transversely was reserve account For this holiday credit balance the remainders wanted by the this part of the general fund appropriation signatory have 200 million form sales reserve account credit thousand zero this year position $9 million next year to prepare renovation fonts additional 32 million procuration will bring up 115 million this year under the main second-year Medicaid wrist reserve this is a new item I we on some pass for Medicaid this positive $90 million first year $90 million the second year that it was not use that will to hundred 80 million in addition to the 500 and must million dollars we have $575 million for preparation Medicaid is another hundred and 80 million Medicaid reserve in the MetroGel someone members of the public Medicaid is a growing demand on the site general farm with his friends over us budget during the middle the year permit site Michael alter state agencies our site services as Medicaid rose up Mingus must offer education public safety just as are the areas and Medicaid is only volatile over this next year is Ruelas of whole impact of the formal Kerouac woodworking affect other factors and unlike enrollment rose which is mandated for the school's public schools and universities have some of Jeremiah we don't know what utilizations going to be an Medicaid because a bad flu season can jump that calls as well to changes the laws changes dissipation five this is the prudent responsible way to deal with the growth of Medicaid concerns the Medicaid reserve for know more details homeland this hours version benefits blighter sours are some benefits this by sleep for a 1% increase for state employees and teachers and 1% are concretion: the contribution for the health INS request the this only funds slap in the vision and the other research related compensation is $20 million and or provide a reserved seat for allocations force mostly a funky state employees or are losing state employees to your local government or the private sector this ranges from engineers the of the highway patrolman Beathard went to local law enforcement alters revenue agents so we do for this recommendation also that $20 million $1 million be spent on the compensation started looking conversation with Wednesday government compared to the private market understand the Gen. assembly authorized to lay dollars study last year because the bills were too high that's that is not implemented I have been assured by site personnel director that we will get the started on a good study.1,000,000

...must report back to the general assembly next year. That's a total reference budget of $20,601,000,000 this year and $21,334,000,000 next year, which leaves $130,000,000 in unappropriated analysis. Last year, the general assembly left $213,000,000. This year we're only leaving $131,000,000. That's after adding almost $900,000,000 bi-annium but also the amounts for the rainy day fund, the medicaid reserve fund, and the disaster relief fund so I think you'll see this is a very prudent financial budget. Next, you'll see what is also probably a very familiar slide to you, the general fund appropriation class sub-committee and education is still the largest part of the state general fund budget: 56%. Health and human services with medicaid comes in second. Just as a reminder to the public and I know members of the general assembly know this, the total state budget is over $50,000,000,000, with almost three-fifths coming form the federal fund and from other receipts. So this year's total state budget is $49,599,000,000 compared to last year's total budget of $51,634,000,000 so we have a decrease primarily due to the federal funds for total budget. There's no adjustment in the federal funds for sequestration. We don't have detailed information yet from the federal government and on sequestration and what its impact may be. Of course, that may be changing legislatively. Generally, somebody does have oversight and responsibility for the federal block. That's the other portion of that. Again, that's additional information we hope you have and that we have to work with you and recommend to you any change and adjustment of the based on federal legislative action. On the total state budget of $26,000,000,000 that is a slight increase of last year's total state budget of $22,000,000,000. Again, for inflation and population growth, I think that you'll see, it's a very responsible budget that meets our needs. Next, we're going to have the highlights for public education. I want to thank the state Office of Budget Management and staff. They're responsible for everything that's good and correct in this budget. I'll take responsibility for any errors and mistakes which we will quickly correct as soon as we identify them. I'd like to thank David Young, who's the Deputy Budget Director and andy Willis, who have the title of Chief Operations Officer. As most of you know, he is my immediate predecessor as State Budget Director. As I said yesterday, Andy could've retired right after transition and left for greener pastures but he's decided to stay on as a true public servant of the state. Now, I'll turn this recitation over to the responsible senior budget officers for each of the sub-committee areas, starting with Elizabeth Growerstein for education. [SPEAKER CHANGES] And as she comes forward, I'm going to remind members that we're going to hold questions until the presentation is completed. Please just keep track of them and we'll deal with your questions at those point. Elizabeth? [SPEAKER CHANGES] Thank you, Mr. Chairman. We'll turn to slide 9. This begins the public education budget highlights . You'll look at the total spending requirements for the 2012-2013 budget. That total's $11.1 billion. The recommended budget will increase the total spending requirement by 1.5% in the first year of the bi-annium and 3.2% in the second year when you include the allocation of the statewide salary reserve funds. The highlights at the bottom of the slide: the budget allocates $43 million from the education lottery funds. These funds will be directed to enhancing digital learning experiences for students, for third-grade reading achievements, or other high-priority instructional areas. In addition, $28 million is directed to continue the implementation of the Excellent Public Schools Acts. These funds are needed to provide the summer reading camps for third-graders as well as the reading plans for parents as directed by the act. The budget also focuses funding for teacher assistants in grades K-1. It provides sufficient funding in those grades to provide a teacher assistant for every 17 students, which is the same ratio for teachers. It reduced the remaining teacher assistant funds in the amount of $17 million. The highlights of the community college system budget begins on slide 10. The 20...

'13 authorized total spending requirements of $1.46 billion will slightly increase by 3/10% in the first year and 9/10% in the second year when you include the allocation of the statewide salary funds. At the bottom of the slide, this budget recommends $16.8 million each year of the biannuum to provide funding for the higher cost instructional programs in the community college system leading to more immediate employment. In addition, an expansion of $28 million over the biannuum is provided for the high need technical education equipment in the community colleges. The budget also funds enrollment in community colleges based on a 2 year or current year average versus the 3 year rolling average. This budgets their enrollment closer to the actual level of enrollment and there is a $20 million savings for this item. In addition, the budget is reduced $15.2 million for part time employment, benefits for part time employees who do not earn retirement or medical insurance. Turning to slide 11, these are the highlights in the UNC system budget. The 2012-13 authorized total spending requirements in the university system totals $4.2 billion. When you include the allocation of the statewide salary reserve funds and the repair and renovation reserve funds the budget slightly decreases by 0.9% in the first year and is essentially flat, or 1/10% increase in the second year. Some highlights of this budget include implementation of the UNC Strategic Directions plan that was approved by the UNC Board of Governors. The budget provides $63 million over the biannuum for the implementation. It also provides $50 million from the repair and renovation reserve to provide repairs at UNC facilities. There is also a management flexibility reduction across the UNC system of $110 million and the budget does increase tuition for non-resident students 6% at most campuses and 12.3% at select campuses with lower non-resident rates than their peer institutions. Mr. Chairman, Pam Kilpatrick will now come forward to present the DHHS budget. [SPEAKER CHANGES] OK. Thank you, ma'am. [SPEAKER CHANGES] Good morning Chairs, members of the committee. Pam Kilpatrick, I'm Assistant State Budget Officer for Health and Human Services and for General Government, so if you may I'd like to start my presentation with slide 12 in your handout. The Department of Health and Human Services total budget is recommended for the biannuum going forward at approximately $18.5 billion in total requirement. Of that, $13.7 billion is receipts, largely federal funds, $4.75 billion is state appropriations, second year recommended appropriations grows to $19 billion. $14 billion in receipts and close to $5 billion in state appropriations. You can see the comparison with the prior year actual expenditure and comparison with the current authorized budget, so the rate of change in the first year of the biannuum in total spending is 5.2%, 1.2% overall in state appropriations in the first year. 5.6% in the second year. In terms of a dollar value, that change in the recommended budget in 2013-14 compared to the authorized budget is just over $58 million and the change in the second year of the biannuum is $263.6 million. The budget for DHHS includes Medicaid, Health Choice, Social Services, mental health, public health, child development

early education, vocational rehabilitation, central administration, which is the secretary, the DIRM activities of the agency, budget controller but also includes the office of rural health, aging services, and services for the blind, deaf, and hard of hearing. Overall, DHHS represents 23% of the state's general fund spending. Most of the DHHS spending of state funds goes to medical assistants. The totals you see in your handout include both the medicaid program, and the health choice program. Overall appropriations to those 2 budgets, $32 billion, or 69% of the department's total budget. And mental health represents 15%, or roughly $700 million in state appropriations. Then all of the other agency's services and programs represent the remaining $800 million, or 16% of total DHHS spending. For illustration, this is the 2013-14 recommended budget, or the first year of the biennium. The governor's strategy around developing a medicaid budget was to essentially try to shore up the medicaid rebates, which is medicaid budget the way it is today, without policy changes, to look at some short term strategies for containing costs in the medicaid program, and to mitigate risk by establishing the medicaid risk reserve. The governor's budget includes funds for changes in enrollment, consumption, mix of services, mandatory cost increases, and yes, there is intact, in terms of enrollment, due to the woodworking effect from the affordable care act. So know that there is no medicaid expansion in this budget, there is impact from the affordable care act. So the first line item to give you the overall for medicaid is a base budget for medicaid. It differs somewhat from the authorized budget in the current year beacuse it is adjusted to take into account the one time actions of the general assembly. So if there was a one time appropriation for a particular item in the money report for in the current year, then that was adjusted and reflected into this current base. So we start with this base budget of about $3 billion, and going forward the first element of change is the rebates, and if I may, I'll just run through a couple of facts about that rebates for services number. So the biggest driver in the rebates cost of $185 million and $390 million is the enrollment growth. Enrollment is the biggest driver of spending, how many people come on board. Presently medicaid enrolls about 1.5 million folks. At any point in time, at any month, we have 2 million enrollees. But because people come on and off the rolls, overall enrollment in the program is about 1.5 million people per year. So the enrollment growth in the governor's budget is 4.5% in the first year, 7.2% over authorized enrollment in the second year. Consumption, mix of services, represents in that 185 and 390 about 3 million in the first year, 14 million in the second year. What that means is the predictions or assumptions of how people will consume services, how many times they're going to go and have a hospital outpatient visit. How many drugs they'll consume, how many chiropractic visits they'll consume. That's the second piece in consumption and mix, and then one of the larger drivers after enrollment is cost changes where the medicaid program really doesn't have the ability at present to control the costs. Those would be where the federal government sets a rate, where rate is tied or indexed to a medicare reimbursement. Drug prices, where there's manufacturer's increases in the budget. So in that category of change will then our rebates for services number up there, with approximately $56 million state dollars in the first year, and $178 million in the second. And then working down this chart, we have contracts and settlements, $29 million each year. That's essentially where the agency contracts for prior authorization, utilization review, claims payment, that's where there is a cost increase in this budget as a result of the numbers of people served in the medicaid program. The increases column, typically we refer to that in our budgets as expansions, but we didn't do that for this presentation because there's not a medicaid expansion.

But there are two increase IMC Medicaid budget beyond every base the first two lines one is $ 4.8 million since the Medicaid budget for one term work around communicate system can do the appropriate 70 planes can be paid are appropriately and then let the second increase in the Medicaid budget Seats and second impact of the affordable care act which does require the children of 233% of poverty are enrolled in nine health waste but instead and so you'll see when you look at the budget there is a reduction in health response to the firm has in this campaign is someone attempting a junior documents, there is a reduction in healthfully stare at 10 increasing AK the increasing NT is greater than the reduction in health waste because Medicaid Services are per member per month are greater indicating they are both ways that changing the Medicaid budget $142.5 million in the first year remaining $52.8 million in the second year range l budget from Medicaid NT 3.2 million you're 13.4 billion you to on changing authorized the CIA percentage is reflected in your hand & bank to 10.8% really doubles out because it's tough to do now to subtract the 3.5 from the chance the difference is really 7.3% over authorizing the second year and for the first time a dedicated was concerned this is proposed to resign outside Medicaid are said to be accessible in the event that Medicaid claims payments and services six CF A's budget with approval of director the budget reporting the general assembly $90,000,000 or 180,000,000 ?? over the plane than nine from page 15 and other priorities within the company and services, as recommended by the S3 0.8 $1,000,000 and are the first year and $9.4 million in the second year the brain and on which are FB appropriations and also remained $10.3 million in the current year , to support the requirements of the North Carolina department of justice Salomon agreements to provide services such as rental assistance and community supports an array of services to individuals a serious mental illness on this budget and $1,000,000 over two years to acquit the new prime hospital scheduled to open, December 2014 the final five creek influence each year of virtual price of $26,000,000 annually and S find it in combination with nine million dollars in state funds to balance the proposed to the spiny from Myron seats but budget all seven provide funding for North Carolina seniors, the project care program nationally recognized as funded from a Federal grants is expiring in the governor's budget proposes that of the states replaces firms expire in Federal grants seven B services ?? can be that the level they are now assisting about 800 families and avoiding more comfort care , help us services priorities for planning $1,000,000 this is essentially the county's attorneys are facing a read captions in their ability to draw down Federal funds for Cal protective services , this is essentially because of a change in interpretation of fact that IC are governor budget proposes a one time and antique Law appropriation $4.8million , with the ID a bad run by the second near the buying and CS which is the new PCs &System that C has invested online money and will be functional and helps, start generating some savings which will accrue to the stand MB of things to the local the level of service agencies differences budget targets for seats wishes from the prior year revenue but it's my illegal arms to them to the states Seats appropriates those receipts, what key $0.2 million, two completes a bad headache and ……………

serve as the state match to complete the MMIS implementation, which is the Medicaid claims processing system. In addition, I had mentioned previously, you saw this in the Medicaid slide, 4.8 million dollars state appropriation directly to Medicaid so that they can implement the audits and edits for proper payments once the system comes online. It's scheduled to be functional July 1st of this year. The budget identifies 36 million dollars in non-Medicaid savings throughout the budget, through administrative reductions, accurately budgeting receipts, and identifying state dollars that are budgeted into programs and services that perpetually are reverting and are used for other purposes. So they are proposed in this budget to be restored to the general fund for availability to support what we identify as the current service needs within DHHS. After all the adjustments to DHHS the budget increases, as I mentioned on the first slide we looked at, 58 million dollars in the first year, 264 million dollars in the second year. Page 17, we'll move on to the area of general government. So the general government agencies are listed for your reference. These are the infrastructure of state government services. The prior year actual expenditures, 887 million dollars and 402 million in appropriations. Our current authorized budget's slightly higher at 413, almost 414 million dollars. The Governor's recommended budget going forward funds the general government agencies in total a decrease of 1.5% in the first year of the biennium, 4.7% in the second. As you can see there are receipts adjustments in this area that help contribute to reducing the need for state appropriations in the area of general government by an overall, I'm sorry, there's an overall adjustment of 4.4% in the first year of appropriations and just under 1% in the second. Overall, general government spending represents 2% of the state's general appropriations. General government priorities in the Governor's recommended budget, 10 million dollars to compensate victims who are verified victims of the state's former Eugenics Board Program which involuntarily sterilized North Carolinians during the 20th century. The Governor's budget restores approximately $600,000 to state appropriations each year so that folks can enjoy and visit the Tryon Palace historic site. The budget appropriates, recommends an appropriation of 17.7 million dollars for a combined total over the biennium to continue developing and implementing the Department of Revenue and the state's tax information management system. 3.4 million dollars is recommended to complete the implementation of a new core banking system for the state. This began with an appropriation by the General Assembly for the current year and this represents the balance of appropriation needed to complete the core banking system upgrade for the Department of Treasurer. And finally, I highlight general government, the budget funds a two year NC Government Efficiency and Reform Project in seek year. It is referenced here but I believe it will also be covered since these funds are proposed to be appropriated into a state-wide reserve but it seemed germane to point it out in the context of general government. So that concludes my presentation and I turn it over to my colleague Mercidee Benton. [SPEAKER CHANGES] Okay, and Ms. Benton comes up, we're going to, there's a lot of numbers coming at you. We're going to pick up the pace a little bit so there's plenty of time for questions. [SPEAKER CHANGES] Good morning, Mr. Chairman, members of the committee. I am Mercidee Benton, Assistant State Budget Officer for Justice and Public Safety, Natural and Economic Resources and Transportation. I will present highlights of the Governor's recommended budget for the 2013-15 biennium for each of these program areas. I will start with natural and economic resources followed by justice and public safety and transportation

The slide that is before you represents the total NER budget. The recommended budget is $624 million dollars. This is a reduction of 9.27% over the authorized budget for the current year. The 2014-15 recommended budget is $606 million dollars which is an 11.9% reduction over the 12-13 authorized budget. As you can see the agencies that are included are the Department of Agriculture and Consumer Services, Labor, Environment and Natural Resources, Clean Water Management Trust Fund, Wildlife Resources Commission and the Department of Commerce and Commerce State Aid. Highlights for the NER program area starting with the Department of Agriculture and Consumer Services restores funding for programs that were designated as nonrecurring in the 2012 legislative session to include $1 million dollars for the Agriculture Water Resources Assistance Program, $1 million dollars for the Wine and Great Course Counsel and $725,000 dollars for the Southeastern North Carolina Agriculture Center and Farmers Market in Lumberton, North Carolina. The Department of Environment and Natural Resources $5 millions dollars in matching funds for the Clean Waters State Revolving Fund allowing the state to access $25 million dollars in federal funds to help finance projects which address water pollution programs. $1.2 million dollars in matching funds for the Drinking Water State Revolving Fund that will coupled with $3.8 million dollars in existing resources allowing the state to access over $23 million dollars in federal funds. There is $7 million dollars over the buyin ?? for the Noncommercial Leaking Underground Storage Tank Program. Funds previously provided for this program were a part of the transportation budget, the gasoline inspection fee. Those funds have been redirected back to the transportation program for maintenance funding. The Department of Environmental and Natural Resources Clean Water Management Trust Fund $600, I'm sorry $6.75 million dollars in nonrecurring funds for assistance with financing for projects that address water pollution and upgrading surface waters. The Department of Commerce recommendations supporting the governor's priority for the economy include $79 million dollars in additional funds for an investment in the Job Development and Incentive Grants Program. And the one North Carolina Program will continue recruitment of new and expansion of existing businesses in North Carolina. $14 million dollars for the Job Maintenance and Capital Development Program to encourage businesses to retain high paying quality jobs and make large scale capital investments in the state. $3 million dollars, I'm sorry $3.9 million dollars for statewide support of small businesses that include the programs that you see before you. $5.4 million dollars for the department to develop a strategic economic growth plan and branding strategy for North Carolina. The Department of Commerce State Aid $6.8, $68 million dollars reduction for nongovernmental entities utilizing these resources for other economic development priorities. Also included in the highlights for the Department of Natural and Economic Resources are the program area are changes to the North Carolina Education Lottery proceeds and commission. It would adjust the amount of total revenues that can be utilized for advertising expenses from no more than 1% to no more than .5%. This will result in $14.8 millions dollars in savings over the buy-in ?? that will be used for digital learning, digital learning initiatives in public schools. There's also an addition of $2.2 million dollars in operating efficiencies that will be redirected to public schools for digital learning initiatives. Department of Justice, Justice and Public Safety Program area the recommended budget for the 13-14 buy-in, fiscal year is $2.6 billion dollars. This is a reduction of .31% over the 12-13 authorized level. The 14-15 recommended budget also $2.6 billion dollars represents a smaller percentage change of .9%. This program area includes the Judicial Branch. The Judicial Branch Indigent Defense, the Department of Justice and the Department of

public saftey. The largest area here is the department of public safety whch comproses over 72% of the budget or 1.7 billion dollars for the 13 14 shool year. Highlights for the judicial branch 7 million dollar over the bi-anium will be used to establish drug courts 2 million dollars for legaly reguird mandates for interpreteurs, expert witnesses and jury fees that are required to operate the state court system. This recomendation increases the budget for the actual expendeture level for these items for fiscal year 11 12. There is also 1.5 million dollars to provide an additional majestrate in 16 counties based on work load data resulting in improved after hours access to citizens. For the judicial branch indigent defense 5 million dollars in non recurring funds in the first year of the biannium to reduce a short fall that accumulated over several years for payment to private council . And there is 783 thousand dollars to update and maintain. automated case management system used by public defenders. continuing ith the highlights for justice and public safety. The department of justice there is 8.6 million dollars over the bi-anium for expansion of crime labs and to improve effeciency and increase turn around tie for law enforcement offiecers ZThere is also 2 million dollars in funds for investigative activities that are core to the mission of the department of justice. There is also a written recomendation that legal and support positions and associated opperating budgets utilze to provide routine legal services to state agencies be transferred from te department of justice to the agencies they serve effective October 1st, 2013 . The department of public safety, 54 million dollars in savings of the bi-annium from closing out dated ineffecient prison facilities due to a declineing prison population the recomendation reduces capactiy by 1,912. the facilities are located in Wayne, Blateen Dukeman and Burke counties. it also reinvest 23 million dollars in savings for implementaion of the justice reinvestment act. Which will add aditional paraol, probation and parol officers to reduce case loads. And also provide additional staff at the post release parole and supervison parol commision. There is seven million dollars for the use of electronic monitoring for offenes on supervision, 6.1 million dollars for additional staff to support the viper network. 2.2 million dollars to enhance technology resources to allow state troopers to have ropad side access to criminal background data. 1.4 million dollars ofr the state capitol release. To improve saftey for visitors and employees in a state government complex. And 625 thousand dollars for the center for safer schools for prviding training and technical support to the educators law enforcement and parents in eforts to protect our children and schools through out North Carolina. The transpoortation program budget overview the 2013 14 recomended budget for the transportation program is 4.3 billion dollars this is a reduction of 15.83% from the current authorised level the 14 15 budget is 5.5 billion dollars which is a 7.6% increase. the vast majority of that related projects is determined for the North Carolina turnpike authority, that was schedualed to come in in the second year of the bi-annium. This budget includes the highway fund the highway trust fund and North Carolina turnpike authority highlights for the highwayfund. This budget 68 million dollars for the highway reapropriation effeciencies privided in other programs suppor tother transportation priorities it recomends 360 million dollars above the base budget level to be directed to the maintenence prgram facilitating the continur=ed support of well maintained multi modal infrastructure allocation 7.5 million dollars gained form effencies to devolp and economic development fund and lastly it provides.

service improvement for citizens that conduct business with the devision of motor vehicles in support of the governors efficiency and transformation in state government priority. Mr. Chairman. [SPEAKER CHANGES] Thank you. Mr. Pope. [SPEAKER CHANGES] Thank you. I will go fairly quickly because of my southern accent so there will be more time for questions, and I’ll hopefully be articulate. This summarizes the reserves which you have already and mentioned. And remember, this comes partly funded from the general department of procreations and partly by the credit balances at the beginning of the year. Over the biennium, over the two years, this increases reserves, non operating reserves by 967 million. Which, 600 million was this years fiscal responsibility, which already mentioned was the same reserve account. 400 million for the medicaid reserve account. 180 million for disaster relief reserve which spent now 20 million. This applies knowledge of hurricanes with north easters, tornados, ice storms, mud slides, in Western North Carolina. The infrastructure reserve is 367 million over the biennium, 300 million for repair and renovations which I’ll give more detail in just a second. 67 million for information technology, which I will also discuss. When you add the end of the year balance unappropriated 131 million to 967 million. That’s 1 billion 098 million, One billion dollars, set aside over the biennium, not for operations, but for the financial and infrastructure to the state which is much needed. For the savings reserve account, originally it was suppose to be 5 percent of the state budget, as you can see from the pattern of the blue lines of what the actual balances were. We’ve had a bust and boom, a bust and boom, state revenue, state government. So, when the boom came, the general fund, the savings account built up. When bust came, it was spent down. Reserve was later changed to 8 percent in 2006, then another bust. So, if this recommended budget is adopted, the savings reserve account, the rainy day fund will go up to 800 million dollars. Which, will be a historic high, with its previous peek of about 760 million. That’s still only 4 percent of the general fund budget, half way to the 8 percent goal. Where the reserve for information technology, this is partly funded by, mostly funded by the general fund, but we also have the e-procurement fund balance of 8 million we are going to utilize for this, for e-procurement related activities. There’s over a billion dollars spent on information technology through out state budget. This does not ?? work towards the effort for the key needs of the information technology, simply to fix broken systems to keep us up to date. And, Chris Esse’s, I believe, has a committee meeting later today, and will go into detail. Chris Esse’s our chief information officer. Repair renovation information fund against against the balance of 300 million dollars, over the biennium at 150 million dollars a year. I think, it’s important to note when you see the balances, this is the most we have been able to set aside for repairs and renovations since 2007, 2008. This is long over due. Quick note on the division between state government and universities. Generally, the rule has been 50 percent for state government, 50 percent for state universities. However, in the discussions with the university, we discussed the issue that the university has what has been called overhead receipts or facilities administration fees. Basically, when they receive grants part of that becomes receipts to the university that reimburse them for their cost. The university then sets this aside for new buildings, new projects, new facilities. And our recommendations to the university is that part of those facilities fees go back to the general fund. Facilities that generate it then for there repairs and renovations. So, that is why our recommendation, the governors recommendation is 100 million for state government, and 50 million for repairs and renovations to the university, and they look to those facility fees to actually use them to actually renovate and maintain facility to generating fees. Even after, 50 million dollars this is more money than the university has had since 2008 for repairs and renovations. Reserves and salaries and benefits, we have already discussed this, and including the compensation study. It is pretty straight forward, it what was requested for the health plan, and the retirement contribution. I will mention briefly, in ?? the government efficiency and reform. This is directly modeled after what is called, the government reformat ?? committee in the 1990’s and the, Governor Martins efficiency study in the 1985, has utilized.

Staff resources is used, outside contractors, volunteers from the private sector to really drill in depth over the next 2 years more so than the McCory Administration has been able to do in the last 2.5 months, 10 weeks and come back with recommendation to the General Assembly both in the 2014 short session and then in the 2015 session. We would like to do this in partnership between the State Budget Office, Fiscal Research, ?? performance ?? division, the state auditors and again volunteers from the private sector. So this is overdue, I'll be glad to talk more about that during questions. To answer a question by the chairman, I said I would be fast and I was but thank you very much for you time allowance to give you this overview. Mr. Chairman. [SPEAKER CHANGES] Thank you, Mr. Pope. Members, what we're going to do is take questions. I'm going to give you a few ground rules for the questions. Although this is an appropriations based budget meeting, we will take questions from any member of the Senate or House who's here and present and interested. I will probably limit you to 1-2 questions once we get started so we can get as many people in as possible and then if we have extra time towards the end and there's some additional questions that will be fine. I believe that Representative Dollar would like to lead off. [SPEAKER CHANGES] I have a question that you all could just get back to the committee on and that is I think it'd be good for all the committee members, House and Senate, to have a breakdown on how the Medicaid money, the total Medicaid money, is actually spent, in other words what portion of that is in mental health and then what are the big categories in mental health and where the money is spent. On the medical side of the house how much is hospitals, how much is dental, how much is long term care and the major categories of long term care and the like. [SPEAKER CHANGES] Mr. Chairman we will do that and just as a remember especially to the general public, what you see in the recommended budget, in this overview, are primarily the changes from previous years. That $575 million ?? for Medicaid, those are the net increases. That's very much appropriate for the appropriations committee, going to the base budget, how the remainder of the, how the billions of dollars plus already in the budget are spent, and again that's hopefully where NC Gear will drill in deeper over the next couple of years. [SPEAKER CHANGES] Thank you, and members when I do call on you if you'll identify yourself too that'll probably help since we have such a big room, but Representative Avila you're next I think. [SPEAKER CHANGES] Marilyn Avila, House District 40, Wake County. On slide 14 where you highlight the state medicaid risk reserve in the unlikely event that we don't spend all that money, is that an accumulative amount that it doesn't revert back, it stays and grows? [SPEAKER CHANGES] For the first, for this biannuum, the recommendation is that it accumulates so it'll be $90 million the first year and if that's not spent it's $90 million the second year for $180 million. We hope at that point in time for the second budget recommended by Governor McCrory that it does not have to be increased so if it's not utilized and it's stable at $180 million we will leave it at that. What you didn't ask about the savings reserve account, on the other hand the savings reserve account will need to be increased until we hit that 8% cap. [SPEAKER CHANGES] Representative Michaux. [SPEAKER CHANGES] Yes. Representative Michaux from Durham County over to your right. I've got a couple of questions Mr. Chairman, two areas. First is a very short one. The first is where do you reach your reduction in the Medicaid monies, you've got a $99 million reduction in Medicaid. Can you sort of give us an outline of what those reductions are. [SPEAKER CHANGES] I would want to, are you talking about on the expenditures side or where the net savings are made? [SPEAKER CHANGES] On the expenditures side. [SPEAKER CHANGES] I will ask Pam Kilpatrick to come forward and answer that. [SPEAKER CHANGES] Representative Michaux, let's see. They are itemized in the budget book, but beyond that let me walk through, there were 6 reduction options included in the governor's recommended budget. I'm going to speak on a worksheet but they're probably also in a different order in the governor's budget book. Reductions in hospital outpatient cost settlements is one of the reductions, about $35.7 million a year from that. Mental health drugs which is, mental health drugs are the last class of drugs within the Medicaid program that don't have a prior authorization for a brand name drug. The governor's budget recommends bringing this class in line with all the other drug classes within the budget. It is the number one category of prescription expenditures in the medicaid budget.

As per assessment savings of $ 60,000,000 this is a proposal if you knew we had very hostile assessment was recently implemented as a voluntary assessment hospitals to dissipate voluntarily a state retains $43,000,000 in the assessment is a fixed amount and for other, areas where the state's which would be the ICF and RNE care facilities for the return of person comes to C T's% fixed rate to this would bring, the hospital's assessment roughly in line to what we do without arise SR industries and retain about 20%, and the assessments are in place by the DB nursing, this is a great injustice since we wear the leader's budget proposes that LPS RS the Medicaid reimbursement be the same as it is sound and uncertainty be differentiated express only the sand and Sarah, recommends differentiating, back and say, a 1.1 million in the first year's 2.3 million deaths in campaigning sternly allow spanking to charge time payments from some service maximum 4 or 3 dollars that was set plan while ago when the Federal maximum of $3.00 maximum is now $3.90 the governor's budget recommends $73.90 an ugly the budget governor proposes to a wood are and an accompaniment to the Federal maximum said it's not something that has to be turned every session that Italian and travel along parallel with the Federal Allies for copayments and then health transfer that for the chronically this is one KCSI B's with the states less 3 managed care in this is an enhanced FFS available in the first year the buying only so reflects a Lincoln savings and Medicaid budget as acting head of the five-link fences to five, (SPEAKER CHANGES) following the other question, in, rich there's any of $68,000,000 reduction, in, the state grants, the colleges, affect the market economic development program as chairman Michael Corleone is a (SPEAKER CHANGES) 10% reduction over the previous year while to follow them, nine blacks are some other question I have,(SPEAKER HCANGES) not the other question was the hall of geology and mineral on services provided by the department of justice to the agency are you going to recommending any decisions yet its own the legal staff and cameras problems stem from hearing about all you get somebody ask a question there is a recommendation from the governor's budget you'll see a reduction for the Atty. general's office of general fund spending over annual of four your own 2014 home 20,000,000,00 excuse me 20,590,004. Agencies and 201 positions. Transfer to the nation's cities on since 1989 of legal services and , by which a regional falcons to the agencies and return the agency's care bill by which a regional offices to the general fund corporation is only part of the tribunal was part of soft market rate increase IE's most recent search firm digital funding corporation to the agency was a very simple console the future is a work four, routinely in the agency's we all agencies are a budget and abrasions expect the returnees from the bottom of the Atty. general dividing line the concept is the money section of the four law enforcement investigation of all, what work, work remained Atty. general's office and that the routine legal services such as waterway work in the party transportation be an update to say it's a good concept of Atty. general who are respectfully disagrees in water, so we or engaging possibly look like the concept as to where the Atty. should be their support staff and so the goers might reduce the trepidation number of Trans first worked with Atty. general's office, (SPEAKER CHANGES) certain Westlake Medical clinic was quoted as well the concept of the work every single day and age and so the legislation below the Potomac for reasons that likely benefit originals office center for women like Mr. Spoke on all New York Canadian dollar union county district 35 for writers are …….

And I'm looking through the budget, and I see where you cut any of our programs, $21 million. you cut $10 million out of the North Carolina Rural Center. Am I to assume that number nicely plugs into the request for eugenics funding, but what was the though process behind that. [SPEAKER CHANGES]The North Carolina Rural Economic Center is probably the unique program in the United States. It was started in 1995 under largely guidelines that Governor Jordan, after a Republican Governor Martin was elected. The Rural League Development Center does a lot of good projects, and however is not directly catted to the General Assembly or the state. The projects that money still leads, the Rural Economic Development Center, with $120 million in cash balance on which it's applied to, it still funds the Rural Economic Development Center. I've got the balance of the funding on a sheet, but it still funds the Rural Economic Development Center. Also, what it does again, is reduce the funding to a third party non-profit, not eliminates it, but it makes more funds available for the general fund. And as part of the overall economic commerce, we used to have a program called the Job Development Senate Grants, J-DiSG, it has increasingly consuming a large part of the general fund budget, it's going to arrive to $60 million this coming biennium, and you've got to get the money from somewhere, so the Rural Economic Development Center specific grant program, competing with JDiSG, and other projects that recruit industrial businesses. Also, while this in not in the budget, the Department of Commerce, when we propose in submitting an all plan reorganization for the department, and the economic development job creation efforts, a more flexible public private partnership, I think that will further address the needs of the rural counties for their grants and needs to get the infrastructure they need to be competitive, so they can break the cycle and attract more industry, have a stronger ta base, which in turn will generate the revenue and fees to further improve their infrastructure and get more jobs. Thank you, Mr. Chair. [SPEAKER CHANGES]Representative Pittman? [SPEAKER CHANGES]Thank your Mr. Chairman. I noticed on page 3, the repeal on the estate tax, and I would say, I'm over here, sir. To your right. There is no one more in favor of doing away with the estate tax than I am. however, in the Agriculture Regulations Committee last year, we tried to run a bill to do that. And it was explained to us that the relationship between the federal estate tax, and the state estate tax is such that as we reduce ours, the federal government increases theirs to make up the difference. They just take it anyway, so if we did away with ours, the federal government would stand up, taking that same amount. So, it seems to me, unless we can prevail upon Congress to do away with the federal estate tax, we're not really going to benefit our citizens, and it's going to damage our budgets. So I'm wondering, does the Governor have any plans to try for maybe trying to prevail upon Congress to get rid of the federal estate tax at the same time? [SPEAKER CHANGES]Respectfully, congress did that at the end of 2012, as part of their legislation for the fiscal cliff. Part of that compromise that Congress passed addressed the changes in the federal estate tax law. There used to be exactly, as you referred to, up till this year, that basically North Carolina had what we called a pick-up tax. Because what a North Carolina taxpayer paid on their inheritance estate was offset by a reduction of the federal tax. That pic-up is no longer allowed by the state with the new legislation, so that's why it's now to be an additional tax on top of their federal tax, if we did not repeal it. And that's why the Governor recommends we change the law at this point in time. [SPEAKER CHANGES]Thank you, sir. I didn't hear about that, and I'm glad to hear it. Let's do it. [SPEAKER CHANGES]Senator Brown. [SPEAKER CHANGES]Thank you, Mr. Chairman. Mr. Pope, I'm right behind you, okay? I see under commerce, on the regional economic development commissions, that deduction of $389 million. Is that part of the plan with commerce to reorganize? Because I think that's pretty much all the state dollars going to those commissions. [SPEAKER CHANGES]No it's not. All the dollars, I think it averages out to about 25%, averaging all the dollars, but yes, that is an anticipation of the Department of Commerce's reorganization. And as my understanding, the Department of Commerce had discussion with the regional partnerships before recommending that as a reduction. [SPEAKER CHANGES]Senator Robinson. Over to your left, Mr. Pope. [SPEAKER CHANGES]The education budget is the Governor's budget, how does it on page

[SPEAKER ROBINSON] Page 10. If you look at education has an overall net change of $284,000,000.00, can you explain that? Exactly where are those changes? Where are those reductions taking place and... [SPEAKER CHANGES] Senator Robinson, is your mic keyed? I think we have people having trouble hearing. [SPEAKER CHANGES] I don't know what's going on. Can you hear me now? [SPEAKER CHANGES] Well, just speak as loud as you can. We usually have your mic blocked, I'm not sure why. [SPEAKER CHANGES] I think Senator Apodaca did that. He don't wanna hear me from yesterday's session. Okay, can you hear me now? [SPEAKER CHANGES] Yes. [SPEAKER CHANGES] Page 10 of the Governor’s Budget, there is a net change for a total education of $284,000,000.00 in reductions over public education, community college, university assistance. Can someone explain where those reductions are, please? [SPEAKER CHANGES] Yes, ma'am. The page 10 is actually for the community college system only and it did receive a reduction. In part, it received the deduction because it has a declining enrollment. Enrollment jumped-up in peak in 2009 to 2011 as expected during the recession and mass unemployment. The good news is a lot of those individuals have received their associates degrees, their professional training, and have moved on, hopefully, into an employment place. But, because unemployment is still a major challenge in this state, we took money from reducing the enrollment, including changing the formula for calculating enrollment, from a three year average to a two year average to more accurately reflect that enrollment and reinvested that money in additional funding for what is called the Tier One Courses. Which are the courses for job training, professional associates degrees, for health care, technology, information systems, and increased that funding without reducing what's called the Tier Two for general education. We also increased funding for $14,000,000.00 a year for a total of $28,000,000.00 for the equipment and facilities that teach those job related courses. Rather than that being prorated throughout the community college system, we want that to be allocated by the community college board on the greatest need where it best provide job training. So there is a net reduction in the job training, excuse me, in the community colleges but primarily due to enrollment decrease of reallocating money to those, primarily those, two areas. Likewise, as you go back to Y10 for the UNC system you'll see a 5.4% reduction in general fund appropriation. But, as usual at this stage of the budget process, the sal-reserve is separate from that. It is put in reserve amount til its allocated to the agency but when the sal-reserve is allocated to the University that amount comes down to 1.6%. But, also, the Governor did recommend, on nonresident students, a tuition increase that will realize $62,000,000.00 in receipt to the University. So that’s $62,000,000.00 is a reduction the general fund appropriation. Then we're dealing with the general fund appropriation budget so that's why it shows that decrease. The University receives that money so when you add in that $62,000,000.00 then the University's total budget will be the $2,659,000,000.00 versus last year’s $2,663,000,000.00 which is a reduction of $4,000,000.00 or just a fraction of a percent. Furthermore, if you look- this is in your budget book, it’s not a slide- but if you look on your budget books at page three oh nine (309) for table 6B, you will see that’s the University's history of appropriations plus tuition receipts. I heard a comment that the University has suffered $400,000,000.00 in cuts over the last two years. Well, on the general fund authorized appropriation for '10 - '11 budget was $2,595,000,000.00 where last year's authorized budget was $2,663,000,000.00 for a slight increase of $68.4 million. When you add the authorized tuition, the proceeds from tuitions, you'll see that the state budget for the state funding through tuition and appropriations went up from $3,725,000,000.00 to $4,021,000,000.00 or a $295.6 increase. So the universities do have enrollment increases to soar with those small funding increases, yes, but I do think we did a good job of prioritizing any funding the University did fund their strategic plan initially and again the University is retaining all its other recent [END RECORDING]

All of operations removes so for the other education this is right outright inquiries is theirs and shifting US as well discussed by the use cost the government did recommend out on informal classroom assistants only on classroom assistants embrace kindergarten first grade when eliminating the funding for second grade and third right this allows one practices very something students resentencing IVM increase the number classrooms is a smooth and on first run with a has what while in fact that the impact and second third greatest moral Rushmore is possible that you might also the governor's budget increases teachers 1800 a year not to years not under the first year not a second year but you see I can hundred seizures in a rough rule all the poly-cultured classroom assistants on one full-time certified teachers however as of the house of the Gen. assembly of the house of the governor we recommend that the following formula published regulatory school district superintendents have flexibility while they spend that money so that you won't more classroom assistants write Sikorski made Lisa so much overall I regurgitation of our first you have one quick fall at letters we have a a viewing will will will will take you to have him and ask them what the other is for the summer reading program is will to reconcile to a liaison with out the girls are have had no luck it was grossing federal funding regarding delegates is drugrunning Elliotts case will send thank you Mr. chair. You are someone provide a deeper explanation of the economic development funding transportation personally… But I guess it very briefly a lot of times of economic development projects for interchanges or three players increase Albany/little balls have increasing traffic the benefits the client will try to recruit is also benefit the local community through the air-traffic system will not be overwhelmed this allows additional funds for that step best answer sunlamps seeing I have two questions in one has to do. As the with the education budget and down and how education and the tuition increases the house for the universities on the questionnaires I hangout with if they are differences among the school's account of the same age of tuition increases Saddam that the students will be challenged it explained a little yes. All the greedy I met I am repeating this for Ephesus the solution increases only on the resident students important housing Federation but here is where resident students and their families have been paying all taxes which is a job on the preparation was not registered is have-nots is more appropriate the rights which were nonresidents to see the recovery calls there on a more free calls to their education at the average increases 12.3% for the campuses were the most demand by nonresidents Lewis Associates University nor ought Chapel Hill but for the campuses were there is less demand and no more bloated all you leave the house they students at about 6% for design for UNC Greensboro and the audience is I will also point out will share this with represented atoms and others we have a look at were the question is for resident students graduate and undergraduate computer the pure universities in Norcross state university for example swishing would be pronounced like student $23,908 that compares the Texas A&M 25 miles from University of Maryland 27,000 is through technology Georgia Tech 29,000 businesslike three 3000 the University North Carolina school be a tremendous bargain still nonresident students and file this is the recommendation of the governor of border governors of the delegated authority rice tuition… 2000 2008 four undergraduate resident students the border governors

[Speaker changes.]...rise 65.8% cumulative increase on resident students. They only raise tuition on non-resident students 26.8%, likewise for graduate students, resident students have seen a 67% tuition increase since 2007-8 but non-resident is 27.2% so given the large residential increase, the governor did think it was appropriate for the reasons I've already stated to have a 12% increase this year at the top level...12.3 at the top level. [Speaker changes.] Thank you for that answer. Hopefully we can keep some of the students who come from out of state such as myself to remain here and pay taxes, etc. I won't comment on that any further but let me just ask you about the items for the pass through of funding adjustments on page 238 of the budget. There were four organizations, minority organizations primarily that support low wealth communities...the North Carolina Minority Support Center, the North Carolina Association of CDC's, Land Loss Prevention and the Indian Economic Development Initiatives. It appears, based on what I'm seeing here, that these programs have been totally eliminated from the budget, is that correct? [Speaker changes.] I'm sorry, could you go back...I got page 238 in front of me, could you go back...which agency? [Speaker changes.] OK...item number four, five, seven and twelve. Those are the ones that I have particular interest in. [Speaker changes.] I wanna ask...I think Pam has a detailed list of what continuation funding is on that? I don't have that with me. [Speaker changes.] And members, I got ten of you in the cue. [Speaker changes.] I apologize. Could you repeat it one more time. [Speaker changes.] Yes, item four the North Carolina Minority Support Center, number five the Association for Community Development Corporations, number seven Land Loss and Prevention and number twelve, the North Carolina Indian Economic Development Initiative. [Speaker changes.] The Support Center is only receiving a 10% reduction so that still leaves them $2,250,000 a year...excuse me, $2,293,000 a year; the NC Institute for Community Economic Development is receiving a 10% reduction, 200,000...that was...will leave them $1,846,000 a year; the Land Loss Prevention Project will still receive about half its funding, $300,000 a year... [Speaker changes.] Representative Adams, I'll tell you what I'm gonna do...Mr???????, can you go talk with her, show her...give her the answers she needs...this is takin' some detail and we can move on with some other questions? [Speaker changes.] Senator Hunt. [Speaker changes.] Thank you. Senator Hunt, Bill Hunt from Wake County. Mr. Pope???????, in 2011-2012 biennium, we spent over three billion dollars on Medicaid. What did the federal government spend during that same period of time? What was our total Medicaid spending? And the second part of the question is, how does that percentage of state spending ??????? to the federal spending compare, over the years? [Speaker changes.] If you will look in your budget books, at page one...literally, under the tab revenues and budget summary, you will see that health and human services were the total budget is seventeen billion dollars. Now that's the largest amount of the total budget so for federal and state spending....federal receipts as well as state spending, health and human services is larger than education and a major part of that is the Medicaid budget. To get you the detailed answer, and again ??????????????? Representative Dollar's request, will get you the detailed history of the division medical system, which is ??????????? Medicaid but also Health Choice. I don't have a single chart that gives that historical information. Yes, federal spending is growing in proportion with state spending. Roughly, thirty-five cents of every Medicaid dollar by the state, sixty-five cents by the federal government. It can vary depending on the particular service or benefit but that's a rough rule of thumb. [Speaker changes.] Senator Bryant I have you next but I see you're involved. I'll come back around to you, ok? And so Senator Kinnaird? [Speaker changes.] Thank you, Mister Chair. I have a very small amount of....

Money to inquire about an over here svelte and I on page 2 you and looking at the community college system the bottom says that reducing the budget for benefits associated with part-time employees are you nursing full-time employees and and those community college folks make some money for the wonderful contributions our site again moving a number of the full-time positions to part-time commitment saying no in the that is a correction of it for falling for more money has been always based on the hundred percent of the compensation things all of the employees qualify for benefits retirement back 60% qualified for 40% that not to over fund the retirement benefits for that 40% of already were not eligible, the Nelson so this is not based on any shift to change of the factly that the qualify for benefits such as from combusting for your actual benefits is going for though I legitimate issue for the community college us all to all state government for hereafter is going to affect us as well committee college has expressed concerns of will that they don't amount think I read that 60% of child benefits origin or not under current law multifold fear act is in full force and will be more committee college employees and part-time faculty will qualify for benefits and so there may need to be adjusted by answer that figure was wing of impactful care act present government questionnaire Mr. my from. Write a question about the lottery advertising being reduced .5% which would result $14.8 million savings that you factor in that an assumption that participation may decrease due to the decline in advertising that issue has been discussed by those positional lottery commission if they don't all promote the lottery advertising that will decrease respectfully the original lottery debate is my understanding that the advisory much more limited in and about the unit is at present the deposit so that you direct questions another's load reduction of expected revenue, while repulsive decrease in advertising abdominal retelling is an old joke about advertising Hart's is okay if they say no Coca-Cola what Saturdays than the fact that hundreds amazed also advertising how do you know works and of an actual 50% works Vincent doesn't work we don't know which will this moment, real-world experiment on my Coca-Cola this computer gets Pepsi-Cola to everyone else that once competed against lotteries monopoly so we'll see if in the the participation goes down while the lottery purchase price of your local news media stories about those few lucky winners so yes we we all make this reductions in cycle bodies suggests melanoma education with exultation legislation will not go down different stifles the results center-right activists Challenger left with total. Follow us on why I had to questions related to questions that went to follow somewhat without of our present out of the question that in comparison to the continuation budget and I got to stand and I just County a stamp we shall about seven entities dealing out the company/everything from and in the classroom to them in all four of them anoints economic development entities including the community development initiative the Association CDC the landlocked prevention project I think there's an and the Indian economic development initiative start When it's – you hope you will look at those house unconcern and that same commerce to a there about 27% reduction in grassroots strength museums which are part of the at dam development for our children and families and a lot of in many of the communities across tensile things that I have a reductions I hope that we can look at back and get some support from the governor in we looking at that is yourself you can you give me some feedback yes I am again you hear about zero-based budgeting is not possible to do zero-based budgeting scratch and 10 weeks of the initial story was reducing Percentages or looking at the kind back and justify their budget family corrected with the landlord

Mention of the racially was to help those of former staff and American Stores were made as in the past but that is that we, as even when they're facility so new that racial purpose past were shooting at 6:00 PM on your answer against illegal and (SPEAKER CHANGES) legal services to keep a small and are going, we solicit land on the phone in Maine is ample more needy given a recession no we have some posturing the play was not complete from the fat from the top agricultural mending this jury with teaches them back again from the vestiges of the on their property ownership and the issues which ran between viability and shifting to babble of the options and Pass small and rural communities is still a factor but the issue is something that can be a national information on the cover of manslaughter as we receive information you will review this position on work with john summary on the committee process will all be only a grassroots lights is just to get rid of this rezoning obscure way back in the 1980s or racially mixed or financial slide to see them all in an enemy hands of replacing shown in the name of the human on their own shirt showing strictly woke them or more than 20 years and most was not always, Conner lead vocal impact is about 25 push of a review of and so the wall carpet stable funding is for the streak of relief on the services for the cost of 5578 e-mail shore 1 to 10, (SPEAKER CHANGES) Seattle and has won a CIF. N that network is from a consortium of their professional that looks at almost any area supply of not only from CL opus that we have leftovers and economic development we have fun of, click on the top of a man of a facility for example and and are now starting in Halifax County one of eight waterfowl center in the United States, perhaps even international and I was also waived notarianni fiscal as a not have to go ahead on all new backs you forget from the thumb of your colleagues here are raising questions and more like the white pass them on burden when of army arrived like the summer (SPEAKER CHANGES) justice and public safety of there's no request for increasing judicial fees and court costs was last summer was increasing calls a breaking down the screen as the fly on hold in comer spiking owner wants the justice is wanted for purposes of government were increasingly boring or services corporation calls even when there's a minor infraction so do we do not play, and workers gestural with respect to Mr. Balsam court's judgment will speak on a weed and seed in the four of the accord calls inquiries we did increase in funding for them for the magistrate's foreign agent for a sweep all hope to do that for general following goals jobs as a general purpose of government and history of the quality of mercy on to get the for you also very quickly laundries center by a symbolic of the lottery funding for travel schools of $100,000,000 signs? Change they were not in the lightning ground we have about 10 people often accuse me of 20 minutes of the garden bench activist said on the two best male base level one Carries a two quick questions would not make the 1 pound of the judicial branch of the way I could have on reading staffing is on.(SPEAKER CHANGES) No way it should be of which 62 of three of you in mission in the voluntary reduction of local authorities and find people to quibble with five different than it would turn the situation on in terms of may be on the work on this one turned in the government conceded the impact of the accepted from expansion indicating the corresponding Federal funding on its impact on this budget and soul of finding in one way or small when records page 183 as caller from goers and actually, (SPEAKER CHANGES) Purdue requests of a 2% reduction from all ages so the miserable for the course responded that they could reduce 63 position some of the government , then the problems positions on that we go to the strip malls………..

Some lexicographic reduction anywhere else will remarkably well and just to get some flexibility for early-retirement emirs and reserves for reduction in forces vastly regardless promilitary this budget bills based on existing wall included woodworking for which its expansion I would recommend this budget this genitals and when the going and also bill for that will be on medicare expansion so that's why this matters much certain is a history on all and is looking at the cyclical yesterday the the negative reserves of we had over the last few years public schools university community colleges i think coronary it out and make permanent cuts in the base budget if i understand this correctly can somebody tell me the amounts of those negative reserves the right permanent cuts in the dollar amounts to just get together that was sent extenuation budget will have our best efforts of us are you sure it doesn't show up anywhere in the budget for the drc the on if you will walk of his top while the bottom why is so you wanted you on these it is concise look into the numbers of the to follow cracklings hundred and is what i got be helpful given the number furniture questions so i would hazard be distributed all member since the hundred million the public school don't know what it is bristow… relentlessly mold it was numbers are displayed up with look on page 6 of your budget table starts it ladies i often saw more agile budget battles manager for 1112 baltimore's expenditure is current year all 12 works honeywell international members offerings in your errands in the base budget adjustments which attenuation was requesting that adjustments than is recommended budget reductions but in the expenses mcgoldrick about will follow corporations to their top level as you write down changes including the changes in the base budget as well so you look at the public schools is that it often 7 billion hundred and 4 million 240 million met inquiries you base budget somebody like hundred hundred 34 introductions 155 expections while increasing 7,000,000,890 hp that inquiries within your support disenrollment run-through that separate them out make adjustments and just follow the problem is on when you do adjustments are noted out and we can't see what those and larry anything these people don't get of permanent cuts and ignoble about international information next to you on another matter principia and brevity center mckissick are well rooted were spotted at a music disc of question you thomas of for so is a i'm glad to see eugenics is being recommended for funding assuming as well overdue addition to deep concern about the substantially reduce funding this associated with minority economic development package i think represented as easy sen. brian synder the advantage of address that specific questions right now has to three items under commerce they were saying the north carolina biotechnology center think free recently got about 17 million you do something like $10 million more than half of their budget will offload good work biotechnologies agree growing presence in the state something we need to be deeply concerned about extra dissent concerned about the force's institute for regenerative medicine would like reducing the 50% the first year limiting the funding second year leslie biofuels it looks like biofuels are going from 4.3 million getting a reduction in million dollars these are items which give a deep concern particular look at the fact they were trying to grow this economy would try to get people employed again it's hard for me to understand with a sinner like biotechnology would are doing amazing work out there and really important communists are producing jobs and scrolling why we would cut them for a from 17 million are generally bought some unit just in my mind something is hard to understand and justify but perhaps you can shed some light on those specific items for small for her

[Speaker changes.] ...question or comment. The institutions for the support minority economic development job creation have not been singled out...the ?????? that you just went through as percentage...you look at rural economic development center, the biotech center, percentage wise there is a much larger reductions not to mention the Golden Leaf Foundation, but we will look forward and review those in more detail. Governor McCrory is open and ????????????? to heighten the tension and, in fact, he's already indicated that for the Wake??? Forest ???????????? revisit that issue and look at either fully funding that or the bio-technology center. There's partly again the philosophy should the state be funding specific segments versus generally benefiting the economy job creation. There's also a discussion whether or not that entity is work being better done at North Carolina State University through the University Center...but that's why it was not eliminated but there is that reduction there and we'll have that further discussion as we go through the committee process on continuing high level funding, current level funding, reducing it and lookin' at whether those activities be better integrated with the university system. Likewise, I'm sorry...what was the third one you mentioned? [Speaker changes.] Biofuels. [Speaker changes.] The same theory on the biofuels. It was...there's a lot of history on the biofuels, whether that entity is the best vehicle and really gonna result in return on the investment for the people of North Carolina again versus university efforts and resources, gonna be purely researched, even the application of that research??????? [Speaker changes.] I look forward to some dialogue, discussion and hopefully some re-thinking on these significant issues. [Speaker changes.] Representative Fisher. [Speaker changes.] Thank you, Mister Chairman. Representative Fisher, Buncombe County/Asheville. Thank you for the presentation and my question has to do with the teacher assistants? In light of the idea that we need to look at getting children/students ready to read by grade three, I'm seeing in the budget where we have only allotted assistants for K-1 and I'm wondering what was the thinking behind that? And how many jobs are we talking about here? And, will they be sort of subsumed or whatever into the other grades somehow? I mean those...that's a lot of jobs. [Speaker changes.] First of all, again, it's funding for grades Kindergarten/First grade at one classroom ????????? ???????????? leaving LEA's flexibility if they do think for in general for particular classes that they want classroom assistants in second and third grade. That is a partly a policy debate on actual evidentury?????? real world results on whether classroom assistants really add to the education in second/third grade as much compared to first and second, first and kindergarten...the number of overall positions, I emphasize the word positions...that are currently will be reduced from this year is 3,200. We do not know how many of those positions are actually filled...because again LEA's have flexibility to use those funds for other purposes or otherwise assign those individuals who don't know the actual numbers. Those 3200 positions are the ???????? ?????????? Currently there are about 4500 classroom assistants in Kindergarten, another 4500 in first grade so about...funding for those will increase to over 7000...so a lot of those positions currently held by second and third grade classroom assistants, they can be moved to the kindergarten/first. Yes, there is a net reduction of positions to 3200 versus 1008 increase in teachers...and another increase in funding in the budget. [Speaker changes.] Thank you and one...just one more follow-up? [Speaker changes.] Follow up. [Speaker changes.] Over into the JVS????? budget? We talked about restoring some of the ability to pay our indigent defense attorneys? How much of that former reduction is going to be restored with the budget as it looks today? [Speaker changes.] It's a five million dollar appropriation for a "one-time catchup" and that's a substantial amount. Legal services, excuse me, indigent defense is doing a better job managing their costs right now so we did increase continuation funding slightly and the issue that needs to be looked at, was not in this budget. It's how we provide legal service...indigent defense. I think it's a safe consensus is more cost effective, provides better services that do that through public defender's offices rather than paying to assign counsels and it is a recommendation. Something we hope to look at ??????? if this body's not....???????....some of the larger counties, which have ?????? ??????, local courtroom, custom, use a sign defense rather than the...... [Speaker changes.]

Public defender's office that issue does need to be looked at and we plan to look at that. [SPEAKER CHANGE] Representative Floyd [SPEAKER CHANGE] Thank you so much, Mr. Speaker. I'm Representative Floyd from Cumberland County. I just want to call your attention it has been mentioned at least twice, on page twenty-three, and this is, you had indicated that you are in a business, and I just want to call your attention that the governors wanted to look and revisit, remember that the U.S. Postal Service was the key entity for us providing mail, then came UPS and Federal Express, which kind of took away from U.S. Mail. And it's the same thing here about the advertisement. And it has been said that the pool is the one that paid in this activity. Many of those individuals may just not want to pay the 75 cents a day to get the local newspaper, than to be at the television at 11:21 to get the numbers. So it may be a draw because they won't have access to that information as quickly as possible, that would allow them to go out the next day and purchase another ticket, but the pool needs that information as quickly as possible. If it were just visited. Just look at it, and see if that could be ?? [SPEAKER CHANGE] Fundamental debate on promoting the lottery verses allowing the lottery, other than we didn't make the decision to reduce the advertising. [SPEAKER CHANGE] We have four more, and then we're going to call it a morning. Representative Brown. [SPEAKER CHANGE] Thank you Mr. Chairman, thank you Mr. Pope, Representative Brian Brown, Pitt County, and looking at the modification of the hospital assessment retention from a set forty-three million to a 28.5 percent retention, can you give me a little more clarification on what that might mean for our hospitals? [SPEAKER CHANGE] The hospitals have undertook a voluntary assessment, which in turn a part of that is used for their reimbursement and generates more proceeds from the federal government. It is a complex formula, what this sets forth is that instead of retaining only forty-three million, the state would retain sixty million of that as voluntary assessment, for a total of 100 million, nor does it fund the Medicaid assessments. There are lots of moving parts, especially the affordable care act, with the partial expansion in Medicaid through the woodworking effect, and the governor is open to working with the hospitals to figure out what is the best formula for the hospitals, so they can recover their costs, and the hospitals benefit from this so we're open to discussing that. [SPEAKER CHANGE] All right, Representative Graham. [SPEAKER CHANGE] Thank you Mr. Chairman, and thank you Mr, right here Mr. Pope, to your right. [SPEAKER CHANGE] Sorry. [SPEAKER CHANGE] Your other right. Thank you sir for your presentation, and I know that this has been mentioned before, but I'm going back to page 238, and I'm really concerned with this actual reduction of the item in, on this page that's dealing with the North Carolina Indian economic development initiative. It seems that there is no budget for this program. And I'm really concerned about that. It's certainly has an impact on the seven tribes in North Carolina. They do great work. And they do promote economic development and support within the tribes. And it seems to me that the message here is not a positive message to our tribes. And I'm concerned about that. Moving forward I hope we'll reconsider that. And show some interest in promoting some economic development within our tribes in North Carolina. Thank you, sir. [SPEAKER CHANGE] ?? We'd be glad to revisit that. It's 86,000. But 86,000 is important to the recipient. And that's why we go through this appropriations process. [SPEAKER CHANGE] Thank you, I appreciate it. [SPEAKER CHANGE] Members what we're going to do now, Mr. Pope we have three other folks with questions. If you could hold your staff around to answer those offline. That would be Representative Cook, Representative Faircloft and Senator Davis, who were patient enough. But we just could not get them fit in today. I want to thank everybody for their participation. If you are a member of the Senate Appropriations-Based Budget Committee we will be cranking up at 10:15 to review an important piece of legislation. Thank you everybody for your attendance, we are adjourned.