Pricey Harrison

Friday, August 05, 2005

Budget Update 08-05-05

Legislators approved another stopgap spending measure on Thursday, which will keep state government operating for another week in lieu of a permanent budget for the next two years.

Negotiators seem to have reached agreement on the cigarette tax, pay raises for teachers and state employees, and a provision that would allow certain UNC campuses to set their own tuition rates.
The cigarette tax will increase by 25 cents a pack September 1, 2005 and another 5 cents July 1, 2006. The original House budget raised the tax 25 cents, the Senate, 35 cents. State employees will get a two percent raise or an $850 increase, whichever is greater, far less than the State Employees Association sought.

The budget will also include provisions to change the lottery bill the House passed earlier this session, removing many of the restrictions that were critical in garnering support from several House Democrats. The Senate will still have to vote on the lottery as separate legislation. Five Democrats remain opposed to the plan. Reportedly, Senate leaders have convinced one Republican to support the lottery, so it would pass even if all five Democrats voted against it.

Senate leaders decided to drop the UNC tuition provisions. The Senate had included the provision in its budget and continued to push the idea with campus trustees; however, almost all House Democrats, the UNC Board of Governors, campus chancellors, former governors, and other leaders from across the state are opposed to the idea, with many arguing that the policy change would harm the university system and governing board. Another troubling component of the proposal would have provided instate tuition for out of state scholarship recipients. The UNC campuses are heavily subsidized by North Carolina's taxpayers, hence the low tuition for in-state residents.

Other updates - Details on the revenue side of the budget are coming together and it doesn't appear as though taxes on entertainment or movies will increase. Consumers may pay slightly more for candy, liquor, and cable television. Liquor (currently taxed at 6 percent), satellite television (5 percent), and phone service (6 percent) all would increase to 7 percent as part of the agreement - thus an increase of a few cents on candy or a few dollars at most on the more expensive items. The three items were raised as part of a national agreement involving approximately 40 states to streamline or balance various taxes. The idea is to prompt Congress to pass legislation that would compel online retailers to collect sales taxes from customers in states where the retailer does not have a brick-and-mortar store - and thus allow North Carolina to collect these tax dollars to pay for items in the budget such as education or health care. Cable television also will be taxed at 7 percent, which would be the same as satellite, but cable providers would get credit for the franchise tax they pay to local governments, which is as much as 5 percent.

The two chambers have also resolved another significant problem that was discovered in the past week involving N.C. Health Choice, which is the health insurance program for families who do not qualify for Medicaid. A math error revealed that the state would run out of federal money to run the program sooner than expected, threatening the enrollment of 30,000 of the 140,000 children who receive the health insurance. Negotiators agreed to solve the problem by shifting enrolled children ages five and under to Medicaid, the government health insurance program for the poor. The decision will save money by spending federal matching money for N.C. Health Choice more slowly and by reducing physician reimbursement rates.

I would also like to clarify some misinformation that is being spread around to educators and parents regarding teacher assistant positions. Some have stated in the past week that more than 2,000 positions could be cut, but this is inaccurate and I can assure you that we're continuing to try to put additional funding in the education budget. Furthermore, Local Education Agencies (LEAs) did not use all available funding from past budgets on these positions - more than $9.6 million in last year's budget and more than $8.1 million in the 2003-04 school year - so budget negotiators decided, based on recommendations by local superintendents, that the budget should provide adequate funding for the positions and the unnecessary funding would be shifted to other education programs. And, several superintendents across the state have been quoted in news articles saying that they were planning to hire even fewer teacher assistants than what is being proposed by the legislature.

Some critics have argued that the budget negotiations must wrap-up so the legislature can adjourn for the year, which was the reason that many Republicans voted against the extension to keep government running. The issues being discussed take time to resolve and it's better to take the time to get it right than to rush through the process. Even though North Carolina does not have session limits, as do some other states, our legislature continues to be one of the most efficient and least expensive in the nation with only six other states with lower operational expenses.

We remain committed to passing a good budget that ensures adequate funding for our priorities such as education at our K-12 schools, universities and community college, health care and human services for our state's neediest citizens, public safety programs for our neighborhoods, pay raises for teachers and state employees, and adequate funding for environmental protection. We must meet the growing demands of our state and its people not balance the budget on the backs of those most in need.


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