Governor McCrory's Budget

Governor McCrory released his first budget yesterday. We will continue to learn more over the coming days, but here is a first look at budget provisions that affect North Carolinians with disabilities. Our state budgets on a biennial basis, so the Governor’s budget makes recommendations for the next two fiscal years, Fiscal Year 2014 (FY14) starting on July 1, 2013 and Fiscal Year 2015 (FY15) starting July 1, 2014. You can see the full budget document here. The next step in the budget process is for the General Assembly to study the Governor’s proposals and pass a budget through first the Senate then the House. While we do not expect the General Assembly to accept all of the Governor’s proposals, their total revenue predictions should match up.

Health and Human Services
FY14
$230 Million increase
FY15
$360 Million increase

General DHHS

North Carolina Families Accessing Services through Technology (NC FAST) $864,655
This is an information technology system that will provide Medicaid eligibility determinations for the coming federally facilitated Health Benefit Exchange. It will provide a ''one-stop shop'' for all services and benefits for which they may be eligible, without having to fill out multiple applications.

Department of Justice Settlement FY14 - $3,834,275 FY15 - $9,394,658
In August of 2012, North Carolina and the US Department of Justice, agreed on a plan to stop and prevent the illegal institutionalization of people with mental illness. This funding provides housing and support services under that settlement.

Medicaid

Medicaid Rebase/Reserve – There is an additional $755 Million over two years allocated for expected Medicaid expenses and reserves. This does not mean an increase in services but a prediction of costs to just maintain existing services. The Governor made it clear he plans to propose a major overhaul to Medicaid in the coming months in order to control costs going forward.
Hospital Cost Settlement –This measure reduces payments to hospitals by $74M in FY14 ($25M in state funds) and $102M in FY15 ($35M in state funds).

Hospital Assessment Retention –$60M recurring cut for hospitals.

Mental Health Drug Management – This measure requires prior authorization for mental health drugs. This will save $5.4M in state funds in FY14 and $11.3M in state funds in FY15. Similar measures have been proposed in recent years.

Adjust Medicaid Copayments – This item increases copayments from $3 to $3.90 for most services, but not for emergency services, family planning, pregnancy-related services or preventative services for children. $3.3M reduction in FY14 and $5M reduction in FY15.

Medicaid / Health Choice Transfer – In accordance with the Affordable Care Act, the Health Choice program will transfer all children under 133% of FPL to the Medicaid program. $23M increase in FY14 and $48M increase in FY15.

Medicaid Management Information System (MMIS) – FY14 $9,658,152 FY15 $1,666,625
This is a long overdue and far over-budget replacement for the state’s aged Medicaid claim payment system. The new administration has expressed a commitment to fully implementing the new system this summer.
Division of Child Development and Early Education

Use Federal Funding for State Regulatory Positions – This is a $900K reduction in state funds, but the positions will remain funded by federal block grant money.

NC Pre-K Expansion – The Governor’s budget allocates $26.2M in FY14 and FY15 to increase enrollment by approximately 5,000 at-risk four-year-olds.

NC GEAR (Government Efficiency and Reform) – McCrory directs OSBM to create NC GEAR to look at ways to make government more efficient. In his introduction to the budget, he indicates that NC GEAR will look at consolidating the state’s early education programs.

Division of Public Health

Early Intervention – The state’s Early Intervention program provides services for children 0-3 who have or are at risk for developmental delays and disabilities. The Governor proposes an $8M reduction in FY14 and FY15. In previous budget years poor management has resulted in unspent funds, but this cut still represents lost opportunities for at-risk children.

ADAP– The AIDS Drug Assistance program is reduced by $8M in FY14 and FY15. This is a substantial cut to a program that provides life-saving drugs to people who are HIV positive.

Tobacco Prevention – The Governor allocates $1M to tobacco prevention. This is a small amount compared to funding a couple of years ago, but it keeps the programs alive for now.

Division of Social Services

NC Reach – The Governor proposes an increase of $1.1M in FY14 and $1.2M in FY15 to the NC Reach program, which assists young people aging out of foster care or who are adopted after their twelfth birthday to attend a public college or university in North Carolina.

Replace 1/3 of Lost Federal of Funds with State Dollars – County DSS agencies are set to receive less federal funds, so the state is providing a nonrecurring allocation of $4.8M in FY14 and FY15.

Food Banks – This item provides $2M recurring allocation for Food Banks.

Health Choice

As noted above, children under 133% of FPL are transferred to Medicaid. However, the funding reduction for Health Choice is less than the expansion for Medicaid. $12.6M reduction in FY14 and $26M expansion in FY15.

Mental Health Drug Management – This measure requires prior authorization for mental health drugs in the Health Choice program as well. It is expected to save $277K in FY14 and $572K in FY15.

Division of Mental Health, Developmental Disabilities, and Substance Abuse
Cut to LME/MCO Administrative Funding – This item fully implements the MCO administrative model, which results in a recurring funding reduction of $15M. Several MCOs are already financially unstable, and it is likely that further cuts will necessitate consolidation or other major changes to the structure of the behavioral health managed care system.
New Broughton Hospital – This item allocates fund to build a new Broughton Hospital. $23M nonrecurring allocation in FY14 and $5.1M nonrecurring allocation in FY15.

Aging

Long Term Care Ombudsman – $200K to LTC Ombudsman each year to replace receipts and maintain current funding

Vocational Rehabilitation

Independent Living – $10K reduction to IL administrative funding


Justice and Public Safety

Courts

Drug Courts– The Governor recommends $3.3 Million in FY14 and $3.6 Million FY15 to fund these effective, efficient court programs.
Indigent Defense
Both Public Defenders and Prisoners’ Legal Services take cuts in the Governor’s budget. PDs lose $258,634 each year, while PLS loses $231,200 each year.
There is a one-time infusion of $5 Million for chronically underfunded private counsel appointments.

Division of Juvenile Justice and Delinquency Prevention

Close Richmond Youth Detention Center - $407K reduction each year.

Cut to Youth Community Programs –This is a $737K reduction each year.

Center for Safer Schools – Governor McCrory announced this effort Tuesday. It will be a clearinghouse for school safety that Local Educational Authorities can utilize as they work to make their schools more secure. $311K recurring allocation.

Public Education

FY14:
$80 Million cut
FY15:
$10 Million increase

ADM Adjustment – The Governor’s budget includes an $11.2M appropriation for FY14 and $11.8M appropriation for FY15 to handle enrollment growth in public schools. These additional funds will allow LEAs to hire 1,800 new teachers over two years.

Textbooks – This item would partially restore the recurring textbook cuts in FY14 and fully restore the cuts in FY15. $58.5M appropriation in FY14 and $76.5M appropriation in FY15.

Restore Funding for Instructional Supplies – This item partially restores nonrecurring reduction in supplies. $9.4M in FY14 and $34.9M in FY15.

Teacher Assistants – This is the most troubling aspect of the Governor’s budget. The budget would eliminate teacher assistants in the second and third grades and lowering the ratio of TAs to students in grades K-1. $177M reduction in FY14 and FY15.

Excellent Public Schools Act – This item provides funding for two provisions of the 2012 Excellent Public Schools Act that are scheduled to be implemented in FY15: Summer Reading Camps and Reading Plans for Parents. $28M expansion in FY15.

E-Readers – The Governor directs lottery funds to be used to purchase reading tablets for students, which will be awarded to schools on a competitive basis. $26M in FY14 ($9M nonrecurring) and $17M in FY15.

Charter Oversight Positions – The Governor proposes adding three positions in DPI to oversee charter schools. $320K in FY14 and FY15.

Other Departments

One note that applies to all agencies is that we do not yet know how cuts to federal funding from sequestration will affect state budget decisions. Sequestration could impact federal funding for exceptional children’s programs in schools, grants for supportive housing, and many other programs in which federal dollars flow through the state’s coffers. Stay tuned for details.

Housing Finance Agency

$32K recurring Reduction of state match to HOME program
Administration

Reduce 3 FTEs at the Human Relations Commission by consolidating staff functions

Eugenics Victims Compensation- The Governor recommends $10 million in one-time funds to compensate victims of the state’s eugenics program.

Board of Elections

Provide Maintenance of Effort funds to allow the state to access federal HAVA program funds
Office of Administrative Hearings

Appropriations to implement electronic filing and online case management system
Upgrade to Rules Review Commission (RRC) website including easier comment submission and streaming of RRC meetings

Fund three additional Administrative Law Judges (ALJs) to staff a regional office in western North Carolina and assist in processing Medicaid appeals. The additional staff will also enable the agency to implement an alternative dispute resolution process whereby a greater number of contested case litigants will gain access to an ALJ settlement conference in an effort to settle the dispute prior to a costly administrative hearing.