McCrory stresses reserves in 1st NC budget plan

Mar. 20, 2013 @ 09:01 PM

RALEIGH — Gov. Pat McCrory unveiled his first two-year budget proposal for state government Wednesday, one that's heavy on setting aside money for emergencies, building repairs and Medicaid costs and light on creating new programs.

The new Republican governor recommended to the General Assembly that it spend $20.6 billion in state funds — a roughly 2 percent increase over the current year's budget — in the first year of the plan beginning July 1.

Keeping to his narrative that state government is broken and must be fixed to generate new revenues and help create jobs, McCrory wants $300 million over two years for state building renovations, $180 million to deal with potential Medicaid shortfalls and $77 million for upgrading information systems. Another $400 million would go to the rainy-day reserve fund, considered key in preserving the state's top fiscal rating from bond agencies.

McCrory said at a news conference that now was the time to mend state's fiscal foundation, many of which were exacerbated by the Great Recession and its aftermath, and help improve education and the state's economic environment. Democrats in the state government minority argue the plan aids neither.

The governor's budget office says the higher year-over-year bottom line will benefit from a 3.6 percent revenue increase next year.

"We have a strong foundation, but the foundation now has some cracks in it," McCrory said. "And our immediate goal is to fill in these cracks, and fix the cracks, so we can have a stronger foundation for future generations."

McCrory wants $2.7 million this coming year to rebrand and retool the state's economic development strategy. He said he would fight to restore funding for local drug treatment courts and needs $9.1 million next year to add 5,000 slots for preschool for at-risk 4-year-olds. He also wants to give monetary compensation to the victims of North Carolina's former forced sterilization program, which ended in the early 1970s. "I do think now is the time," he added.

Unlike previous governors, he offered no original signature initiative that requires a significant appropriation from the GOP-led legislature, which will review his proposal and pass its own two-year budget for McCrory to sign.

"This budget funds our priorities, rebuilds our financial reserves and strengthens our foundation for future generations," McCrory said. "Yes, there's some tough decisions within this budget. I didn't enjoy making all of them. But they were based upon priorities."

Those tough decisions, according to McCrory, included recommending that five state prisons be closed — four of them Down East — that would eliminate 685 state positions and more than 1,900 prison beds. Budget documents say the state prison population is currently below bed capacity.

The spending plan also would eliminate $117 million in public school funding to local districts for teacher assistants for second and third grades, meaning the loss of money equal to 3,200 assistants. Money would be shifted to hire 1,800 additional teachers over two years.

"We firmly believe that full-time teachers in the classroom — having more certified teachers in the classroom — will improve our education," the governor said. Local superintendents would retain to flexibility to hiring assistants in those grades, he said.

The University of North Carolina system would have to find $136 million in spending reductions and efficiencies across its 17 campuses and at headquarters in the coming year. McCrory recommends increasing out-of-state tuition by 12.3 percent at places like UNC-Chapel Hill, N.C. State University and four other campuses, and by 6 percent elsewhere.

State employees, teachers and retirees would receive 1 percent salary or pension raises. The budget proposal lacked details on any tax overhaul package Republicans are seeking but did call for North Carolina's estate tax to be abolished, at a loss of $52 million annually.

Democrats jumped on the job losses and education cuts as more of the same from Republicans who took over control of the General Assembly in 2011 and passed two budgets despite the vetoes of then-Gov. Beverly Perdue, a Democrat.

The budget "does nothing to create jobs or grow our economy while continuing the Republican cuts to education," House Minority Leader Larry Hall, D-Durham, said in a prepared statement, adding that it's "a smoke screen for their assault on middle-class families."

But Republicans legislative leaders complimented the proposal. House Speaker Thom Tillis, R-Mecklenburg, said he was particularly pleased to see the $10 million set aside for eugenics program victims. Tillis was the General Assembly's leading champion last year on the issue, which passed the House but was blocked in the Senate.

"We look forward to reviewing the governor's plan in greater detail, and feel confident we will share common ground on many important priorities," Senate leader Phil Berger, R-Rockingham, said in a prepared statement.

The governor's proposal also:

— cuts spending by 1 to 3 percent in various agencies.

— would shift $43 million in N.C. Education Lottery funds over two years to purchase digital reading tablets for students, but would cut by half funds that could be spent in lottery advertising.

— intercepts or accumulates $143 million in reserves or trust fund money for state government operations, including $65 million heading to the Golden LEAF foundation, which receives half of North Carolina's share of national tobacco settlement funds.

— seeks $1.4 million for Saturday hours at 20 Division of Motor Vehicles offices next year.