1. Building a Stronger North Carolina: A Legislative Briefing and Call to Action  
2014

2. OVERVIEW
State of NC Economy
Community Impacts
Policy Matters
Moving Forward to 2015

3. State of
NC Economy

4. NC has reached same number of jobs as in December 2007

5. Yet jobs deficit persists
To provide employment opportunities for the growing working-age population
449,598 jobs

6. Majority of job growth in the recovery in low-wage and poverty-wage occupations

7. Poverty has not declined, Despite the recovery
Source: 2013 American Community Survey.

8. $23,492 (poverty level for family of four)
Poverty remains high
1.7 million+ in Poverty
$23,492 (poverty level for family of four)
Can we add number of children in poverty (KidsCount #’s?)
Source: 2013 American Community Survey.

9. North Carolina ranks 34th in the nation for overall child well-being
26% of North Carolina children are below poverty
1/3 have parents who lack secure employment
34% live in households with a high housing cost burden
Learn more at datacenter.kidscount.org/NC

10. Community Impacts

11. Job Growth Varies by Region
Percent Change in Employment, September 2013 to 2014
Source: Current Employment Statistics, US Department of Labor

12. Median Household Income
Local hardship persists despite
official recovery
Poverty Rate
Child Poverty Rate
Median Household Income
Buncombe
14.8%
17.4%
$46,431
Henderson
15.6%
22.1%
$44,036
North Carolina
17.9%
25.2%
$45,906
Update for each place
Source: 2013 American Community Survey

13. Local Labor Market Trends Since Great Recession
Change in Labor Force Since Recession
Change in Unemployed Since Recession
Asheville MSA
5.6%
44%
North Carolina
3.3%
39.6%
Working age population has increased by more than 10%
Source: Local Area Unemployment Statistics, US Department of Labor

14. The end of the NC Earned Income Tax Credit hits working families
Number of Taxpayers
Value of Credit
Buncombe
20,520
$2,127,185
Henderson
7,868
$872,272
North Carolina
906,916
$107,660,805
Source: Tax Year 2012, NC Department of Revenue

15. Policy Matters

16. NC Relies on Diverse Sources of Revenue to Fund its Priorities
And so it is helpful to have an understanding, at least a high level understanding, regarding the state budget. Nearly 90% of State Revenue Comes from 3 “Pillars”
About half of all spending goes towards public schools and institutions of higher learning.
FY2015 General Fund Budget (BTC’s analysis of State Controller data)

18. Tax cuts limited the ability to regain ground lost during the recession.
I moved this up because I thought it might flow better to do the revenue update first and then spending so we can flow into the policy around spending changes. Not wedded to it though!
Source: Original, FN for HB 998; Revised, Consensus Forecast; ITEP, Using Up-to-Date Taxpayer Data

19. was Repeal of Local Privilege Tax
Major 2014 Tax Change
was Repeal of Local Privilege Tax
Major 2014 Tax Changes included:
Changes to the way corporate income tax was calculated resulting in a loss of approximately $5 million to the state General Fund
Scheduled repeal of local privilege tax as of July 1, 2015
No effort to reconsider decisions about major credits and deductions: those that were brought forward for discussion in 2014 but failed to see their sunsets extended were the low income housing tax credit, the historic rehabilitation tax credit, the film tax credit and the Earned Income Tax Credit
The biggest tax change in 2014 will be the repeal fo the local privilege tax which man y localities have said will reduce their available revenue significantly and require either cuts to local servics or raising property taxes.
PROVIDE THE POTENTIAL LOSS FOR THE AREAS PRESENTING:
Source: Fiscal Research Division, Fiscal Note, HB 1050

20. State spending is not recovering, despite official economic recovery
Take Out?

21. Spending is % below pre-recession levels

22. K-12 Education Teacher Salary Changes Teacher Assistant Funding
Adjustments to Read to Achieve
Replace Common Core
At-risk Student Services Reduced
Teacher Salary Changes – Average 7%, 5.5% if back out longevity pay; focused on newer teachers, huge range
Maintains Teacher Assistant funding at a level that will purportedly maintain the levels at which TAs were employed last year, but provides no additional funding for increased enrollment, and backs out funding for positions that were used for Teachers instead of Teacher Assistants.
$6 mil to implement the Excellent Public Schools Act. RTA changes: HB 230 amends the Read to Achieve law passed last year to make several modifications: it directs the State Board of Education to provide, approve and establish achievement levels for several valid and reliable alternative assessments; allows the student reading portfolio to begin to be compiled during the first half of the school year; gives flexibility in providing the summer reading camps; requires qualitative and quantitative data from the Kindergarten Entry Assessment; clarifies the good cause exemptions from mandatory retention for Limited English Proficient students and students with IEPs; makes clear that parents/guardians make the final decision regarding a retained student's participation in reading camp, with at least one opportunity for students not attending to demonstrate proficiency prior to being retained; and clarifies that a student can be promoted anytime.
SB 812 establishes an Academic Standards Review Commission to advise the State Board of Education on NC academic standards, which shall be named the North Carolina Standard Course of Study.
At-risk Student Services - This allotment is reduced by $9.2M.

23. Health and Human Services
Contract reductions
State/County Special Assistance Changes
Mental Health
Medicaid Reform
Provider Rate Cuts
Flexibility Cut: DHHS is required to cut $16 mil from administration expenses, vacant or filled positions, or contract expenses on a recurring basis. The budget prohibits DHHS from taking funds that provide direct services, but the term is not defined (OSBM getting involved).
State/County Special Assistance (SA): The budget reduces Medicaid eligibility for recipients of SA to only those individuals whose income is 100% of the Federal Poverty Level or less. The current standard is individuals with insufficient income or resources to provide a reasonable subsistence. The special provision language also attempts to grandfather in all those who are currently Medicaid eligible through Special Assistance. However, Medicaid eligibility will no longer be tied at all to Special Assistance if Medicaid is over budget and the Department needs to access the above contingency fund.
Medicaid Reform: The House and the Senate were unable to reconcile their different proposals for Medicaid Reform. The Senate proposed a separate Medicaid agency outside of DHHS and allowed private managed care organizations; the House proposed continuing the current agency structure and public Accountable Care Organizations.
Provider Rates: Reduces provider rates by 1.0% effective January 1, This reduction applies to all fee-for-service providers with the exception of hospital inpatient services, drugs and dispensing fees, nursing homes, non-PCS home care services, private duty nursing, all cost based providers, services where rates or rate methodologies are set by the federal government, negotiated through a contract, hospice, CAP services, FQHC and Rural Health Centers or as specified in special provision. This is in addition to a 3% reduction passed last year, which applies to inpatient hospitals, Physicians, excluding primary care until January 1, 2015, Dental, Optical services and supplies, Podiatry, Chiropractors, Hearing aids, Personal care services, Nursing homes (ending June 1, 2015), Adult care homes, and Dispensing drugs.

24. Early Childhood Child Care Market Rate Increase
Child Care Subsidy Eligibility Changes
Increasing Reliance on federal funds
NC PreK: $5 mil to accommodate the recommended rate increase and teacher salary increases, and additional slots if funding is available. The budget also replaces nearly $20 mil in general fund dollars with TANF funds on a non- recurring basis.
Childcare Subsidy: Subsidy funding is reduced by $7.7 mil with subsidy eligibility changes from 75% of state median income for all children birth to 12 to the following:
Age % of Federal Poverty Level (FPL);
Age % of FPL;
Child with special needs of any age - 200% of FPL
Sliding scale for parent fees is eliminated and replaced with a flat 10%. Co- payments are no longer pro-rated for partial day care. (Funding reduced $1.6 mil and $2.1 mil to reflect this change.)
According to the Fiscal Research Division, 110,000 children received subsidy in Of those children, the following would not be eligible under the new formula: 2,130 of birth to 5; 9,860 of 6 to 12; 7 of There is also a provision directing a study of subsidy for 11 and 12 year olds.
Child Care Market Rate Increase - The budget allocates $6.8 mil to increase market rates so that child care providers will be able keep up with growing costs.
Child Care Subsidy Block Grant Swap - The budget replaces nearly $14 mil in general fund dollars with federal block grant funds on a non-recurring basis.
Child Care Subsidy Co-payments set at 10% of Income (Reduces allocation by $1.6 mil) and co-payments no longer pro-rated for part-time care (reduces allocation by $2.1 mil). Children receiving child care subsidy through Child Welfare, Child Protective Services and Foster Care are exempt from the co- payment requirement. There were 40,000 children whose families paid a co- payment based on 8% or 9% of their family income out of 110,000 children whose families paid a co-payment in FY There were 26,000 children whose families paid a reduced co-payment due to part-time care that year.
Child Care Waiting List: With the reductions discussed above, approximately 1,000 children will be moved off the waiting list in the first year and 4,000 children when fully implemented.

25. Moving Forward

26. 2015 Policy Opportunities & Threats
Budget: Lower revenue due to tax cuts and a likely shortfall before the end of the fiscal year
Taxes: Efforts to eliminate income taxes and capital gain tax, nonprofit sales tax refunds, charitable deductions, nonprofit property tax exemption
Medicaid: Potential for expansion still exists but unlikely, opportunities for better outcomes with reform
Economic Development: Greater push for corporate subsidies
Early Education: Child care subsidy eligibility, Early literacy

27. State of NC Economy:
Jobs deficit persists, low-wage jobs grow
Policy Matters:
A commitment to reinvestment
& targeted assistance is needed
Local Impacts:
Communities struggle in recovery
Moving Forward to 2015:
Lots of opportunities to get involved, share your work

28. Today’s presentation can found at:
Contact:
Annaliese Dolph
Government Relations Contractor and Registered Lobbyist, (919)
Amber Moodie-Dyer
Policy Advocate, Budget & Tax Center, NC Justice Center,
Today’s presentation can found at: