Final 2018-2019 State Budget Approved by NCGA

The General Assembly gave final approval to the state’s 2018-2019 budget on June 22, addressing many county priorities in the legislation. Three of NCACC’s top five goals – increasing revenue for school capital needs, raising the age of juvenile jurisdiction, and more funds for transportation infrastructure –were addressed in the budget. Specifically, it provides a 75 percent increase in lottery funding for school construction. It also accomplishes three of the association’s HHS goals related to community paramedicine and behavioral health resources, adult care and protective services, and early childhood education.

The 2017 Budget Act is in the hands of Governor Cooper, and speculation abounds on whether he will sign or veto it. In the case of a veto, the legislature will attempt an override vote, as both chambers passed the legislation with veto-proof majorities.

  • Allocates $100 million from lottery proceeds to the Public School Building Capital Fund
  • Adds $30 million in FY 2018 and $75 million in FY 2019 to a newly-created Needs-Based Public School Capital Fund (NCACC priority goal #1)
    • For grants to Tier 1 and Tier 2 counties
    • For new construction only
    • Matching requirement – $1 for every $3 received in Tier 1 counties with a grant cap of $15 million; $1 for every $1 received in Tier 2 counties with a grant cap of $10 million
    • Counties that receive grants from the needs-based fund are ineligible for allocation from the capital fund for five years, increasing availability from the capital fund to other counties
  • Net revenues greater than appropriated amounts each year shall be transferred into the Needs-Based fund, with the stated intent to increase the percentage of lottery proceeds dedicated to school capital needs to 40 percent over time
  • Continues to fund non-instructional support personnel from lottery revenue, and uses $43 million in lottery resources to fund LEA transportation needs in FY 2018
  • Provides some limited class size flexibility for K-3 in six school systems for pilot programs and language immersion classes
  • Allows the State Board of Education to allot additional teachers in some isolated schools and allocates $500,000 for this purpose
  • Establishes an interagency council between the departments of Health and Human Services and Public Instruction to address early education needs from birth through grade three
  • Creates a one-year pilot program to provide transportation funds to charter schools through grants and transfers $2.5 million from the Department of Transportation to fund the program
Health and Human Services
  • Includes $2 million for new child-focused behavioral health crisis facilities and $17 million for additional inpatient behavioral health beds at five hospitals across the state (HHS-1)
  • Continues the community paramedicine pilot program in three counties with $350,000 in funding (HHS-1)
  • Directs DHHS to establish a plan using Medicaid funds to reimburse county paramedics for transportation to behavioral health facilities instead of emergency departments (HHS-1)
  • Provides additional resources for early childhood education using $3 million in FY18 and $6.1 million in FY19 combined with $18.8 million in TANF block grants across both years to reduce the NC Pre-K waitlist (HHS-2)
  • Provides an additional $1 million for 21 new positions over the next two years to increase staff and improve timeliness of inspections at various adult care facilities; appropriates over $100,000 in each year to fund background checks for long term care staff (HHS-3)
  • Provides additional state level resources for opioid and substance abuse management, including $250,000 to New Hanover County specifically, and redirects federal grants to specific opioid use treatment and recovery services (Aligns with NCACC President Fred McClure’s Presidential Initiative)
  • Implements additional state level training, oversight, and corrective action plan processes to help with county DSS Medicaid eligibility accuracy
    • Similar to the current process for Medicaid timeliness
    • Would also penalize counties by requiring repayment of Medicaid claims resulting from inaccurate eligibility determinations
    • Would include annual audits beginning in 2019 and a DHHS-designed training and certification program for county caseworkers
  • Reduces funding for LME/MCOs by $86.9 million in total ($31.5 million recurring) in the first year and $90.6 million ($36 million recurring) in the second year
    • Some reductions reinvested in community services such as $2.5 million each year for three-way behavioral health crisis beds
    • Reductions could be offset by up to $30 million in each year if the Medicaid budget has a surplus
  • Provides $10.8 million in additional funds for NC FAST operations, maintenance and system development, including a child welfare case management system
  • Sets aside $161,439 in FY 2018 and $3,229,695 in FY 2019 to implement the Family/Child Protection & Accountability Act as passed in House Bill 630
  • Increases funding for community health centers by $7.5 million each year and provides funds to local health departments to supplement local funding for school nurses
  • Temporarily funds $5 million each year from the state for facilities that utilize state-county special assistance funds; requires a 50% match from counties and will expire the earlier of June 30, 2019 or when all state funds are expended
  • Provides $18.2 million from TANF block grants for training and personnel for county DSS child welfare and protective services
  • Adjusts the child care subsidy allocation formula and requires counties with higher demand and spending than their allocation to submit a plan to DHHS prior to receiving additional funds
Justice and Public Safety
  • Raises the age of juvenile jurisdiction to 18 and provides $519,600 in FY 2018 and $478,000 in FY 2019 for planning to implement the change (NCACC priority goal #5)
  • Appropriates $13.2 million for the construction of a new youth development center to implementthe Juvenile Justice Reinvestment Act (NCACC priority goal #5)
  • Provides funds for a Wilmington pilot project to establish Quick Response Teams to respond to opiate and heroin overdose emergencies.
  • Eliminates funding for inmate Litter Crews and Road Squads
  • Appropriates $650,000 recurring for a pilot project between Pamlico Community College and Pamlico Correctional Institution to reduce recidivism
  • Allows the Department of Public Safety to reimburse counties at a rate of no more than $40.00 a day for the housing of offenders awaiting transfer to state facilities; and requires the Department to report on how much they spend annually on these reimbursements 
  • Appropriates $4.1 million non-recurring for the construction of new VIPER towers across the state; provides $605,089 in FY 2017 and $678,077 in FY 2018 for additional VIPER tower operating funds
  • Defines State Highway Patrol as a PSAP for the purposes of 911 grant eligibility
  • Provides $250,000 to the Administrative Office of the Courts to study rural judicial districts
  • Funds 31 new Assistant District Attorney positions and 67 new Deputy Clerk Positions across the state (JPS-2)
  • Establishes a magistrate/clerk staffing pilot project in Surry County
Economic Development
  • Establishes the NC Ready Sites Fund in the NC Deparetment of Commerce and appropriates $2 million to assist local governments in tier one and two counties with development of infrastructure around industrial sites to help attract economic investment (T&F-2)
  • Extends JDIG sunset to 2021 and adds an exemption from JDIG maximum grants to “transformative projects” with a private investment of at least $4 billion projected to create at least 5,000 jobs
  • Funds various targeted economic development grants to help local governments with specific projects
  • Provides $15 million recurring in FY 2018 and $31 million recurring in FY 2019 for the Film and Entertainment Grant Fund, reversing the trend in recent budgets that provided non-recurring dollars.
  • Increases funding to the Strategic Transportation Infrastructure Program by $320 million by the end of FY 2019 (NCACC priority goal #4)
  • Provides $750,000 recurring to Rural Transportation Planning Organizations and Metropolitan Planning Organizations to fund a portion of the local match required for federal State Planning and Research Program funds
  • Provides $1.5 million in FY 2018 and $2 million in FY 2019 to incentivize regional consolidation of public transportation systems
  • Provides an additional $5 million over both years ($805,707 recurring) for the Clean Water Management Trust Fund (ENV-1)
  • Appropriates almost $3.3 million in total additional funds for the Parks and Recreation Trust Fund
  • Provides $15.6 million for the state’s match with federal and local funds for Water Resources Development Programs
  • Eliminates one position in each of the Department of Environmental Quality’s seven regional offices
  • Requires a study to evaluate the transfer of well inspection and permitting from the Department of Health & Human Services to DEQ
  • Directs a study of the state’s solid waste disposal tax
  • Budgets nearly $1 million for international marketing of North Carolina agricultural products (AG-1)
  • Appropriates $2 million to the Agricultural Development and Farmland Preservation Trust  (AG-1)
The budget includes a number of tax and revenue related provisions. None appear to directly impact local government revenues, but do influence state level availability and economic development planning.
First, the legislation reduces the personal income tax rate from 5.499% to 5.25%, and increases the standard deduction for all filing statuses (married, head of household, etc.), effective January 1, 2019. It also converts the existing child tax credit to a deduction, and accelerates the reduction in corporate income taxes. Other business-friendly changes include modifications to the state franchise tax, elimination of the tax on most mill machinery, and creation of a new tax incentives for “transformative projects.” Finally, the legislation diverts the tax revenue from the short term lease or rental of motor vehicles from the General Fund to the Highway Fund. This is a transfer of approximately $10.0 million per year.
  • Requires all non-state entities receiving funds in FY 2018 to report to the Office of State Budget and Management on the use of the funds
  • Directs a legislative study on local government enterprise systems, particularly water and sewer systems, and requires consultation with NCACC and others during the study
  • Allocates $4 million for eastern NC storm debris removal from the water resources development projects funds
  • Increases state aid to public libraries by $500,000 (T&F-3)
  • Authorizes the Department of Agriculture and Consumer Services to use up to $250,000 for litigation regarding the federal Waters of the US rule
  • Allocates $1 million to carry out the government transparency initiative directed by the 2015 budget act
  • Provides $100 million for activities directed by the 2016 Disaster Recovery Act