NCGA Week in Review: May 21-25

May 29, 2012

Pardon Our Dust

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House Tackles Budget Adjustments
The House has unveiled pieces of their preliminary budget plan for FY 2012-2013. The appropriation subcommittees approved adjustments to the second year of the two-year budget passed in 2011. The full House Appropriations Committee meets May 29th to debate and vote on the complete budget. The initial recommendations include:


·        $333 million in additional spending for K-12 (offsetting reduced allotments to local education agencies)

·        Restores pass-through funding: $3.2 million to Teaching Fellows Fund; $900,000 to Teach for America; and $200,000 for Governor’s School.

·        $10 million to NC Back to Work (Community Colleges)

·        UNC: $11.7 million to lessen management flexibility reduction; $3 million for faculty recruiting and retention fund.


·        $2.6 million: cuts to public transit grants (originally proposed cuts were $8.6 million)

·        Absorbs $150 million expected drop in gas tax collections

·        Adds $2.5 million to the ferry budget

·        Highway Fund’s secondary road construction program cut by $39.4 million

Health & Human Services

·        $15 million in increased funds for Pre-K (Total:$143 million)

·        Smart Start: Replace state funds with federal block grant funds

·        $163 million in increased funding for HHS budget (Total: $4.4 billion)

·        Medicaid: See article below

Justice & Public Safety

·        $6 million: Justice Department reduction

·        $2.8 million: Restoring Family Court Program

·        Public Safety: $16 million reduction

·        Judicial: $1.2 million reduction

Natural & Economic Resources

·        One North Carolina Fund: Additional $9 million

·        Regional Economic Development Commissions: Additional $2.6 million

·        DENR Regional Offices: Restoration of $12.6 in funding

·        Geodetic Survey: Transfer from DENR to Department of Public Safety

General Government

·        $1.8 million: Voluntary Safety Workers’ Compensation Fund

·        $4 million: Unfreezing federal money to accommodate expected increase in voter turnout in 2012 elections.

·        Museums: $210,074 restored to Museum of Art; $300,000 to Transportation Museum

Click here for full subcommittee appropriation reports.


Annexation Reform Moves Forward

The Senate gave its final approval on legislation that would prevent ongoing annexations in nine cities, as well as place new restrictions on future involuntary annexations. Surprisingly, the bills were approved with very little dispute, with 32-12 and 30-14 votes, respectively. This legislation comes in response to a court ruling that overturned the annexation legislation that was approved last year; the previous legislation allowed the nine annexations to be overturned after a process in which 60 percent of landowners had to oppose the move. The new bill overturns these annexations, and allows future involuntary annexations to be blocked with a majority vote by residents. The bills are scheduled for final approval in the House on Tuesday (5/29).


New Software
A new software program designed to seek out potential fraud has yielded questionable billing by over 200 outpatient behavioral health care providers, according to North Carolina’s Medicaid office. Health and Human Services Secretary, Al Delia said that the unusual Medicaid billing is valued at up to $191 million. There are ten cases that have already been investigated and referred to state attorneys; funds could also be recovered. Auditors and investigators have been making surprise visits to providers to examine billings—the analysis has found cases where providers have billed more than 24 hours of service for a patient in a single day, or double-billed for the same service.

The Shortfall
Estimates of this year’s Medicaid budget gap were initially estimated to be around $139 million, then grew to $149 million as the result of a federal court order which reinstates coverage of personal care services for disabled adults. Legislative leaders and the Office of State Budget and Management have agreed to revise the estimate of the current-year Medicaid shortfall upwards to $205 million—this increase was prompted by higher-than-estimated program utilization.

S.B. 797 directs the Governor to transfer at least $29 million of available funds in the Department of Health and Human Services to pay Medicaid providers; deletes the prohibition on authorizing delay of drug rebates; adds a transfer of $21 million in unanticipated federal Children’s Health Insurance Program Reauthorization Act bonus funds to the State Controller; makes clarifying changes and modifies the order of priority for funds to be adjusted; and makes technical and clarifying changes. It also “Prohibits NC from issuing any request for proposals, or entering into a new contract, for the oversight or management of health care services for state prison system inmates without the General Assembly’s prior approval in a legislative act. Makes a conforming change to the bill title.”

Finally, S.B. 797 creates a prioritized list (see below) of funding sources for the current-year Medicaid shortfall, and requires a specified amount of each fund source to be used up before the next is tapped.

  1. $50 million in funds available within the Department of Health and Human Services, excluding transfers of unearned or borrow Medicaid Disproportionate Share Receipts, delay of drug rebates, or transfer of any funds that will create or increase a financial obligation in FY2012-13 or beyond;
  2. $10.5 million from the portion of the state’s Repairs and Renovations Reserve Account that are currently allocations to DHHS;
  3. $105 million in projected current-year General Fund reversions from all state agencies and departments, including debt service reversions;
  4. $20 million in projected revenue over collections. If used, this amount would have to be deducted from the forecasted $232 million revenue surplus for FY2011-12.
  5. A further $20 million from the Repairs and Renovations Account, if necessary.

The impact of this measure on the total budget availability is not entirely clear and will depend on how much money is actually drawn to pay-off Medicaid claims for the current year. Availability for other General Fund purposes will be decreased in accordance with agency reversions and the revenue surplus that is used to fund Medicaid; the upcoming Medicaid shortfall (2012-2013) is estimated at $243 million, and is unaddressed by this legislation.