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Joint | May 31, 2016 | Press Room | Press Conference McInnis

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[BLANK_AUDIO] [BLANK_AUDIO] [BLANK_AUDIO] [BLANK_AUDIO] [BLANK_AUDIO] [BLANK_AUDIO] [BLANK_AUDIO] [BLANK_AUDIO] [BLANK_AUDIO] [BLANK_AUDIO] [BLANK_AUDIO] [BLANK_AUDIO] [BLANK_AUDIO] [BLANK_AUDIO] [BLANK_AUDIO] [BLANK_AUDIO]

[BLANK_AUDIO] [BLANK_AUDIO] [BLANK_AUDIO] [BLANK_AUDIO] [BLANK_AUDIO] [BLANK_AUDIO] [BLANK_AUDIO] [BLANK_AUDIO] [BLANK_AUDIO] [BLANK_AUDIO] Good afternoon. Thank you all for coming today. Later today, the Senate will be realizing a budget that embraces the priorities we share with governor McCrory and the House of cutting taxes on middle class, controlling the growth of government standing, bolstering the States savings and dramatically increasing future pay while at the same time providing over $180 million for State employee in performance based pay increases. The proposal will meet the $22.225 billion spending level agreed to by the House and Senate. It includes a responsible 2.2% sending increase in vast hundreds of millions of additional dollars n public education and other co priorities, NA adds $ 583 million to the state's rainy day fund, meeting the statutory requirement of an 8% funding reserve for

the first time ever. It lays the groundwork for a bold plan for teachers to see their average pay surge to nearly $55,000 within two years for the first time in state history. If the proposal becomes law, average teacher pay will be up almost $10,000. More than 20% since the 2013-2014 school year. The budget provides major tax relief for the middle class and small businesses by making the first $17,500 a family earns exempt from state income tax. That means a family making the North Carolinian median household income of $44,000 annually will see an additional tax cut of $110 next year. This will bring the total amount of tax relief provided by state Republicans to approximately $3 billion since 2011 and the budget also includes provisions to help make college far more affordable and accessible to students across the state, strengthening and stabilizing our public universities with low enrollment and stimulating regional economies. It will help our public school and teachers letting families keep more of their hard earned money and controlling the spiraling cost of college as those are issues we hear the most from people across North Carolina. I am proud of my Senate colleagues standing behind me for crafting a balance and fiscally responsible budget that includes the plan to raise average pay to $55,000, allow the typical North Carolina family to keep an additional $110 annually by making the first $17,500 of their income tax free and reduces tuition at five public universities to $100,000 per year while ensuring tuition does not increase at any UNC system school during a student's four year in college. That my senate colleagues have tackled these challenging issues while keeping growth of government spending below 2.5% and filing our rainy day fund for the first time in state history, so it's tremendous discipline and a firm commitment to conservative budgeting priorities. I will now turn this over to Senator Harry Brown who will go through more details about the budget. >> Thank you, Phil. I will begin with salaries and benefits in the budget, to raise a foundation to [INAUDIBLE_AUDIO] increase average teacher pay from $47,783 to $54,224 over the next two years which will provide North Carolina public school teachers an average $4700 permanent pay raise over the same period and propelled the state to the top of the regional rankings. This is in addition to the generous teacher pay rises legislators passed in 2014 and 2015. It offers experienced-based step increases to teachers, assistant principles, principles, state highway patrol troopers, clerks and magistrates and appropriates 16 million to boost the pay for correctional officers. It provides a one time, $2000 bonus for school principles and a one time, $500 bonus for assistant principles. It earmarks 95 million for permanent Merit based pay rises for state employees and another 85 million for one time performance based bonuses. It includes 10 million for a pilot program to provide performance-based bonuses of up to $6800 for third grade reading teachers, 5 million would be available for the top 25% of teachers in each school district based on [UNKNOWN] gross scores and an additional 5 million will be available to the top 25% of teachers on a state-wide basis. In education, the budget increases for education by more than $394 million It funds K12 enrollment growth, community college enrollment and public university enrollment, it continues the senate's commitment to lower class sizes and early grades, a set research has repeatedly shown it's key to academic success for hiring close to 1,000 additional first and a second grade teachers. It protects the Read to Achieve, School Connectivity, Teach for America and communities and schools programs from being cut by the department of proper construction to fund bureaucracy. It establishes an opportunity scholarship grant fund reserve of 34.8 million, to award more need based scholarships to children from working families, and provides for funding to add 20,000 children

to the program over the next 10 years. It establishes a teacher assisted reimbursement pilot program, in Anson, Franklin, Moore, Richmond, and Scotland counties. Which provide tuition reimbursement of up to $4500 annually for 25 local TAs to pursue a college degree relating to teacher licensure. It fully funds teacher's positions at the 2014/15 level. It invests 50 million in a lottery reserve to fund future local school building needs. It authorizes an increase in the base budget for the UNC system of up to $70 million to fund access to affordable college education act. It guarantees no in-state tuition increase for standard undergraduate college term which is usually four years at all North Carolina public universities, not only providing certainty to families who are budgeting for college costs and tax payers who have fully subsidized tuition but also additional incentives to students to complete their degrees on time. It would also apply to active members of the military based in North Carolina. It reduces student fees, often used to fund non-academic expenses at all North Carolina public universities by 5% and limit future increases to no more than 3% per academic year. It lowers tuition at select universities located in every geographic corner of the state to $500 per semester for instate tuition for in state students, I'm sorry, and $2500 per semester for out of state students, ensuring all North Carolinian's have an affordable option close to home. This would also help to attract new students to universities with lower enrollment, make those schools more stable and competitive, and stimulate struggling regional economies is sometimes friends in the states borders. The reduced tuition would apply to the following schools beginning in the fall of 2018. Elizabeth City State University, Fayetteville State University, University of North Carolina Pembroke, Winston-Salem State University, and Western Carolina University. Direct $300,000 on a recurring basis to the new [UNKNOWN] White merit scholarship program for students at North Carolina Central and North Carolina A&T University. It provides a community college tuition, a registration fee waiver to firefighters, EMS and rescue and life saving personnel at military installations for courses that support of their organizations needs. It earmarks 183,000 to expand an internship program for students at the states historically black colleges and universities. It requires all public universities with educator preparation programs to open and operate a lab school for K12 of K through eighth grade students and a school district where 25% or more students are identified as low performing. In taxes and economic development, the budget provides an immediate $145 million tax cut this year and an additional $205 million tax cut next year. Most of them are benefiting middle class families and smaller businesses, and increases the 0% tax bracket over the next two years ensuring all North Carolina tax payers regardless of income pay no state income taxes on more of their earnings. 86% benefits families earning less than $85,000 And health and human services, the budget re-purposes more than $300 million surplus in the medicaid budget made possible by a Republican-led reforms that have gotten the chronically troubled program back on track. It invests over [INAUDIBLE] to reform North Carolina's child welfare program by requiring additional training, providing more physicians and expanding in home services to support children's safety while keeping families together. It builds a stronger controlled substance reporting system that will use advanced analytics to detect and fight prescription drug abuse. It continues the commitment to improve education and retention of all physicians by directing nearly $11 million to help establish new medical school programs in Fayetteville and Ashville. The fund's nearly $500,000 for Zika prevention and detection. It directs proceeds from the sale of the Dorothea Dix property to go to service for the mentally ill, including 2 million to establish child facility based crisis centers. And 12 million to expand inpatient behavioral health beds targeting rural areas. It funds over 200 additional slots for Alzheimer's patients and their families through the community alternative program for disabled

adults. In transportation, the budget increases funding for the strategic/g transportation investment law of over $32 million which will allow new highway projects to be added over a ten year period. It allocates nearly three million to improve customer service and decrease wait times and have all DMV office locations. It increases state assistance for urban and rural transit systems by four million dollars and state aid to general aviation airports by $15 million. It provides nearly 14 million in additional funding to improve freight rail trucks, foreseeing/g safety and industrial port and military access. It repeals to$500,000 cap state funding for light rail projects effective for the next round of project for our organisation. In justice and public safety, the budget made strategic investments and public safety providing 1.3 million to get the western crime lab up and running and 640,000 for equipment upgrades in the other two crime labs, it includes 2.1 million to help close out the long standing backlog at the state crime lab once and for all. It provides 250,000 to digitize mental health records to help streamline background checks for gun purchases, and it invests 500,000 for school risk management plans to be developed in 835 public schools to help keep our children and teachers safe while they are at school. In agriculture and environment, the budget allocates over half a million dollars for international marketing of North Carolina agricultural products. It increases funding for the clean water management trust fund by $5 million. Elsewhere in the budget, it directs federal funds to a broadband initiative, and a water and sewer project in public schools. It approves government transparency by helping the office of state auditor conduct more specialized audits of state agencies and by implementing a new filing system for statements of economic interest. It provides recurring funding for the human rights commission. It establishes a cyber security program for disabled veterans to develop their skills for protecting the state against cyber attacks. It adds $10 million dollars to the disaster relief fund. It pays off an outstanding $37 million loan from the federal government. The Governor Jim Hunt [UNKNOWN] in 1999 in deferred payment owed for over 15 years. This will save the state $45 million in interest over the next 30 years. And invest 12 million to implement state of the art software to ease tax filing for North Carolinian's. Full budget bill will be posted to the North Carolina General Assembly website at www.ncleg.net tonight. And I guess we're ready for questions. >> What percentage is the raise for second [INAUDIBLE] I noticed somewhere it is but what percentage is it please? >> If you count the bonus with it, it's roughly at 2% average. >> What about without the bonus? >> 1% for it. [BLANK_AUDIO] Is the tuition cover for the colleges senator in one year due or is there future plan to consider this during low rate or [INAUDIBLE] >> That is written as and intended to be permanent [INAUDIBLE] in the tuition structure for those universities? >> And of course the other part of it is freeze of tuition at the other universities in the system at the rate that the individual students matriculates/g for a period of four years. Tuition freeze, four years and lower tuition at the main [INAUDIBLE] >> The increased funding for the teacher pay raises and for state employees, where is that money ultimately coming from? >> Basically it's coming from tax receipts and it's coming from the fact with the budgeting we've done over the past five years, with the tax modifications that we've made with what we've seen as far as revenue coming into state coffers and this fully funded with recurrent revenue. >> There's no recurring expenses paid with non-recurring money in this budget. No. >> But the House agreed with you on this with the tax changes in education. They add the same money that you do, but you put in another $283 million more in the rainy day fund than they do,

How do you do that? Where do you get the money from? >> Again if you look at the dollars the over collections from this year is a little over $300 million I think. And then amount of money from last year's budget that was not spent will be another $300 million. Basically we were using the same numbers that the House was using and we just prioritized the teacher pay raise in a different way than either the governor or the house. I think you mentioned in your comments the standard deduction language would be in your budget. Does the budget include any other significant tax changes like the RMI discussion from earlier today in Senate finance or market based sourcing or any of those other proposals that are being discussed? >> The market sources bases in there, nothing from today's discussion is in there. >>What about broadcasters [INAUDIBLE] senate bill 869 whenever that market source billing in there? Market base sourcing language is in- >> Broadcasting? >> Including broadcasting. [BLANK_AUDIO] >> Any significant cuts? >> Not really, I can't think of anything. >> Define cut. >> Yeah, what's a cut? >> [INAUDIBLE] [LAUGH] >> [INAUDIBLE] in the money? Of course it says the appropriations shall be reduced by in the- [CROSSTALK] [INAUDIBLE] is anything changing with TAs in order to make that plan happen? >> Nothing with TAs. The primary provision bill dealing with TAs in this budget is the scholarship for TAs in certain areas as a pilot program providing them with an opportunity to complete their education and then come teach and when he's asking about cuts, Senator Hise was saying something about the b base. What's the Medicaid b base? >> It's the same as [INAUDIBLE] in the House bill. We have the largest reduction [INAUDIBLE]. >> Could you describe a little more about the state employee raises, how they would work and one time bonuses and permanent increases, are the both considered performance based? >> They are. >> Who determines who gets them, I guess? >> They're allocated to each department in state government and there's a provision that says it cannot be across the board and it's really based on performance, hard to fill positions, market adjustments. It has several provisions to really try and address some of the challenges we've had. >> In many respects, what we've tried to do is follow the Governor's lead on this and provide funding areas in that he indicated were areas of need, but also provide, in the budget step increases for various areas of state government, clerks, I'd call- >> [INAUDIBLE] >> Follow that wouldn't be cap on the bonuses for any individual person? >> There is no cap, but there is a report as associated with it. So we can see how they'll allocate it. [BLANK_AUDIO] >> [INAUDIBLE] about rainy day fund threshold to eight percent being reached, do you plan on in future budgets to continue with the allocate to the rainy day fund [INAUDIBLE] do priorities for those recurring funds. >> Obviously what we'll do is as the next budgets are written we'll make a determination/g, The eight percent number, well clearly as the budget rises we'll [INAUDIBLE] put some additional dollars there. But we've maintained what I would say is a very consistent policy that any money that comes into the state, in some respect some of that money needs to go back to where it came from, if we have extra dollars [BLANK_AUDIO] >> Can you describe what your process will be the rest of the week and then what you anticipate the process of the house will be and what the major sticking points will be and how long that might take? >> [INAUDIBLE] Well mate- >> [LAUGH] >> We'll have appropriations in the morning at 9 O'clock then there will be a finance committee sometime tomorrow and pensions as well later in the day and we plan to vote it Thursday and Friday. >> And at this point our plan would be the Friday vote would probably be early early Friday

[SOUND] morning. As far as I anticipate from the house obviously and you probably say we hope that they'll look at it and see that this good budget just [INAUDIBLE] >> That's right. >> I will [INAUDIBLE] to understand that's likely not gonna be the case and we are extremely [INAUDIBLE] of the negotiation process were moved. But risking/g it long we'll be able to meet the goal that we all have. I think which is to finish by the end of June about the 4th of July the absolute latest. >> You mentioned pensions and retirements, is there gonna be a [INAUDIBLE] to retirees? >> [INAUDIBLE] included for several reasons, the cost associated with it but really the main reason is the long term liability that it creates. What the House did, it creates about $700 million liability over the next 12 years and we just didn't think that's good budgeting and also we tried to follow what the Governor had done as well. >> We've seen what's happened in other states with liabilities that have been created in pension systems and how a number of states are in dire trouble, one not only creating problems for their budget but also creating problems in keeping promises that have been made to retirees. So what we wanted to do is make sure that we were able to maintain the promises that was made to retirees that the pension would be there for them over a long period of time. And when we had the numbers run on the [INAUDIBLE] that the House calculated and we saw there was left three quarters of a billion dollars in real cost over time, we decided that that was not something that was prudent for us to do. Yes, sir.>> Is there any update on the average amount contributable on benefits per year? >> The benefit package would remain the same as it is. >> No, it's 7,000. I think it's worth 7,000 [INAUDIBLE] >> If you take the average that this would go to to 51 in the first year, the average total compensation would be about 68,000, that's $15,000 or $17,000 verses the cost of providing the employee healthcare coverage and the retirement benefit, the taxpayer cost. Yes, ma'am. >> Previous budgets you've focused at putting pieces of policy that would not necessarily related to fiscal policy. Is there anything like that in this budget? >> Pardon? There was no [INAUDIBLE] >> Anytime you make a decision as to spending a dollar, you are making a policy decision and so to try and separate funding totally from policy is extremely problematic and two people can look at the same budget and say there's a lot of policy and others can say there's not much. One of the things that I think some of our members mentioned when we saw the House budgets gushes a lot of policy in there. I would say that as far as this budget is concerned, it's primarily focused on how do you send money that the taxpayers send to us? >> We'll follow up in parts that question, where do you see the differences of what might be the problems when you get it? If the house doesn't concur, what do you say the difference is second points? >> We can all see the big differences there is a larger tax relief in this budget, so that's the difference with the house, and there's a larger teacher pay raise in this and that's the difference with the house, I would say those are the two big ones. >> Regarding the $500 tuition [UNKNOWN] equals for those five schools being ruled into this budget. What kind of conversations have you been having with president Scullings and what is your answer to people who are contesting the fiscal devalue the quality of education [INAUDIBLE] >> First on the second part I disagree with that, 100%. North Carolina is unique in that we have a constitutional provision that says that we have an obligation to provide the benefits of college education, as free as practical. We think that this is a way to do that, that $500 per semester for instate residents is not flurry/g but I think it certainly meets that constitutional provision. I think far from cheapening education as a result what it does is it creates an opportunity for more people to have a benefit of the college education. >> First I was just saying out of most applications I don't think

there's a line that says how much did it cost you to go college, I mean it's just not an important issue I think most people trying to answer. >> I think it's kinda interesting when college administrators come up here and say we want to charge more to our students, that doesn't make any sense. >> [COUGH] >> Do you have any details on how the teacher pay raise will be weighted toward different levels of experience? Now in the house they seem to put a lot of the biggest raises on the folks in the middle years of career, how is the senate plan work out with that? >> As I understand it, the press release will have some hyperlinks and it will link you to provisions in the budget so you'll be able to see it directly even before the full budget is released but again, what we've been trying to do over the past several years is treat teachers like professionals and in most professions someone get to the top of the pay in their profession within 10 to 15 years and so rather than 30 plus years which is what the schedule called for when we were put in the majority? This budget in the second year if it passes and these divisions get enacted, that path from beginning feature to top pay will be 15 years. So much of that money is invested in that modification in the salary schedule [BLANK_AUDIO] Other questions? >> [COUGH] [CROSSTALK] Does this make any changes to the ferry tolling system? >> No changes to the current tolling system. >> There is a provision that would allow you to buy a pass for $150 a year to be able to go to the front of the line basically. That's the only provision dealing with ferries in the budget. >> Two more questions, if you have two more questions. >> I do. I got one. Oh, you got one back there? Okay. >> Senator if I could maybe just get your comment or thoughts on Senator Bryant's most recent comments regarding HB2 and it should be rolled back and it would be in the best interest of North Carolina. >> So we're here talking about the budget and we're not gonna respond to questions other than questions dealing directly with the budget, sorry. >> With regard to teacher pay, one of the areas that I've talks around is that there is gonna be emphasis placed on certain subjects as in more pay for potential stem related subjects, does that factor into this? Is there any opportunity cost towards non- [INAUDIBLE] ? >> Not stem necessarily but one of the things that we have which is a precursor to doing some of those kinds of things. We have funded $10 million for the provision of bonuses for third grade teachers. It will be split into two parts. One would be a state ward part. And so those teachers that are third grade teachers, that achieve the most growth in the state will be able to participate in that first $5 million, in the second five, top 25% of third grade teachers There's a second $5 million that will be allocated to the LEAs where the top 25% of third grade teachers in each LEA would be entitled to a bonus. And again, when you're talking about some of the scores, this is not based on wild scores. This is based on growth that teachers are able to achieve with their students and we are able to measure that very accurately with the EVERS system that exists and that actually was developed by SAS here in North Carolina. And let em just kinda complete that. And the idea is that that's a pilot to see how a bonus type program could work and could be administered so that as we move forward and go down the road, we can talk in terms of a similar bonus for teachers that are in math or science subjects or similar bonuses for teachers that are teaching in hard to staff environments and those kinds of things. >> That's for two years so you can really [INAUDIBLE] >> Another thing I've heard [INAUDIBLE] is as far as teacher responsibility goes there's not really much room for teachers to bump up promotional-wise unless they want to go towards a principle role or an administrative role. Is there any sort of reward system to keep teachers assuming more responsibility without having to go towards something along the administrative end that fits into this budget?

>> Well actually one of the ironies is that we have just this year began to hear something about how principal pay is not where it needs to be, so I think there's been some success with what we've been able to do with the teachers salary schedule if not completely eliminating that issue. Hopefully alleviating it some and over time, our expectations would be that we will have other bonus types programs in fact as a supplement to the pay scale. >> And the program that Senator Berger talked about earlier for the third grade teachers. Third grade teacher can get up to about $6000 bonus because they could get out of both pockets so that's a pretty big bonus for, I would say, teachers doing a great job. Okay we'll do one more. >> You were mentioning earlier the differences between the house proposal and your proposal and you talked about tax reform and increasing the standard deduction. Why the importance of taking a step further than where the house has? You could speak to that. >> So why shouldn't we be satisfied with a smaller tax cut? >> In your estimation why the importance of going even further that what the House had proposed? >> So the importance is that we philosophically believe that the money that's paid in taxes actually comes out of somebody's pocket. And from a policy stand point, the more we can do to leave more of that money in people's pockets, the better for that individual, but ultimately the better for the state as a whole. I think what we've seen over the past few years is that that policy of being intentional in terms of reducing taxes has had a positive impact on the overall economy. So I guess the short answer would be that we want a larger tax cut because what that means is more economic growth. Thank you all. [BLANK_AUDIO] [BLANK_AUDIO] [BLANK_AUDIO] [BLANK_AUDIO] [BLANK_AUDIO] [BLANK_AUDIO] [BLANK_AUDIO] [BLANK_AUDIO] [BLANK_AUDIO] [BLANK_AUDIO]

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