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Joint | July 15, 2014 | Chamber | Budget Conference

Full MP3 Audio File

Good afternoon everyone. Let's begin taking our seats so we call this meeting to order. [SPEAKER CHANGES] Good afternoon. Welcome to senate appropriations. Like to introduce our pages. Ruth Parsons, Jordan Raglin, Charles Van Dyke, Davis Braswell, and Richard Parago. Also thank your Sergent In Arms, Steve Wilson, Ed Kesler, Matt Urban, Issac Walker, and Billy Fritcher. Going to go ahead and call Chairman Brown to the well, to present our offer. [SPEAKER CHANGES] Thank you Madam Chairman. I think we're handing out the offers. So let's make sure we get it out before we start. Yeah, pretty. While we're handing it out, I guess I can go ahead and begin with just a few comments. I think having these meetings in the public just kind of shows you what happens behind closed doors. Sometimes, this thing doesn't get pretty. Sometimes it's a contentious. A lot of disagreements. A lot of back and forth. And in the end, it takes a lot of give and take in order to get to a solution or a conclusion that everybody can agree with. I think the key piece, though, is as you negotiate through these budgets and try to come to a final conclusion, it does take both sides to have a willingness to give and take and to negotiate until we can kinda come to that final conclusion. I think on the senate side, we have been saying for the last week or so, that we've been willing to go to the middle. We've had, or have talked about, this particular proposal, probably for the last week or so. Trying to really get, I guess, some more input from the House on where they're willing to move and to see. But I think it's time in the process that somebody's got to take the lead. And I think the Senate is willing to take the lead on trying to come to the middle and make a compromise. And I think this proposal does just that. In fact, I think this proposal probably lets the house win maybe a few more times than the Senate wins. But again, I think it's time we moved this process along and try to get it behind us. And I think in the end we're going to have a good budget. And maybe one that everybody had to give and take a little bit on. But again, a budget that we all would be proud of and could live with. So saying that, I'm going to just touch on the high points. I guess the first piece I'll touch on state employee pay. We have pretty much adopted the House position. But with being online 64, 65, 67, 68, 69, pretty much all the pay pieces other than teacher pay, we have adopted the House's position. With the exception of the school based administrators. And we took the Governors position on that particular pay raise. I think the big piece and the sticking point for us in this negotiation has been teacher pay. And as you know we feel like it's important that we get as close as we can to the national average on teacher pay. And I think that's why we've been as adamant as we've been on where we've tried to get these negotiations to go to. This is a serious compromise, I think, on the Senate side to try to move this forward. And what the Senate is willing to do, the House has been at 5%. The Senate has been at 11%. This moves teacher pay to 8%. It splits it right down the middle. So basically the Senate was at 468 million on teacher pay. This proposal moves that down to about 342 million. Concession of about 125 million dollars or so. 26 million dollars. I think that is a key key concession on our part. That along with a 10 year piece that we gave up earlier on, I think, are major major gives for us on the Senate side. And I hope that the House understands.

how much of a concession this is for us, because this was our number one priority. ?? to make this move, we feel like this is a major concession for us. But again, it's splitting down the middle. I think it makes it fair, and I think that's what compromise is about. In saying that, the House is going to have to make a concession as well. And the next piece is on, the teacher pay piece, first of all, is on line 63, if you want to look at those numbers. Line 63. For the major piece that I think the House has to give on, is the teacher assistant piece, and that's on line 34. What the Senate has proposed in this is to split that down the middle as well. That is, find a way to, and if you want to talk numbers, I guess, the House spends about 407 million on teacher assistants. Our first proposal was around 178 million or so, this gets us to about 292 million. It fully funds another class of teacher assistants. Again, it's right down the middle. It splits us down the middle, just like we're doing with teacher pay, to try to find a solution to this, to this process. Also, a piece that we've debated back and forth a little bit, is the lottery piece. This pretty much takes, I guess a little bit of the House, a little bit of the Senate. For us it takes, it leaves the lottery advertising piece in place where it's at today, which we agreed to, I think, in our last few meetings. A key piece for us, though, is the forward funding of UNC need based financial aid. And the reason that's a key piece, is this will finally finish that off. We won't have to worry with it any more. It'll be over, we don't have to address it any longer. And we've been dealing with that forward funding for the last several years. This piece finally gets that off the table, where you don't have to deal with it any more. The House found a cut in, a technology cut in education, and moved that to school books and supplies. We offered to, also take that cut, but we proposed moving it to the teacher pay piece to help fund that portion of it. Another key piece, I think, that's important to this proposal is the old schedule for the teacher pay, had about three, eight, or nine steps. I can't ever remember that number, there's so many. If you'll remember, the Governor came out with a proposal on a new step plan for teacher pay. Our proposal is to pretty much adopt the Governor's plan. It creates a new six-step plan for teacher pay, it incorporates the piece that we all agreed on of starting pay about $33,000 per year. That would be the pay for about the first four years, and then after, from about the 5th year to about the 9th year, it goes to about 37,000 per year, and it progresses on up, and we can come up with some charts to show you what we're talking about on that. It simplifies the process. The other package, I think, was just so complicated, and it just never has worked for a long time in our opinion. Again, this incorporates what the Governor had talked about doing, and we think this is the best way to move forward as far as a new plan for teacher pay, as far as steps go. Those are the major differences, except for the Medicaid piece. I guess that's important isn't it? I better touch on Medicaid. I set that one up. You know, Medicaid is a piece that we've all had to deal with for the last, well I don't know how many years. Ten years anyway. And I think we all agree that we've got to do something to control Medicaid. And the House has got proposals, we've got proposals on how we reform Medicaid, and we're going to have to continue to work on that. But what this proposal does is, it takes about, on the Senate side, it takes about 105 million dollar cut in Medicaid savings that we had in place for the aged, blind and disabled. It fully funds that at the levels they are today. That moves our Medicaid cut to about 150 million, the House is at about 120

million puts us about 30 million apart on Medicaid, and I would surely hope that we can sit down and find a way to narrow that gap of about 30 million dollars on Medicaid at this point. That is a major concession for us. We think that you've eventually got to address the eligibility requirements in Medicaid if we're going to control costs. We've said that all along. I think the Governor even said that, for a while and things changed I guess, I'm not sure who changed his mind, but I think he felt that was the way to go for a while, but we've got to get this on the table and we have got to figure out how to reform Medicaid if we plan to continue to take care of education. And what I think some other priorities that are going to be coming soon in our court system who are just I think as tight a budget as any budget we've got in state government now, is JPS in my opinion, you know we've got to address those issues soon, and the only way we can do that is if we take care of the Medicaid problem that we've had for the last several years. And we've got to seriously sit down and look at how we can reform it. We're, I know on the Senate side we're working on some things and I hope we can sit down with our House members and continue to work on it, but to me that's gonna be the number one priority moving forward whether it's this year or next year or whenever it is, this body's got to seriously address that issue or we will continue to have to come back year after year, deal with shortfalls, deal with cuts and other areas of state government to pay for Medicaid and it's time we get serious about that. But this is a fair proposal. This is a proposal I think that givies more back to the House than what we're asking to keep, to be quite honest. I think we moved more in Medicaid than I think anybody thought we would. We split the TA position down the middle, we've split teacher pay down the middle, we've accepted the other pay issues that the House proposed, we've taken some steps that the Governor would like to have in his budget. I think this is a major concession on the Senate to try to get to a conclusion on the budget process. So having said that, I'll answer any questions. [SPEAKER CHANGES] Thank you Chairman Brown. Questions or comments from committee? Chairman Dollar. [SPEAKER CHANGES] Thank you. Let me make a few comments first and then I'll try to be brief and then maybe a few questions. First of all let me say that we do appreciate progress being made, particularly progress with respect to rank and file state employees. Obviously we're still apart on some items in that area but the offer largely moves together for rank and file state employess and that's, I think it's a very positive step. It's obviously also a positive step that the larger eligibility issue with regard to Medicaid has been taken off and we've had discussion about that, I won't belabor that point for our purposes today. There are obviously as you know, Senator Brown, some areas where you know we some concern would still be in play and let me focus on just maybe one of the questions here. Is it, am I reading this correctly when I look at the notations in the back with regard to teaching assistants, If I'm reading that correctly, this offer would still cut TA's or that allottment by roughly in half. And in addition to that, the funds that remain there, are those largely non-recurring funds, and the reason why I ask is that would mean that all or a large portion of the balance of that line item would have to, you'd have to find whoever's working on the budget next year would have to find funding for that should they choose to fund that. Am I reading that correctly? [SPEAKER CHANGES] Chairman Brown? [SPEAKER CHANGES] You are, Representaive Dollar, as far as the piece that, the class I guess

Compromise, that is a non-refunding compromise. Non-recurring compromise. [SPEAKER CHANGES] So, did, the amount that remains would be non-recurring dollars. [SPEAKER CHANGES] Exactly. [SPEAKER CHANGES] Follow up? [SPEAKER CHANGES] Yes, another, another question, with regard to, there were two eligibility pieces, and if there's some of this that, that someone wants to get more detail and get to us, perfectly fine. But there was a second eligibility piece with regard to individuals on SA being able to qualify. Were ya'll still looking at that as a twenty eight million dollar reduction for the purposes of, of your, of the offer? [SPEAKER CHANGES] Chairman Brown. [SPEAKER CHANGES] It's my understanding that's about a fourteen million dollar reduction for this particular budget cycle. That is, and that's, you're talking about the piece where you're automatically qualified for Medicaid if you go into assisted. [SPEAKER CHANGES] SA. That, right, yes sir. [SPEAKER CHANGES] That is still on the table for negotiations. Again, that's part of the difference between the one hundred and fifty million to the one hundred and twenty million, again, what's left after the one hundred and five million that we just gave on eligibility cuts is only around, for this particular year, only around if, my understanding, somewhere in that fifteen to twenty million dollar range. That's the only thing that's left for eligibility cuts to take. So we gave up five hundred, one hundred and five million dollars' worth, that could have been on the table, to now try to negotiate on something in that fifteen to twenty million dollar range. So you can see we made a pretty big concession there on eligibility. [SPEAKER CHANGES] Did you have a follow up? [SPEAKER CHANGES] Yes, I think I had another follow up. And the retiree COLA, for the purposes of this offer is at point eight percent, which was the Senate position if I'm understanding correctly. [SPEAKER CHANGES] That's right, we're at the Governor's and Senate's position on COLA. [SPEAKER CHANGES] Okay, I thought the Governor was at one point nine, we were at one point four four, this is technical stuff, but we were at one point four and I think we had moved to one. [SPEAKER CHANGES] Maybe I'm wrong, it is at the Senate position at this point. [SPEAKER CHANGES] I gotcha, but, right. I understand. [SPEAKER CHANGES] Thank you. [SPEAKER CHANGES] Thank you very much. [SPEAKER CHANGES] Senator Hise. [SPEAKER CHANGES] Just to clarify on the special assistance population, we passed out the Senate assuming it was a twenty eight million dollar cut, numbers we've received from the department that would assume that all of those individuals lose Medicaid eligibility, and what we've since received is that about half of that population would remain qualified for Medicaid without the special exception. That's why it came down to a fourteen million dollar cut. And we suspect about six thousand individuals of that population would still receive coverage on Medicaid because they meet the requirements under either their specific disability or their income guidelines. [SPEAKER CHANGES] Thank you. [SPEAKER CHANGES] Further questions or comments from committee? Representative Hager? [SPEAKER CHANGES] Thank you miss Chairman. Senator Brown, thank you for bringing this offer forth, I think it's, appreciate the work that you guys have done. Just got a question real quick. As you know, I've been, tried to look at the TA position that's been kind of the area that I've focused on, it's important to me in my rural district. You've got a, and we've talked about lottery funds and all those things, just something that you guys consider, and I really haven't talked, and I [??] a little off on the front end of this, with the twenty million dollars you've got in film grants and the projected fifty nine million, which gives you about eighty million. That seems to be a source of money that I just want to put out there, about, that would save about, almost twenty six hundred TAs. That thirty one thousand dollars. Just want to make that comment and I appreciate you guys considering that. [SPEAKER CHANGES] Thank you for your comment. Senator Brown, would you like to respond? [SPEAKER CHANGES] I would, and I understand the passion for TAs on the House side, but if you remember during one of your meetings a few days ago, when the administrators were here, they admitted that about, well I don't know that anybody finally admitted on a number, but I think it was seventy to ninety million dollars of the TA money is not being used for TAs. They admitted that in a meeting the other day. And if you think about it, we're at about a hundred and fifteen million or so

[SPEAKER CHANGES] That's what the cut would be now for T.A.s. So the cut we're talking about taking is pretty close, the amount now that's not even being used for T.A.'s. And I know Representative Holloway argued that some of those were being used for teacher positions and, and maybe that's the case. But if that's the case, then let's fund teacher positions. What we're saying is that money is supposed to be for teacher assistance, and its not. Its being used for something else. And that's seventy, ninety million dollars. So, we got a gimmick in the budget, that you can take that money that's for teacher assistance and do something else with it. We think that's a pretty good argument because that's whats happening. And, so we feel like again, we moved in the middle on teacher assistance. I think that's a pretty big compromise, especially when you look at what we've done with the pay fees and , the tenure fees. And, and particularly on the Medicaid fees where we more than moved to the middle and my opinion on the Medicaid piece. [SPEAKER CHANGES] Thank you Chairman Brown. Chairman Johnson. [SPEAKER CHANGES] Thank you Madame Chairman. And I take pride in saying Madame Chairman. I wanted to, I think we'd asked, some of my questions have been asked. Online, thirty five? The, the original House reduction, look at, on that line, was one thirty six was our last proposal and other adjustments. Your now at one seventy three? So we have a difference there of about forty million. Could you furnish us with what those extra cuts would be. And my other question is there, there was a line item for pathways, and I didn't get see that and wondered if that my be part of that other adjustments? If you'd like to address that? Thank you. [SPEAKER CHANGES] Representative Johnson, your right, there is a difference in the education budget on cuts throughout, I guess the education budget that are different from the House. And I think, you know, those are things we're going to have to sit down and work through. You know we addressed DPI a little differently than you guys did. You guys addressed the university system a lot different than we did. So there are still a lot of moving parts in the education budget that will have to be worked through. But I think if we can settle on these major dollar pieces, I would hope we could sit down and work out the differences in education, HHS on the sub committee level. Try to get as many of those accomplished and worked out as possible. And, and those differences that are left, we'll, we'll sit down and try to hash them out. [SPEAKER CHANGES] Thank you. Speaker Toliss. [SPEAKER CHANGES] Thank you Madame Chair. I, I wanted to bring up. Well actually one thing. Senator Brown, I think ya'll have done great work. I appreciate the movement and particularly appreciate the movement think on Medicaid. That seventy five million, in my opinion, is noteworthy. A couple of things, I want to get back to the teacher assistance. One, after the public comments by the Superintendents, I asked my staff to, to drill down on the non teacher assistant funding. I don't want to hit the, the small numbers. But just, just so that we know that the larger allocations. Are bout two and a half million with special needs and five million for low wealth, supplemental fund. And another sixteen million for waivers for certified personnel and then there other ones with hundreds of thousands like small county supplemental funding. But the biggest number is sixty four million, three hundred thousand for K three teachers. And I think its something as we go through the negotiation process we need to look at that because I don't think, I don't think its the intent of the Senate to cut what are clearly teacher positions. And it looks like there is at least a significant part out there, sixty four million. The, the other question that I had was whether or not the Senate may want to consider as we go forward with this. In the same way as the Superintendents have taken some of the, the teacher assistant allotment and used it for other purposes that they felt were a better and higher use than teacher assistance. The, the number that you pointed out.

Whether or not the Senate and this is not necessarily for immediate response but for consideration as we go forward looking at maybe some concept of a mandatory minimum pay increase and then something that more closely approaches either eight percent or eleven percent. Legislative direction to have the LEA's have the flexibility for those who think that it may be appropriate for them to keep teacher assistance at least through some sort of transition phase if its the will of this body over time to reduce teacher assistance and have more emphasis on teachers but do it in a way that doesn't necessarily have the decision made by legislators but give very clear direction that we would encourage the LEA's to report back to the Legislature if they do make a decision not to provide that higher raise in other words keep that teacher assistant in the classroom that there has to be some mechanism to demonstrate to us through academic outcomes or through priorities at the LEA that they believe that they've put that money to best and highest use but still really put an upward pressure on the raise whatever the mandatory minimum would be whether its five percent or six percent or some other number between where we are and where you all are but then still provide that flexibility to the LEA. I would really encourage that to be some of the discussion maybe after the conferences we continue in negotiation [SPEAKER CHANGES] Thank you Chairman Brown would you like to respond [SPEAKER CHANGES] Speaker Tillis again I think were willing to sit down and negotiate on any of this stuff but I think you see a problem with flexibility when you give LEA's flexibility you see what happens to teacher assistance again I think flexibility may be good in education obviously the deal is we felt like it was cause we've given it to them but maybe we need to look at the teacher allotment because if they're using TA money to pay for teachers then it tells me we've got another problem. Its a different kind of problem and so there's some things maybe we need to look at again I think were open to any kind of negotiation again teacher pays are important to us I know TA's are important to you and we'll be willing to negotiate in good faith on any of this [SPEAKER CHANGES] Speaker Tillis [SPEAKER CHANGES] The main reason for example I've got the Morrison grade school district within ten fifteen minute drive of my house and that's a school district that has done some remarkable improvement and they haven't appreciably increased per pupil spending as a matter of fact I think their probably somewhere above a hundred of the in per pupil spending. But now their second or third highest performing school district in the state and in that particular case its apparent to me that doctor Edwards has really come up with some innovative ways to use teacher assistance. Use the mix differently to produce those outcomes and that's why I'm a bit apprehensive about putting to much control over that because it could prevent some innovation that's occurring in some of these higher performing school districts and I'm sympathetic I think with your concern that maybe it's not getting the right resources in the classroom but the flip side of that argument is if we over think it here and take away some of that flexibility that's producing great outcomes like the ?? school district project lift and others where their really moving people around the extent to which we limit that flexibility here it could eliminate some of the greater outcomes that were really expecting of them [SPEAKER CHANGES] Thank you. Would you care to respond? [SPEAKER CHANGES] I couldnt agree more you know I think sometimes flexibility creates innovation and I think that's what your talking about and again you know I think its just trying to get the numbers to work for both of us [SPEAKER CHANGES] further questions from comments at this time Senator Tillman [SPEAKER CHANGES] Thank You Madam Chairman. Thank You Speaker Tillis I did hear some things that I liked if you take flexibility away and we've been given it to them you tie their hands on creativity and innovation every time you do it you tie their hands so we've virtually made the teacher allotment and the teacher assistant allotment one big pile of money and said you've got this you hire all the teachers you need and if you don't want any assistance, lower your class size do that that's fine if you want more assistance you take a couple of teaching positions per school and hire more teacher assistance. That's great flexibility and they now have that they just had it for two years so I'm all for that if we go to a system of saying here's your pot of money now you pay teachers what you want and Speaker Tillis suggested the minimum but if you had no minimum

The market would dictate that real quick. If you give no raises, and hire a lot more people, or you take that money and do whatever you can with it, the market will send those teachers somewhere else. We won't have to worry about that. I believe that flexibility takes you away from a uniform salary schedule, which, if you're goin' to Pathways, and if you're gonna go to pay for performance, this is where we need to be anyway. And I think we would get further down the road if we can work this in at some point. But we can't tie their hands and say, now you can't move assistants, and you can't move teachers. That'd be the worst thing in the world. [SPEAKER CHANGES] Thank you, Senator Tillman. Further comments or questions from committee? [SPEAKER CHANGES] If I could mention... [SPEAKER CHANGES] Senator Brown. [SPEAKER CHANGES] You know, I think part of our problem, too, has been the race to the top money that was one-time money that was distributed out through the LEAs. Especially in a tough budget time, I think, during the recession, created a lot of the problems we're having to deal with today. Because a lot of those dollars and LEAs were used as one-time money used for recurring expenses. And I think a lot of LEAs hired teachers with it, and moved money around to kinda shore up their budgets at that time. And I think you're dealing with some of the consequences of that today as we try to move forward. Because any time you infuse four hundred and, what? -- sixty-five million or so dollars in a system, but it's one-time money, you have a tendency to make some bad decisions and some LEAs across the system. And I think that's what happened, some LEAs handled that money better than others, some have their budgets in pretty good shape, some don't. And I think it has created part of the problem that we're having to deal with today. [SPEAKER CHANGES] Thank you. Chairman Holloway? [SPEAKER CHANGES] Thank you. I want to thank Senator Brown and the Senate for their offer. I think that we certainly are showing some progress, and I do want to just comment again on Speaker Tillis' comments. I think he makes a good point that we can not know what all the 115 school systems may or may not need. Some of them may need the TAs, some of them think the TAs may need to be used for other things, such as salaries, et cetera, and I think letting them have that flexibility rather than us try to micro-manage here from Raleigh is something that we need to give thought to. I do just want to touch on just again about the money as how it's been used for other things than TAs and, without question, I think it was 64 million that was transferred for teachers and, you know, this thing, it goes back long before we even took control and, you know, the budget we inherited, we had a mess. And we had to make some really tough decisions. And our predecessors before us, they made cuts to teachers. We had to make some really tough decisions, and these superintendents were probably put in a situation where they had to use their flexibility to fund the teachers they felt that they need. So, you know, I do agree that some of the TA money is used for other things, but I do think it's used for something valuable as teachers and the part that's used for something other than positions is very, very small. But, again, I do thank the Senate. I think we're making good progress and I'm glad to see that the offer that we've got here before us, and I think that we'll be able to get this done. [SPEAKER CHANGES] Thank you for your comments. Chairman Brown, did you have any other comments? Questions or comments for committee further? [SPEAKER CHANGES] If I could respond real quick? If the House had made this proposal about a week ago, we'd have been moving a lot quicker. [SPEAKER CHANGES] [laughter] Thank you for your comments. Seeing no other hands, this meeting is... [SPEAKER CHANGES] Madam Chair? [SPEAKER CHANGES] You really want to comment on that, Harry? [SPEAKER CHANGES] I want to thank Harry Brown for his work. [SPEAKER CHANGES] Thank you very much. This meeting is adjourned.