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Senate | May 29, 2014 | Committee Room | Appropriations Committee

Full MP3 Audio File

Good morning everybody. If the members would take their seats. Everybody take your seats please. We've got a lot of members that aren't here yet, but they're going to be drifting in. We're going to go ahead and introduce the pages. And pages please raise your hand so I know where you are. First we have Cameron Wade. Next we have Emily Weatherspoon. Why don't you all stand up so people can see you. Emily Weatherspoon. Sarah Mock. Delaney Nantz. Lane Higgman. Taylor Nidawidsky. Thank you all for serving. We appreciate your presence. Our Sargent at Arms this morning are Ernie Cheryl, Charles Marsalas, Leah Kessler, Giles Jefferies, Matt Irvin. Thank you all for your service. This morning obviously we're going through the appropriations bill. To get us started do we have a motion to adopt the committee substitute for purposes of discussion. Senator Tillman has made a motion that we adopt the PCS Senate Bill 744 for discussion purposes. Let me just go over the rules briefly. You all have the rules in your packet and you were also e-mailed the rules. So I won't go over all of them now, but I want to remind you of rule 11. Rule 11 requires that all purposed amendments be submitted to the committee clerk by 10 AM. I will remind you of this deadline periodically as we proceed with discussion on this bill. Senator Brown are you ready to present an overview of the proposed committee substitute? [SPEAKER CHANGE] Good morning. First of all I'd like to start by thanking my committee chairs, Senator Hunt, Harrington and Jackson, for the long hours and hard work in putting this budget together. And I'd also like to thank the staff. Sometimes I think we take the staff for granted around here. But when you deal with them and work with them on a daily basis you really appreciate the professionalism and the hard work they put in to help us work through these provisions and help us put this budget together. I'm just amazed at how talented they are and how hard they work to help us make this happen. So I will start. The total Senate budget for fiscal year 14-15 is a 21.16 billion dollar budget. Which is a 2.6% increase over fiscal year 13-14 enacted budget and is .8% more than what the Governor proposed. Additionally the senate budget does not use any non-recurring funds to pay for recurring items. That is the first time this has happened in many many years, first time. If you'll get your money report out and turn to page 1. You'll see that the unappropriated balance from the prior year of 323.7 million dollars plus reversions on line 3 of 371.6 million dollars, which totals 695.3 million more than offset the 445 million shortfall in line 2. If you'll move down to line 5, you'll see that the savings reserve appropriation is 43 million dollars for fiscal year 14-15. This appropriation increases the savings reserve 694 million dollars. The balance was 419 million in fiscal year 12-13. So this is a 65% increase in 2 years. On line 7 you will see R&R is also at 43 million dollars for fiscal year 14 and 15. Lines 9-21 reflect a consensus revenue forecast and lines 23-34 reflect various small changes to availability due to cash balance transfers, increasing ABC permit fees...

[SPEAKER CHANGES] Beginning a four year phase out of the Medicaid hold harmless guarantee. Lines 36 through 40 show that there is a zero unappropriated balance after netting total spending of the 21.16 billion. I’ll next refer you to page M1, which is the capital section. I will just touch on a couple of those that I think are major ones. The first one I would just touch on is we appropriate 3 million dollars to the repair of the USS North Carolina battleship hull. It’s in very poor shape. It’s going to take a lot more than that, but I think private dollars will help fund the balance, is the plan. Also provides a one million dollar general fund challenge branch to the department of cultural resources, to plan for the expansion of the North Carolina museum of history. This is a dollar for dollar match requirement for those funds. It also authorizes 206 million in general obligation two thirds bonds to refinance existing authorized but unissued special indebtedness certificates of participation. This will enable the state to receive savings from higher rated debt, and improve the state’s existing bond portfolio. It also authorizes 15.4 million in general obligation two third bonds to construct the western crime lab in Edneyville, North Carolina. As you know, we funded the planning piece last year and this has been in the works for several years, with the backlog we have now this will help take care of that piece. I’ll talk about lottery dollars briefly. We have 56 million in additional projected net lottery revenues that are budgeted over the previous appropriated biennial. 19 million is reallocated this fiscal year to complete the shift of forward funding on UNC need based aid. For fiscal year 15 16, 56 million is redirected into the classroom teachers allotment. I’ll start now, I guess I’ll begin with salaries and benefits. First the Senate budget provides for an average of 11% raise for teachers. That’s an average 5800 dollar pay raise. This moves the state from 47th to 27th nationally, 9th to 3rd regionally, and puts us ahead of Virginia, Tennessee and South Carolina. It also provides a 1000 dollar salary and benefit increase for most other state employees, which is a 1.9% increase. It provides a step increase for those who are eligible, particular highway patrol, assistant and deputy clerks, and magistrates. Some of the exceptions are UNC EPA employees do not receive an increase. The university system has had flexibility to give them pay raises even during the recession. So they’ve had raises, others haven’t. Non-certified school personnel receive a 681 salary and benefit increase. This is a 32.6 million dollar cost, and we have a .8% COLA adjustment for retired state employees and teachers. Other pieces as we get into education that I will touch on, that we do is we also fulfilled a commitment that state leaders made earlier this year by setting aside an additional 18.7 million to extend the supplemental pay for teachers with masters degrees to those who have completed at least one course in a graduate program as of July 1 2013. We also include an additional 6 million to fully fund the read to achieve program which provides focused reading camps, special literacy intensive classrooms and other resources to ensure students can read proficiently by fourth grade. We fund ?? but also require that the center report on its programs and outcomes in providing professional development and training to teachers in areas of digital learning and early grade literacy. We established the North Carolina education endowment fund championed by lieutenant governor Dan Forrest, which empowers North Carolinians to contribute to a fund for teacher compensation that supports better academic outcomes for students in public schools. We also changed the small school formula. A formula that was hard to understand, we’ve gotten the superintendents of those small schools together and I think had a consensus agreement on the framework of this new formula which will

maintain most of the funding for small schools. We also fund 1 million dollars to the community college and almost 4.9 million to the university system to draw down matching federal dollars for the Yellow Ribbon Program to eligible veterans and dependents. Under Health and Human Services we set aside 4.9 million to create a new organization that will ultimately house the division of medical assistance and focus on meeting critical objectives for Medicaid, including improving quality, moving to whole person care, and achieving budget predictability. The state also addresses the full cost of anticipated fiscal year 13-14 Medicaid liabilities and the 14-15 re-base. This cost of roughly 200 million additional tax dollars for Medicaid brings the total to over 2 billion dollars in extra state spending since 2011. I repeat, over 2 billion dollars since 2011. We also take steps to bring Medicaid in line with federal eligibility standards and with other southeastern states. We provide funding for additional 1,000 pre-case slots. We focus resources for the childcare subsidy program on families with the greatest need thereby reducing the waiting list for subsidy funds. We significantly expand child protective services and provide 8.3 million to reduce the average caseloads to ten families per worker. This is the level recommended by the Division of Social Services. And we also follow Governor McCrory's lead in allocating an additional 1 million to State Medical Examiner's Office. In Energy and Environment we allocate 1.75 million and create 25 new positions to support the long term requirements associated with the cleanup and management of coal ash and we provide over 1.1 million for natural gas exploration and marketing the state's gas resources. In Transportation we focus resources on critical highway needs by creating a new pavement preservation program to emphasize maintaining our roadways before they need more exhaustive and costly repair, an investment expected to extend the life of 6,000 lane miles across the state by an average of seven years. We reduce administrative spending within the Department of Transportation and apply those savings to needed roadway maintenance activities and capital projects. We support the Governor's budget by including his plans to allow for online driver's license renewals and make critical investments in the Division of Motor Vehicles to modernize it's business partners or, I'm sorry, business processes and improve customer service. Elsewhere in the budget we continue the Senate's efforts to modernize the state's outdated IT infrastructure, a move that will strengthen protections for citizens personal data and enable North Carolinians to have more customer friendly interactions with state government. We tighten the state's oversight and expertise in dealing with IT by requiring all contracts to include detailed performance standards and schedules and penalties for failure to meet benchmarks. We de-politicize the State Bureau of Investigation by structuring it as an independent agency under the Department of Public Safety. The Governor would nominate an SBI director for confirmation by the General Assembly to an eight year term. The SBI is the only law enforcement division housed outside of the EPS and the vast majority of states locate their investigative arm under their executive branches. We address long standing budgetary backlog and accountability problems within the state crime lab, placing it under new oversight at the Department of Public Safety. Those were the highlights of this budget. Again, I think a key piece is this budget does not use any non-recurring funds to pay for reoccurring items. Again, the first time that's happened in many, many years. At this time I'll ask for our subcommittee chairs to come and touch on provisions in their particular budgets. Mr. Chairman. [SPEAKER CHANGES] Senator Tillman would give us a report on education. [SPEAKER CHANGES] You all have your budget documents and money reports in front of you.

You all look at K12 and see what we’ve done. Been a lot of changes in K12 budget. I’ll be glad to take any questions or we’ll leave that until the end. If that’s what Mr. Chairman, whatever you desire there. You’ll see a couple of big items in there. Teachers’ salaries have taken approximately 470 million dollars, and you’ll see that we’ve eliminated teaching assistants in all grades except for K1. However the school systems have the flexibility to move teachers and assistances and interchange the money and put them where the positions require. We’ve not changed a whole lot of other things in significant degrees. We had about 65 million left over in some ADM gains that were losing ADM and we’ve picked up some teachers from prior years. So we’ve taken those two pots of money and some other pots from a few places, but what I would like for you to know is that these are recurring expenses. So it’s all paid for. No tax increases to do this, and not taking from the universities or the community colleges. We didn’t touch their money. In fact, you’ll see a gain, a small gain in the budget for public schools, community colleges, and universities. But I won’t go into the details. You’ve got that in front of you, and take a look at it. Anything that gives you heartburn, let me know. Mr. Chairman, I don’t know if you want questions now or not. [SPEAKER CHANGES] Yeah, I think it’s appropriate to go ahead and take them now. Senator Blue. [SPEAKER CHANGES] Just a quick question, Senator Tillman. I’m trying to do the arithmetic and I operate a little more slowly than I used to. But traditionally, we’ve held salary increases in a separate category than showing up in the budget, so I’m trying to figure out if we looked at the budget from last year for this year in education, how much did we cut education? That is, by what amount did we cut education, when you back out the salary increase since they seem to be mixed together now? [SPEAKER CHANGES] We took about 390 million dollars out of the K12 budget. Other items to put into the teachers’ salary. We wanted to show that, so you’d know where it was coming from. That’s why it’s a little different than prior years. [SPEAKER CHANGES] Thank you. One other, Is he doing special provisions too? Are you doing special provisions too? [SPEAKER CHANGES] Yes. [SPEAKER CHANGES] Let me ask you about one, and somebody brought it to my attention, on page 38 of the provisions. And it has to do with the driver ed funding. And if I read it, we are in effect eliminating state funding for drivers’ education. [SPEAKER CHANGES] Yes, this has been a transfer from DOT, who driver education program 27, 28 million dollars of taxpayer money going in to fund driver education. It will continue as-is for this year. For next year, that allotment ceases, which means if we don’t pick up and do something with it, driver education supported by taxpayer dollars will be ended. [SPEAKER CHANGES] Senator Brown. [SPEAKER CHANGES] Thank you, Mr. Chairman. Senator Tillman, I just thought it was important to make note that over a hundred million of those cuts was in ADM adjustment as well. So that’s just fewer numbers in the classroom. I thought that was important you made a note of that. [SPEAKER CHANGES] One follow up then regarding that. [SPEAKER CHANGES] Senator Blue. [SPEAKER CHANGES] What do we project as the ADM increase K12? [SPEAKER CHANGES] I don’t know if we’re expecting much of an increase or not. I know last year it went down a little bit. I don’t have those figures. I know some of our fiscal staff do, Mr. Chairman. They’re well-versed in these figures. [SPEAKER CHANGES] All right, staff, thank you. [SPEAKER CHANGES] Thank you, Mr. Chair. Brian Madison with fiscal. Senator Blue, I direct your attention if you would to page F2 in your money report. Page F2, sir. If you look at item number seven, that’s the ADM adjustment. What this adjustment does, when you budget at the beginning of the biennium, sir, for ADM increases over the entire biennium, you put in a figure for the first year and the second year. This adjustment revises the second year figure downward. It’s not an overall decrease in student headcount in public schools, but rather a downward adjustment from what had already been built into the budget. So you see in total, in the second part of the snappy there under item seven, that total ADM for 2014-2015

It's about 1.5 2 million students and that is an increase of about 10,000 students over this current year. [SPEAKER CHANGES] Mr. Chairman? [SPEAKER CHANGES] Yes sir. [SPEAKER CHANGES] One of your, thank you. We're not talking about a budget cut in education. In any of the budgets, if you will notice the bottom line is there is an increase in spending in K12 a small increase. A little larger increases in community colleges, in universities. So we have added money while giving historic future raises. So,just so every body know, the bottom line is increased spending in education. [SPEAKER CHANGES] Yes, Senator ?? [SPEAKER CHANGES] Yes Maam. [SPEAKER CHANGES] Senator Robinson? [SPEAKER CHANGES] I'm sorry. Senator Robinson. [SPEAKER CHANGES] ?? We'll get it straight before some of these terms.Alright. Would you talk a little bit about ?? Is that it? Okay. We'll work on the glasses too, mine need to be changed. ?? Let's talk. Education lottery receipts Mr. Senator tell me, can you talk a little bit about that in terms of how we are using those funds? I see on M2 our staff ?? maybe in terms of what amount is used for class room teachers and where the other money is being allocated. [SPEAKER CHANGES] Well you know the lottery money is divided into 4 categories of percentages that we take from lottery funds, and staff can tell us exactly which percentage is going where. We've adjusted that throughout the few years and I don't have the exact percentages, but Mr Chairman, if you would like staff can do that very quickly. [SPEAKER CHANGES] Mr Chair Brian Madison again, and Senator Robinson,to your question, all of the additional net resources or sorry net receipts that have been additionally budgeted for the lottery, about 36 million and projected overages this current fiscal year nearly 20 million in the upcoming fiscal year. All of those are put into class room teachers. You would find more detail on that in Section 5.2 of the budget bill. So other appropriations that the general assembly made for this bi-annual for the lottery are unchanged with exception for the classroom teachers in the second year of the budget. Increases to the lottery receipt by 56 million and takes a corresponding decrease to general fund support for the classroom teacher's allotment such that the same support would be available, but the mix between State general fund and State receipts would be slightly different. [SPEAKER CHANGES] Other questions for Senator Tillman Senator Tucker. [SPEAKER CHANGES] Senator Tillman, on the lottery funds, perhaps the question for staff. Could you give me the percentages of how a lottery dollar is split up from staff? Originally it was 40% and that was to be used for capital dept retirement and construction. Where's the percentage if you take the dollar, where does it go now? [SPEAKER CHANGES] ?? Staff knows exactly where that goes, I don't. ?? [SPEAKER CHANGES] Thank you Senator ?? Senator Tucker to your question, last year or this current year's budget, modified the language in the lottery act that had required proportions for lottery allocations so the net revenues that you're referring to use to be the 50/40/10. You know 40% going to capital. I think you were eluding to. Currently the 100 million allocated for capital would represent roughly 20% of net lottery receipts that go for education programs. The bulk of the money now currently going as proposed in Senate budget to classroom teachers. A little over half there. But the capital figure you are asking about roughly 20%. Slightly below that. [SPEAKER CHANGES] Thank you sir. [SPEAKER CHANGES] Miss ?? Senator Brian. [SPEAKER CHANGES] I have a question about Section 11.3. Where there is a no reductions, well related two Sections. 1. No reductions for special focus institutions this year. I think that's a good thing. But in number 6,there's a study on a plan to dissolve institutions will enrollment decline. Can staff or the chair give us some sense of what institutions would be at risk for this or sort of what our thinking is or. [SPEAKER CHANGES] Mr. Chair ?? [SPEAKER CHANGES] ?? division and who would be at risk. Thank you. [SPEAKER CHANGES] Who's at risk? The small unprofitable universities

That are struggling and have to use a disproportionate amount of funds to keep their doors open. We think it is only prudent that the board of governors take a close look at the consolidating or eliminating some of those. That’s what that’s all about. [SPEAKER CHANGES] Follow up Mr. Chair. The staff tell us which of the constituent institutions would be at risk in this category. You saw this pad. We saw this declining enrollment. The standard is in this language. I’m just concerned that HPCV’s might be involved and other (??). [SPEAKER CHANGES] Here it comes. [SPEAKER CHANGES] Yes, ma’am. [SPEAKER CHANGES] Senator based on the requirements within the special provision about the decline in enrollment. Based on current data only Elizabeth City State University would meet those criteria. [SPEAKER CHANGES] Thank you and one more follow up Mr. Chair in the same area. I saw that the, saw about the college foundation having to raise its own money. And, I was wondering if the chair or the staff could explain how they are funded now and how would they be raising their own money? How would that effect financial aid for students in the state? [SPEAKER CHANGES] Can you help us with that? Yes, ma’am. [SPEAKER CHANGES] Senator you are right that the special provision does request a report from the college foundation of North Carolina about its revenue picture. One thing you may remember is that a change in federal regulations about 3 years ago, 2-3 years ago, prohibited these types of institutions across the country from originating federal student loans. In the past, SCAA and SFNC took a cut of revenue, or took a portion of its revenue from that. However, that was not the total revenue of SFNC. [SPEAKER CHANGES] Let me make just one more reminder that we have a little less than an hour for amendments to be presented. 10 o’clock is the cut off time. Senator Brown? [SPEAKER CHANGES] Thank you. I’ll follow up. [SPEAKER CHANGES] Senator Blue? [SPEAKER CHANGES] Based on those two comments since I asked my last question. Especially Senator Tucker’s question regarding the lottery. Part of the reason for the lottery was in put in the capital revenue was because of its volatility and the inability to know what it was going to do. And, so do I understand it correctly? That 80% of those proceeds are outside capital so that we are dependent on it? Are we changing the philosophy about the lottery proceeds? I know that this budget wouldn’t be the first one to do it. Is that basically were we are going? That those funds are as predictable and as reliable as the other revenue projections that we have? [SPEAKER CHANGES] Mr. Chairman? [SPEAKER CHANGES] Senator Tillman. [SPEAKER CHANGES] We have a fairly good track record of lottery proceeds. Although it is not maybe as stable as some. From what I’ve seen, I don’t know any revenue source that is that stable anymore. If you look at how it bounces up and down with sales taxes and personal income taxes. That’s a floating fund that we have been able to use wherever the need is the greatest. We have gotten pretty far away from the original formula, Senator Blue. And I know I have county commissioners depending on that source. I’d love to pay off bonded and indebtedness and for future projects. I for one been a proponent of making that stable so they can make some planning. We’ve used it where we thought the need was the greatest this time. It can change. [SPEAKER CHANGES] When it’s based on. [SPEAKER CHANGES] Senator Blue? [SPEAKER CHANGES] Now that I’ve had a chance to read through here a little bit more. On item 8 F2 again. [SPEAKER CHANGES] The 64 million dollars is from certified personnel. [SPEAKER CHANGES] I’m trying to figure out what positions are specifically effected here. This is a little amorphous and I can’t dig into it. If you give me a listing of the certified positions that are effected by this cut. [SPEAKER CHANGES] Thank you again Mr. Chair. Senator Blue, Bryan, again to your question sir. This adjustment here is typically taken in the second year of the budget for funding guaranteed positions taken here across the, not to get too deep here in the weeds. You fund some positions on dollar allotments to schools. Then some positions where you guarantee a teacher’s salary, a principal salary, etc. The way those salaries and those positions are budgeted to get you an overall figure in the budget is the number of positions are estimated and those are multiplied by the…. (cuts off)

...salary and benefits as of the sixth pay period in the year in which we're doing the budgeting. So, looking at the December 2013 average salary for teachers and other certified personnel paid on a guaranteed position. So what this adjustment does is recognize that the average salary for teachers, for those teachers taking up state-guaranteed positions, was about five hundred dollars less in December 2013 than we had or that you all had budgeted for this upcoming year. So it just adjusts the projected average salary going into FY 2014-'15 and makes a reduction there, does not reduce the number of positions that would be available to school districts, just reduces what we think the projected cost will be of fully funding those positions. [SPEAKER CHANGES] So the answer is, every certified position is affected. [SPEAKER CHANGES] Mr. Chairman? [SPEAKER CHANGES] Yes, Senator Tillman. [SPEAKER CHANGES] This doesn't affect any living live bodies that will be going anywhere. We had a projection of ADM that was higher than what we actually had. That's the number we're talking about. There's no bodies that is going to lose positions because of this, there's bodies we won't be hiring and money we had set aside that will now have sixty-five million or so. [SPEAKER CHANGES] Yes, Senator Robinson. [SPEAKER CHANGES] Thank you, Mr. Chair. Senator Tillman, I'm assuming you can also respond to the UNC system, any of these. Let's talk... [SPEAKER CHANGES] Senator Apodaca is going to handle the UNC and the community colleges... [SPEAKER CHANGES] Senator Stein? [SPEAKER CHANGES] Thank you, Mr. Chair. Following up on your statement, Senator Tillman, no bodies will be eliminated, is that true with the teacher's assistants? Because 233 million dollar cut to teacher's assistants and that's half of what we're paying which is been cut by 30, 40% last year. Will there be enough money for every kindergarten and first grade class to have a teacher's assistant after we make this cut? [SPEAKER CHANGES] Senator Tillman. [SPEAKER CHANGES] Mr. Chairman, we're finding every position that will be called for for teacher assistants in K-1. We've eliminated, and that will be 7400 teacher assistants, I understand I couldn't wait for your question, in fact I'm disappointed I haven't had it earlier, but that's just the way it is. If you want to put teacher raises at the all time high, which we're doing, you gotta find 470 million dollars somewhere. And looking at the budget, research shows us that K-1 teacher's assistants are more effective there, the research is very cloudy on what good they do. Bless their hearts, I love them, but research shows that they're more effective in K-1, that's where we put the money. [SPEAKER CHANGES] Senator Apodaca. [SPEAKER CHANGES] Thank you, Mr. Chairman. Senator Tillman, did we not have that in the budget last year for this year? The teacher assistants? [SPEAKER CHANGES] Yes, we did, as a forewarning that this where we may be taking all the money, this is not a new issue. We had this issue last year and we projected that we may go this route, it was in the budget. [SPEAKER CHANGES] Mr. Chairman? [SPEAKER CHANGES] Senator Brown. [SPEAKER CHANGES] Also, remember that the LEAs have the flexibility to move those positions around if needed. They're funded on K-1 schedule, but if I need them in second or third grade they have that flexibility. [SPEAKER CHANGES] Senator Tucker. [SPEAKER CHANGES] Just a comment on the TAs for Senator Stein. Most of the counties have put in some dollars, 2 or 3%, best I could tell, for teacher raises and now that the teacher raise from state so substantial they can shift those dollars they've allocated in your budget to pay for TAs if they wish. And if I recall correctly, the LEAs in the state have roughly 678 million in cash on hand, which is actually more than what the state has in cash on hand, that they can utilize some of those dollars if they choose to fund TAs. [SPEAKER CHANGES] Let's see, Senator McKissick. [SPEAKER CHANGES] Just a quick question about the issue about the teaching assistants and the few others related to funding the teacher's salaries. I think we all want to see teacher's salaries increase significantly. So I appreciate the idea of trying to get there. The thing I'm trying to understand though, is where all these funds are coming from. The issue with teaching assistants is one but it looks like there's also fifteen million coming from the department of public instruction, about five million from central office staff and twenty-eight million from transportation. And transportation I guess that's the school buses from what I'm looking at in the money report and other...

In the budget. So could you, perhaps elaborate a little bit further on the impacts that will, some of these areas that are obviously needed and have been funded in the past in terms of the impact it’s going to have on the Department of Public Construction and Central Office of Transportation. [speaker changes] Tillman [speaker changes] Mr. Chairman, Senator McKissick, the biggest cut is at DPI. DPI has over 1,000 employees, every ??? says six thousand dollars and as far as I can tell they don’t teach a single child. We took a 30% cut there and that’s big and they do some vital functions. They’re going to have to reorganize and make due. The local school systems years ago, Superintendent Presnell raise your hand. You all didn’t have the expertise to do all these functions in transportation and school construction. Now they have their own architects, they have their own engineers, their own staff, their own lawyers. They can do about 90% of the functions now that they couldn’t do back then. Yet DPI has grown. So you figure out where we’re coming from and that’s all I can tell ya about that. Yes, they’ll say vital functions are going to be cut and I suppose they will. [speaker changes] Uh, any other questions from members? [speaker changes] Can I ask a quick follow up Senator Hunt? [speaker changes] Let me just find out if there are any committee members that have any questions first. I just want to make sure we have enough time to get through all this. Okay Senator McKissick. [speaker changes] Sure and I guess the part you weren’t able to address, as of yet Senator Tillman, is the transportation as well. How that’s going to impact our system overall in terms of getting students to and from school and other vital transportational functions. Secondly, [speaker changes] Mr. Chairman, Mr. Chairman [speaker changes] Senator Hunt. [speaker changes] Can I have order, please. Mr. Chairman I don’t think we need nine members of the appropriations committee asking questions at this point. We have a huge agenda ahead of us. [speaker changes] We do. We do. Let Senator McKissick finish his question and then we’ll, maybe we should let Senator Tillman answer what you’ve already asked. [speaker changes] I’ll be happy to Senator McKissick. 28 million of that money is from the DOT budget money that’s been transferred to drivers education program, that’s in it’s second year. That will be eliminated. Some transportation, of course, consolidation will have to take place and those savings will come from their overall budget. I don’t think it’ll have that serious of an impact to be honest with you. We’re going to run the same buses and pick up the same schoolchildren with a little older school buses in some cases maybe, but a little bit better maintenance than we’ve had in the past. And noe buses get an average of, instead of 100 or 200 hundred thousand miles, these diesel buses are getting 800,000 miles. So then can do that and I don’t think it’ll be a serious impact in transportation, personally. [speaker changes] Okay, if there are no other questions on K12 Senator Apodoca you want to take some questions on UNC system and community colleges. Any questions of members? [speaker changes] Yes, I thought you were going to cover it. Some of it first Senator Apodoca, I’ll wait for you. [speaker changes] Well, there’s not a whole lot to say, it’s just a fine budget. It’s as good as we’ve seen since I’ve been here. It restores some of the cuts done by the executive branch and it does no harm to our university systems and community colleges. For once, they get more money than they had last year and what a wonderful thing that is for them after what they’ve been put through the last ten or so years. Now, Karen what did you have? [speaker changes] Okay, I guess I should have gone ahead then. [speaker changes] No, I appreciate the opportunity. [speaker changes] Just a couple of things and I don’t see it in here. In the compensation benefits for community colleges, I understood and I don’t see it in here, is there a transfer of the unemployment cost for community college employees from the state funds to the community colleges themselves, I don’t see it in here, but can someone answer that? [speaker changes] Sure, how about Denise or her cohort. [speaker changes] Denise Canada from Piskel Research. Senator I think you might be referring to a provision in the Governors budget that transferred responsibility for worker’s comp claims from the system office down to the individual college but that’s not reflected in the Senate budget. [speaker changes] So, Senator we made it a much better budget going back to my original statement, thank you. [speaker changes] Okay and… [speaker changes] Go ahead, follow up. [speaker changes] Yes, follow up on another question.

As I shift over to the UNC system, on page f10 I see the UNCG public private partnership for 2 million dollars. Senator Apodaca, is this UNCG the only institution in Greensboro a part of that? [SPEAKER CHANGE] My understanding is no. Now there may be other institutions in Greensboro that will in the capital budget. But for that appropriation that's the only one I know of. Are there any other institutions in Greensboro? [SPEAKER CHANGE] Well the only one that I got my Master's and PHd from Senator Apodaca and I think it's a very credible institution. [SPEAKER CHANGE] A&T? [SPEAKER CHANGE] Yes and it was a part of the description here. If staff will correct that. [SPEAKER CHANGE] No it goes directly to UNCG [SPEAKER CHANGE] But the description talks about collaborative and it doesn't include it. [SPEAKER CHANGE] Senator Apodaca if you would go through the chair list. [SPEAKER CHANGE] Sorry about that Senator. [SPEAKER CHANGE] Denise to you want to respond to that? [SPEAKER CHANGE] Denise Canada from fiscal research. The senator is correct that this is a collaborative project between several institutions in the area. NC A&T and Guilford Tech Community college are involved as well as UNCG. [SPEAKER CHANGE] Thanks Denise [SPEAKER CHANGE] Denise do you think we need to clarify that for the other institutions or does that cover it? [SPEAKER CHANGE] Denise [SPEAKER CHANGE] Mr. Chairman I'm not sure I followed the question. [SPEAKER CHANGE] My question Denise is that in the description it talks about UNCG, Guilford Tech, Cone Health systems. The only institution left out is North Carolina A&T and I was asking is it a part of this and if so I would like some clarification in the description. [SPEAKER CHANGE] Denise. [SPEAKER CHANGE] Thank you senator. I understand. We can certainly draft an amendment that would clarify that snappy. [SPEAKER CHANGE] Alright. Other members questions? Alright thank you very much. Let's move to HHS. Senator Hise you stood up. Are you going to walk up here? Alright. [SPEAKER CHANGE] Thank you Mr. Chairman and members of the committee. Just some brief areas to cover on the HHS budget as it moves forward. I will begin members on bullet point 66, which is G22 in your budgets. This is a combination of what has occurred this year and moving forward to next year. I will say that we expect the shortfall from last year, this is somewhat disagreement with what was in the Governor's budget, we estimate that shortfall to be 93.9 million dollars. We carried forward about 50 million dollars from the previous year in a cash surplus. So you have to expend that again in the first year, so this is coming through as 143.8 million dollars. If you go back to 65, we are also experiencing, in the MEDICAID program, a 206 million dollar growth in the re-base number in MEDICAID for this year over and above the nearly half a billion dollars in re-base we expected from the previous year. This is an accelerated growth in MEDICAID. Our intent in the MEDICAID budget was to control the growth of MEDICAID within the budget of MEDICAID. Which makes things possible in other areas of the budget and moving forward. That was their intent. There is net positive money spent in MEDICAID this year even over and above what was allocated last year, but we did have some growth in other things that we had to account for and that's what we look for in the cuts we made to the program. Before I go step by step. [SPEAKER CHANGE] Senator Pate. Make some remarks? [SPEAKER CHANGE] Thank you Mr. Chairman. Thank you Senator Hise. I had to step out for just a minute. I didn't know Senator Apodaca would talk so quickly. I would invite the motion...

… members to turn to page G22 on the money report, item 68. There’s about almost five million dollars set aside to Medicaid medical assistance reorganization, which will help us with looking at Medicaid more deeply, and that’s the money side of it, and I ask you to also in your budget book turn to page 91, is you will. That explains it a little bit farther. I don’t know about you, members of the committee, but I’m getting sick and tired of coming up here every year to have to find four or five hundred million dollars or more to prop up Medicaid. Our system right now is not working because we have no predictability as to what the Medicaid budget’s going to be on a year by year basis, and so we, thanks to the Chairs of the Appropriations Committee, and thank you to also Senator Hise for his understanding, and also for our great staff who’ve been helping us, we are going to reorganize Medicaid. We’re going to make it its own entity and we’re going to have top notch nationwide stars who can come in here and help us run this program and make it the program that our patients deserve – people who are on Medicaid, our providers deserve, and make it just a better program and something that gives us much more predictability. We’re going to treat the whole patient when they present themselves. We’re going to try to intercept them and have preventative-type medicine so that they will not present themselves to the emergency room every time they feel sick. So that’s the things that we’re going to try to do, and I think it’s probably one of the more important things in this budget this year, so we’ll answer questions the appropriate time arrives. Senator Hise. [SPEAKER CHANGES] Senator, it’s appropriate now. Senator Ford has a question. [SPEAKER CHANGES] Thank you, Mr. Chairman, and it’s good news to hear about the efforts of the Senate leadership to try and reform Medicaid. I was shocked when I got here to see the kind of money that we spend and the unpredictability of the impact that it has on our budget. What I’m real curious about is who is going to manage it. [SPEAKER CHANGES] That remains to be seen, Senator Ford. Mr. Chair? [SPEAKER CHANGES] Sure. [SPEAKER CHANGES] We’re going to form a board that’s going to do a nationwide search and bring in and interview some of the top talent across this nation. There are other states who do this already; we might steal from another state. There might be some hidden talent out there somewhere. We intend to find the talent who will be able to handle this program and treat it for what it is – and insurance program to see that people get the medical care that’s due them. [SPEAKER CHANGES] Follow-up, Mr. Chair? [SPEAKER CHANGES] Follow-up. [SPEAKER CHANGES] Thank you, Sir. So are you creating another bureaucracy? [SPEAKER CHANGES] Indeed we’re not. We’re going to replace the program – probably move it out of Health and Human Services and form an independent program to run our Medicaid program in our state. [SPEAKER CHANGES] Senator Robinson. [SPEAKER CHANGES] Thank you, Mr. Chair. Senator Pate, just back to that five million dollars, your experience and mine this past year has been that we spent four million dollars in one contractor and we spent a whole lot of millions in some others for North Carolina tracks and fads that didn’t work. How much of that money, or is any of that money going to be used to pay consultants to come into our state to do that kind of thing, or are we going to employ people to set up, and what will those positions be? [SPEAKER CHANGES] That’s - [SPEAKER CHANGES] Senator Pate. [SPEAKER CHANGES] Thank you, Mr. Chair. That’s still to be determined, Senator Robinson. This is the first baby step along the way. We are not going to have a department of Medicaid, for instance, set up, ready for the long session. It…

It will not happen that quickly. It would be a waste of money to try to divide something between and then but we are going to step down this road I’d rather that it take 5 years, and we get it right. Then to completely change over before Christmas and we cannot we have proven that you cannot change things quickly, in mid-stream. We have to develop this and then we will go to work as cutting back what the department is doing right now. [SPEAKER CHANGES] Follow Miss ?? [SPEAKER CHANGES] Yes mam. [SPEAKER CHANGES] And I appreciate because Medicaid it has been a long time it well take probably forever to fix it. So my question is for the 5 million dollars that on the budget says it will take a while before we get to positions exactly what are we spending the 5 million dollars on? [SPEAKER CHANGES] Thank you Mr. Chair. That will be to set up a board and get some independence from the department so that we can start concentrating on the long range problems at hand at setting up a particular agency. It's going to be money well spent. [SPEAKER CHANGES] senator ?? Closer to the microphone. [SPEAKER CHANGES] I do. I also want to point out for all your numbers that are in the budget as a whole. These are state dollars for spending in almost every category of Medicaid. There are different levels of federal match that are available for the administrative spending; it is like 50-50 match. So there would be twice of that amount of money available within the new agency for those spending. We are also envisioning a department that would transition and eventually become the Medicaid service provider so as they add position to move them, it would be funds they have to begin to pay that into individual funds we can eliminate the next to, In the previous organization. [SPEAKER CHANGES] Alright, Senator Blue. [SPEAKER CHANGES] Yeah, to either of the chair, what is the consent to serve Medicaid the assumption for Medicaid the growth 5,5,6,5,8 I haven't seen the number. [SPEAKER CHANGES] I believe the staff can confirm, believe the number ?? 5.8% growth. [SPEAKER CHANGES] 5.8 [SPEAKER CHANGES] Let me ask you; follow up with a couple of other questions on the [SPEAKER CHANGES] Follow up. [SPEAKER CHANGES] Budget Bill. It’s on page. Item 60 on [SPEAKER CHANGES] G 20? [SPEAKER CHANGES] The retention of the gap on plan assessment. The hospitals on board with this and so that they made the deal several years ago to assess themselves in order to get money from the fiat to pay as ?? to other state and an agreement was made where ?? what that rate would be, Are they in a court with this additional assessment to them. [SPEAKER CHANGES] senator ?? [SPEAKER CHANGES] I will say my conversation is with the hospital association would not indicate that they were on board with that change in assessment but i would point out upfront that the agreement ended significantly a year ago when the increase was in excess of 100 million dollar to the assessment. This movement 15 may was a proposal by the governor that we put forward and is a much smaller move then we saw in the previous year. [SPEAKER CHANGES] Another Question? [SPEAKER CHANGES] senator ?? [SPEAKER CHANGES] If you would clarify. [SPEAKER CHANGES] Section 62 is that a reduction to whole network of providers to the primary and everybody. [SPEAKER CHANGES] It is a 2% reduction to all providers that are not currently under contract or capitation. For example LMEMC, those are capitated grade under contract. That contract already exists; this right doesn’t change those from whether moving forward. It's interesting when you go through the entire Medicaid budget and it's only half year of the assumption as it begun January 1st. A 2% rate reduction in state money for half a year will only net 10 million dollars. [SPEAKER CHANGES] Okay and last question? [SPEAKER CHANGES] Alright Mr. ?? [SPEAKER CHANGES] Item 36 on the page G 12. Since it’s one that brings in differential treatment. You’re reducing the school nurse funding initiative. As I recall that basically put a nurse in the ?? because of so much medication that kids come school with and they have to have it demonstrate it to them. [SPEAKER CHANGES] This is reducing that.

... full amount by 29% but it's also de-funding totally, this effort in counties such as Wake County, ?? Tier 1 counties, is there any, do you have any ideas as to how the counties will replace that, are you forcing counties to pick up the full funding for these nurses to help kids that minister, you know, diabetes, or to do the other things that school nurses do? [SPEAKER CHANGES] Senator Hise. [SPEAKER CHANGES] What you'll find is that the, a significant majority, I guess we'll say, of school nurses are provided by the LEAs and through the education funding that exists, this is that portion of those nurses that are coming from the Department of Health and Human Services and going forward. We have attempted to get to those ratios of one to seven-hundred fifty students for quite a while, there is not the funds to do that anywhere in HHS. That will be a discussion for education in future years, how we do those. It was our choice to be able to do that in all the Tier 1 counties to make sure that those economically disadvantaged counties, which is what Tier 1 means, that's coming forward, that we would provide the school nurses at that ratio in those levels, and we would step out of the program in the other areas, so the more economically advantaged counties, as you ?? for Wake County, that will be in their purview and is covered in some things they discuss pretty readily in the education budget, as to the funds they have available. [SPEAKER CHANGES] One last ??, follow up. [SPEAKER CHANGES] One last follow up. [SPEAKER CHANGES] Then with respect to the Tier 2 counties, that aren't quite as positioned as we may be to do it, but maybe just a little better off than the Tier 1 counties, what is the total count of counties in those two categories? [SPEAKER CHANGES] Staff may be able to answer that better than I do, I think it's approximately a third, a third, a third, but I don't, we're not, that's not necessarily part of the HHS budget. Denise, do you know the breakdown of tier counties? [SPEAKER CHANGES] I can't hear you, can't hear you Denise. Still can't hear you. [SPEAKER CHANGES] Denise Thomas, fiscal research staff. Senator, would you repeat the question? [SPEAKER CHANGES] I believe he's looking for what are the breakdown, how many counties are Tier 1, Tier 2, and Tier 3? [SPEAKER CHANGES] There are thirty-five Tier 1 counties, and just a minute, I have to check for the Tier 2. [SPEAKER CHANGES] While Denise is looking that up, just for a minute, we've got about twenty-five minutes before the, is the deadline for amendments, just a reminder. [SPEAKER CHANGES] Mr. Chair, there are thirty-nine Tier 2 counties, and twenty-four Tier 3 counties. [SPEAKER CHANGES] Answer your question Senator Blue? Senator Bryant. [SPEAKER CHANGES] Thank you, Mr. Chair. I just noticed in the special provisions, and also in the Monday report there was something called a Health Exchange, Health Information Exchange, is that related to the Affordable Care Act exchange, or is that a different animal? [SPEAKER CHANGES] Senator Hise. [SPEAKER CHANGES] No, this is a program that's currently operated by a third-party vendor in the state. We required in previous years all hospitals and others to provide their clinical information and data to the Health Information Exchange. As they developed the Exchange and came back with the cost to the hospitals, they were charging, the estimate was about $200 a bed, $250 a bed and $110 a physician that they were going to charge back to be able to operate that, the provision requires that that's state data, so we have access to it, that's coming forward and we put the funds in to pay that fee or reduce that fee, depending on how we can get the federal match to do it moving forward. [SPEAKER CHANGES] I was just wondering- [SPEAKER CHANGES] Follow-up. [SPEAKER CHANGES] Follow-up. On the child care subsidy, I notice we changed the, and I don't, I was multi-tasking so I hope it's not a duplicated question, we changed the criteria, and I was wondering if you or staff could explain how the income level compares between the median - you know, the one standard we were using, and now the new standard we're using, and I understand thousands of, it will reduce the eligible youth, and I was just trying to determine who's left out in this change. [SPEAKER CHANGES] Senator Hines. [SPEAKER CHANGES] We have, I will first say with the child care subsidy we have a massive wait list in this state, I think the estimates are about forty-something thousand students are on the wait list, that don't receive the program at all.

Coming forward, we reduced eligibility for individuals. I think it currently is about the equivalency of 224% of federal poverty, what we’re currently at. For ages birth to five, we have shifted to the federal poverty guidelines and said at birth to five at 200% of federal poverty. It is also 200% of federal poverty for any child with a disability, regardless of age. After age five, we reduce it to 133% of federal poverty, to be eligible for the subsidies. All of the savings that were achieved by the reductions and eligibility have been put back into slots in the state to reduce the waiting list. So we have the same amount of money going to subsidies slots. We also changed the copay changes. It was 10% income, 9% income or 8% income, depending on family size. We’ve changed all that to 10%, and we don’t do partial payment for part time care. All those funds have gone back into additional slots. [SPEAKER CHANGES] Follow up. [SPEAKER CHANGES] Can staff say what kind of income, or you may know, what income ranges are we talking about? We moved from what amount per year to what amount per year, just so we have a sense for our constituents, what kind of ?? [SPEAKER CHANGES] Debra Landry, with fiscal. Currently for a family of three, at the state median income of 75%, it’s 42,204. At 200% of poverty, it’s 39,580 a year. And 133% of poverty for a family of three, it’s 26,321 dollars a year. [SPEAKER CHANGES] Follow up. [SPEAKER CHANGES] So basically the decision was to serve more lower income youth. Is that the decision? Okay. [SPEAKER CHANGES] Follow up. [SPEAKER CHANGES] The single base hospital rate, is there a chart or something that shows how that’ll impact our local hospitals? Or will it have a negative impact? Are there winners or losers in this? [SPEAKER CHANGES] Senator Hanes. [SPEAKER CHANGES] There are. We set the base rate. It’s interesting to say winners or losers, because when you look at this, what the base rate is is the initial payment made to the hospitals, when a patient presents themselves. Those costs are adjusted again at the end of the year by ?? and other things that come to the state that bring them back up to their actual cost. So for most, will see this as a cash flow difference more than they will see it as an overall cost difference. The exception to that is that part of that cash flow difference has to do with the assessment. So when they’re paying that assessment, we keep a retention of that assessment of, I think it changed to 28%, in that range there. We keep that portion as a stay. What you see because we picked the median level for all hospitals in the state. Half the hospitals are above it, half the hospitals are below it. It is general to say that the larger hospitals, I would say in more urban areas, have a much higher base rate currently than small, rural hospitals in the state, so you will see more of the impact being positive to the rural hospitals, particularly in cash flow than you will see from the larger urban hospitals who have significant large endowments, and I could go through that list if we needed to. [SPEAKER CHANGES] Just one more. [SPEAKER CHANGES] One more. [SPEAKER CHANGES] I noticed that LIEAP, the low income heating program, and I had to read a whole lot real fast, are we limiting that now only to elders and people with disabilities, or is that just one special part of LIEAP that we were addressing in special provisions? [SPEAKER CHANGES] The neatest way to address that area, well the biggest thing we’ve done with the LIEAP funds is that we are now requiring the counties to give a plan for the distribution of those funds. So that we’re not setting it as a first come first serve kind of operation, that we actually have them looking at those populations and determining how they’re going back. There was a question about the changes to LIEAP that was coming in and are we limiting it just to elderly but I think that’s under the ?? grant previsions. [SPEAKER CHANGES] Yes, Devron. [SPEAKER CHANGES] Devron Andrew with fiscal again. The LIHEAT program, for a couple of years now, this is a change that was made by the general assembly a couple years ago that targets age 60 and over and individuals with disability. Counties can still serve others, but they have to target and serve those individuals first. [SPEAKER CHANGES] Thank you. [SPEAKER CHANGES] Any other members questions, before we get to Senator Stein? [SPEAKER CHANGES] Senator Stein. [SPEAKER CHANGES] Thank you, Mr. Chairman. I’m trying to understand the changes that were made to Medicaid. If you can identify what services or were there any services that were no longer produced or provided or used to be provided, are there populations who used to get services who won’t be getting services. I mean, one thing that jumped out at me

The provisions 54 and 55 and the money report on pages G18 and 19 where it looks like thousands of aged, blind, and disabled are no longer getting services so if you could just help understand what you all did to Medicaid in terms of service opportunities. [SPEAKER CHANGE] Senator Hise. [SPEAKER CHANGE] Our intent was to move, and this is the first year of several you’ve been able to make that move, there are populations we serve that exceed the income requirements that we are required to serve under Medicaid and we are making that reduction down. The first area that you’re seeing here is the aged, blind, disabled and the county special assistance funds. We currently have in the state if an individual receives the special assistance, regardless of whatever income levels or things they may have, it is an automatic qualifier for Medicaid. We have decoupled those so the individual must qualify for Medicaid under the normal qualifications for Medicaid. We’ve done the same for some of the medically needy standards. You must meet the base qualifications for Medicaid for income and others moving forward and not the special rates that we had previously put in in moving forward. This is a cut in the population of Medicaid that we will serve. [SPEAKER CHANGE] Alright I see we have a member here. Senator Robinson. [SPEAKER CHANGE] I have several questions here and just to follow that up Senator Hise from Senator Stein. Is that change consistent with federal guidelines or inconsistent? [SPEAKER CHANGE] The federal governments set the minimum standards. We are still at or above the minimum standards in those areas. [SPEAKER CHANGE] Follow up. [SPEAKER CHANGE] Follow up. In the two questions, I had the page. Rehabilitation services in terms of the cut, what page is that? It’s a $575 million cut in terms of reduction, would you tell me what kinds of.. [SPEAKER CHANGE] Could you give me that number? [SPEAKER CHANGE] Page G16. [SPEAKER CHANGE] Senator Hise. [SPEAKER CHANGE] Would you explain how that reduction is being made? [SPEAKER CHANGE] It’s $575,000. If we found that kind of funds there’d be a lot of different changes in Medicaid coming in. This is solely in the management and operation of the program. Within the department this is identified cuts from the department of the governor’s office that they can get in operational efficiencies. [SPEAKER CHANGE] Okay so it doesn’t affect services? [SPEAKER CHANGE] It should not affect services. [SPEAKER CHANGE] Follow up? [SPEAKER CHANGE] Follow up. And over to the LMEs, NCOs, and I can’t find that page again I had my hands on it. Where there is also a reduction of… [SPEAKER CHANGE] Just the assessment? [SPEAKER CHANGE] Yes. [SPEAKER CHANGE] Okay, it’s about sixty million dollars, and if I find the number I’ll put it in, for the assessment. Assessment is similar to what we did for the hospital last year is a, federal government calls it a fee, others call it a tax, of what you’re going in that can be placed on a provider group within the state. Those funds are then used to increase, you take those funds, you put them back into the providers, and get a two to one federal match on the funds that you come in and raise the ???. So what you will see is the funds that are pulled out actually go back to the same provider, it’s more of a shell game than an actual operation. The providers will be kept whole and it means an additional sixty million dollars to the state. [SPEAKER CHANGE] Okay so we should see no reduction in the services provided by those? [SPEAKER CHANGE] No, that was charged in. There were some administrative costs and I confidently believe the sixty million covers those administrative costs. [SPEAKER CHANGE] Just a reminder we’ve got fifteen minutes for amendments. Any other questions or comments on HSS? Senator McKissick. [SPEAKER CHANGE] A couple of quick questions. First, I think your projects of Medicaid are far more realistic at ninety-three million versus what the governor had but one thing the governor’s budget did have that seemed like a pretty good idea was a fifty million dollar Medicaid reserve. I see you got two hundred million in there for the rebates but is there a reason why we are not considering the spiraling cost of Medicaid or not establishing some type of reserve similar or comparable to what was recommended in the governor’s plan?

Senator Hise. [SPEAKER CHANGES] I think the purpose in the state government is that the savings reserve fills that void for the state if there is the risk in Medicaid is creating another reserve in which they they have a number or target they can shoot at to spend from the beginning of the year versus the process of having to go through other agencies and others to get through that was coming forward. But we feel, I feel that the Governor's reserve was there in place of underestimated figures to begin with and we feel that we've placed those estimates at a level that I believe going in, should things operate as they should, would not require the need for a reserve. My short history of a couple years in Medicaid always makes me nervous to say that, in moving forward, but I do feel that the proper role for that is in savings reserve versus creating something specifically designated to that agency. [SPEAKER CHANGES] Follow-up, Mr. Chair. [SPEAKER CHANGES] Okay. [SPEAKER CHANGES] And this relates, also, to the Medicaid issue here. The agency HHS has looked at these accountable care organizations, affordable care organizations, as a model to move toward and there was a great deal of buy-in among the providers. Now, I gather with this approximately 5 million dollars that's being set aside now, it looks as if there's a potential to completely reevaluate what was, I guess they spent the last year trying to come up with. So I'm trying to understand if we were completely abandoning that concept which emerged from significant input from providers and all those that were impacted parties or- [SPEAKER CHANGES] Senator Hise. [SPEAKER CHANGES] The guidelines that were given by the legislature in planning for a Medicaid reform, specifically two, was one to give budget predictability to the state, the other was to provide whole person care. I would say that the plan we have right now did neither. There was no budget predictability that came back from it. I think the best we could hope for was a controlled savings of 100 million dollars and several years for us to get to that level and it clearly carved out mental health, carved out long term care, and came up with some interesting formulas for carving out pharmaceuticals. What we say in the provision is we were looking for a full-risk plan that is looking at both provider and non-provider led potential plans that are moving forward that provide whole person care. We have clearly stated that objective before. I'm not sure if those objectives have been heard but we have planned to state them once again. Whole person care is the intent of the plan. We cannot continue to segment individuals care under the system to different areas and different levels. [SPEAKER CHANGES] In the interest of time we're gonna hold questions just to members for the time being. If we have time at the end we can come back to non-members that want to ask questions. Senator Brown. [SPEAKER CHANGES] Thank you, Mr. Chairman. I just wanted to touch on the reserve that Senator McKissick touched on, the 50 million dollar reserve that the Governor has in his budget. What we did is with the rebates, we added a little over 200 million to the rebates, which the Governor didn't do. So if you really want to talk about reserves we've got over 150 more million in reserve than what the Governor had. [SPEAKER CHANGES] Alright, other members questions, comments. Okay let's, thank you very much, Senator Hise and Senator ??. How about let's go to natural economic resources? Senator Brock. [SPEAKER CHANGES] Thank you, Mr. Chairman, and after the two last easy presentations we'll get in to something hard. First I'd like to thank our staff and co-chair senator Bingham for their hard work on it. Our staff worked overtime on it and needless to say when you would show up, on their, our committee table they have Muscle Milk that you have to drink. Needless to say they worked through it. First, we'll start off, if you want to look at your summaries report, or your money report. [SPEAKER CHANGES] Senator Brock, before you get wound up let me remind everybody we got ten minutes before committee amendments can be offered. Excuse me, go ahead. [SPEAKER CHANGES] Thank you, Mr. Chairman. First we'll start with the Department of Agriculture and Consumer Services and will just say this, that in over the last year that the economic impact of agriculture went from 77 billion up to 78 billion, which is still the largest industry in North Carolina. And with the farm bill, which was the first major significant piece of legislation passed in about 20 years concerning agriculture we expect to grow that even more. But starting on the money report, page

Page 2 out of mate you will see the Forest Service which are implementing a new cost share method for a county specific service personnel. The match will be based on county wealth requiring low wealth counties to match less than high wealth counties. This results in about a million dollars to the state. The Forest service it implements a new fee on forestry management plans and this is to assess forest land for present use value for tax purposes and this is a 1.7 million dollars to the state. The farmer's market there will be a change coming, but part of the farmer's market is to make sure that we have 2 of our markets that are not self sustaining and part of that in the capital fund you will see that in Mcdue roof up in Ashville had a 2 million ?? impression would be through capital to repair the roof up there. In farmland preservation we increased more money to farmland preservation this year than previously. In Ag WRAP, which is Water impalement which is water for agriculture reasons we provided more money than before. Farmland preservation was $248,000 more. Also in the money report you will see page H5 items 21 and 22 is an initiative through North Carolina State, which provides $350,000 for plant science initiative and $250,000 for food processing initiative. Currently 80% of what we grow here in North Carolina is processed outside of our state. When we look at a 78 billion dollar industry what we can do is keep some of that within our borders and process it here to bring more jobs to North Carolina especially in our rural areas and that will help us to achieve that goal. Through Department of Labor we gave a 2% flexibility reduction for the commissioner. To Department of Environment and Natural Resources, if you look on the money report page H9 item 37, for shell gas we provided over 1.1 million for drilling, testing and analysis of shell gas wells and $100,000 for marketing for the state's gas resources. This is on various items or on various pages in the budget and different items is for coal ash. The senate budget provides a total of 1.7 million dollars and 25 positions to support the long term requirements associated with the coal ash management and clean up in the state. Legislation will be very coming soon to address this issue. On page H12 item 52, for the Oregon inlet we created a new Outer banks land management fund and will provide a total of 15 million dollars to be used toward the purchase of the Oregon inlet. That is very vital for Northeastern North Carolina in so many different ways. In the non-commercial lust fund, we provide more money for the lust fund. This is the underground storage tank that we have them all throughout the state. As soon as we put the money out every year through our budget, it's especially tapped out very shortly because we have tanks all over the state that we're trying to mediate. On page H15 item 65, on site waste water will be transferred once again from DHS to DENR. It's moved over and we think we found a better place, a better home for it. On H17 item 72, we have the aquatic weed control which transfers the aquatic weed control from DENR to Wildlife and it provides up to $500,000 from the shallow draft dredging fund on a recurring basis and a non-recurring $400,000 to provide to combat Hydrilla in Lake Waccamaw. We think this is a better way to address this problem and we think Wildlife has the resources and also the authority and respect from boaters to make sure we combat this thing which has literally choking the life out of our aquatic resources. Through the Department of Commerce, page H18 line item 73, gives a 2% flexibility reduction for close to a million dollars. On page H20 item 83, Access North Carolina and Demand Driven Data Delivery system, which is also known as D4, we provided over a half a million dollars in non-recurring funding to merge the 2 IT programs together to provide statewide business sites in economic down...

?? If you look at where we've been with Commerce that sometimes when we had side selection it would take up take for up to two weeks for us to get a reply back to the company. We're looking at competition with other states they can get the information back to these companies within twenty minutes. So with consolidation and with technology we're able to cut that time thus right in the driving driver's seat for economic development. Page H twenty item eighty four the limited resource of communities grant we eliminate that which is a two point five million dollar savings to the state and H twenty, items eighty five and eighty six is a community development bought grant which provides the department with six hundred and thirty seven thousand dollars in recurring funding to draw down federal CDBG funds which are offset by reduction of positions in a like amount. The department is directed to provide the remaining match from any kind of support as provided by the CDBG guidelines. And H twenty one item eighty eight is something with the initiative from the governor which is the apprentice program and provides the department with three hundred thousand dollars in receipts from the community college system to weigh fees associated with the apprenticeship program for twenty fourteen fifteen. The department is directed to evaluate the success of the fee waivers before requesting a permanent fee change. This first implemented...we've had this, long time ago. We stopped doing it, the Europeans found it. It's been very successful Catapillar incent for his implemented program and six students who graduated actually just this week or this month will be starting a job at Catapillar but working at Catapillar going through education at the same time starting in June. We thank it's a worthwhile program that will help our students that are focused to go in programs where they can have a good lifelong career. And there's a special provision in commerce with repeals the section fifteen point seven eight eight the Section law of two thousand thirteen which provided Commerce with authority to reorganize and establish a public private partnership. The state aid to non profits, page H twenty two, item nine, the grassroot science museums to provide funding for two new museums one in Hendersonville, Amazon and Marvels here in Raleigh. They will start at the base amount of fifty eight thousand dollars and it will remove the museum that closed Ells Adventure that closed in twenty thirteen. H twenty two item ninety one RTI grant will provide two hundred and fifty five in non recurring funds to research Triangle institute to match federal department energy grant funds. We look at special funds, page H thirty one with Light R which provides three point two million dollars in non recurring funding to complete the third phase of the statewide mapping system to provide...yes sir? SPEAKER CHANGES I just wanted to remind you we have about two minutes the Valley deadline for amendments and ?? pick it up a little bit. SPEAKER CHANGES Thank you. Farming gas program provides two point nine million and two point five million in recurring funding for it's expanded gas products to the algriculture program. The One North Carolina small business fund on page H thirty four provides the One North Carolina small business with two point five billion non recurring funding to provide early stage support for small high growth and high tech businesses. And page H thirty four, H thirty two, H twelve, item fifty two provides seven million dollars for organ inlet for non recurring funding to the auto banks and management fund. Chairmen that concludes my report. SPEAKER CHANGES Thanks Senator Bach. The deadline has now passed for filing amendments. Senator Lee you have a question? SPEAKER CHANGES Just one question, you piqued my interest on the four farmer's markets. Are we eliminating or reducing the state funding and giving the air commissioner the flexibility to use the profits from those two that are profitable to support the other two that aren't quite profitable. SPEAKER CHANGES Yes sir. Senator Blue, we look to that as far as creating an enterprise fund, we're looking at the needs of the Magoo center up in Nashville which was two million dollars but the market in Charlotte, the market in Nashville could not support the capital costs so I have an amendment coming that will take it back to state funding and...??

... care of this capital need, so we’re actually, we’re going to remove that provision. [SPEAKER CHANGES] So then when… follow-up. So the two markets that are profitable will basically not be saddled with having to… [SPEAKER CHANGES] Correct. You’re right. Yeah, they’re fine. [SPEAKER CHANGES] Other questions from committee members? Senator Bryant. [SPEAKER CHANGES] I have a couple questions to the Chairman or the staff. One of my concerns was what appeared to be the complete wipeout of the Deputy Commissioners of the Industrial Commission. That’s in your… in the NER, right? I think? [SPEAKER CHANGES] The Industrial Commission is – [SPEAKER CHANGES] Senator Brock. [SPEAKER CHANGES] North Carolina Industrial – [SPEAKER CHANGES] I think that’s in… [SPEAKER CHANGES] You don’t have that? That’s in Commerce, isn’t it? [SPEAKER CHANGES] Let’s see. Deputy Commissioner… [SPEAKER CHANGES] ?? 15.6? [SPEAKER CHANGES] I’m sorry. We’re trying to get to a mic that works. [SPEAKER CHANGES] Yeah, it’s in NER. It’s in NER I think. [SPEAKER CHANGES] Yes, ma’am. This is Aubrey Incorvaia, Fiscal Research. There is a provision sweeping the Industrial Commission, last in, first out. [SPEAKER CHANGES] Follow-up. [SPEAKER CHANGES] Yes, ma’am. [SPEAKER CHANGES] I was just very curious as to sort of the thought behind sweeping the whole agency out and… question? [SPEAKER CHANGES] Well looking at the Industrial Commission, we thought it might make a better sense, especially if we try and do North Carolina into a more business-friendly atmosphere, to sweep and start anew. [SPEAKER CHANGES] Another question and then a comment. [SPEAKER CHANGES] Yes, ma’am. [SPEAKER CHANGES] The changes, the reductions in CDBG, while I realize we’re taking the reductions to get the match – you can tell me if I’m understanding it correctly – by reducing the staff so much, how are we effecting the ability to serve our rural and small towns who aren’t entitlement cities that use that fund? What’s the balance there and the impact in terms of those cuts, if I’m understanding it correctly? [SPEAKER CHANGES] Thank you, Senator Bryant. As we mentioned before on the other issue, what we’re looking at is trying to find efficiencies in the system, and as far as trying to cut overhead as much as possible, well because one thing you do know with the grant system of how much is taken off the top for administrative personnel, that if we can cut that a little bit, we can put more resources onto the issue we have at hand. [SPEAKER CHANGES] And one more question. [SPEAKER CHANGES] One more. [SPEAKER CHANGES] The grassroots museums, I couldn’t see a rhyme or reason to the reductions. Some people got less, some people got more. I know we added two museums. Was that just ad hoc or was some formula used? [SPEAKER CHANGES] No, ma’am. What the grassroots museums are based on, there’s a baseline of 58 thousand dollars per museum. Their funding after that is a formula that we use of overall operating expenses, so if some people got a little reduction, it means their operating expenses were a little less last year than before. [SPEAKER CHANGES] One brief comment, Mr. Chair. On the Industrial Commission, I’m just concerned. It is a quasi-judicial agency that decides – and I worked there back in the 1980s – and it’s where workers come to have their injuries adjudicated, and I remember back in the history of when people didn’t feel they would get fairness in those venues, and while I understand you want to be business-friendly, we also have a state of millions of workers who need a fair shot when they get injured, and to sweep this agency and have people in a judicial position have to be in fear of their jobs when they decide those cases really is a fairness issue for workers, and I just felt like I needed to make a public statement about that. [SPEAKER CHANGES] Senator Brock. [SPEAKER CHANGES] I’ll just say this. The appointees that will be appointed to the Industrial Commission, those that have been on, I will say this. Their qualifications, their talent, are those above match, or way above the bar. They’re a good people and they’ll do a good job for all of North Carolina. [SPEAKER CHANGES] Senator Ford. [SPEAKER CHANGES] Thank you, Mr. Chairman. Senator Brock, within the Senate’s budget, to your understanding, or maybe staff can help me, does this budget deal with the continuation of the current film refundable tax credits? [SPEAKER CHANGES] That would be the revenue side. [SPEAKER CHANGES] Senator Brock. [SPEAKER CHANGES] I think that would be in the revenue side of the budget. Senator Rucho looks like he’s tweeting right now. He might be the best person. [SPEAKER CHANGES] Mr. Chairman? [SPEAKER CHANGES] Let me see… Senator Brown. Wait a minute, did we ever get an answer to your question, Senator Ford? [SPEAKER CHANGES] I wasn’t trying to answer… [SPEAKER CHANGES] No, he was ducking and dodging. [SPEAKER CHANGES] It’s on the revenue side. [SPEAKER CHANGES] He’s been ducking and dodging. [SPEAKER CHANGES] Senator Ford, in the Senate budget at this point, we do not have anything for film incentives. We’re still working on that issue, so I think you’ll see something very soon.

Thank you sir. Mr. Chair, follow up? [SPEAKER CHANGE] Sure. [SPEAKER CHANGE] Senator Brock maybe you can answer this question. I’m looking on the budget, page 154, line 48 there’s a repeal of the commerce flexibility to reorganize the department. Can you bring some clarity to us for that? [SPEAKER CHANGE] Senator Brock. [SPEAKER CHANGE] One thing we’re looking at with the P3 was trying to find a good baseline of where to make the proper recommendations of how to look at the P3. We looked at it, it’s very attractive. We want to make sure we go through the process as slow and as carefully as possible to make sure we make the ??. We’ve looked at other states and other states have done very well with it. Other states have had missteps, we just want to make sure we do this in the most careful way possible. [SPEAKER CHANGE] Follow up? [SPEAKER CHANGE] Yes sir. So you said all that to say what? [SPEAKER CHANGE] Mr. Chairman. [SPEAKER CHANGE] Senator Brown. [SPEAKER CHANGE] Senator Ford you will probably see a P3 bill probably in commerce on Friday. We started over and tried to strengthen that bill so you’ll probably see a bill come forth in commerce this week or next. [SPEAKER CHANGE] Other committee members, questions? Thank you very much Senator Brock. Let’s go to justice of public safety. Senator Goolsby is marching to the podium. [SPEAKER CHANGE] Mr. Chairman if I could also comment on the industrial commission. It’s not a full sweep at one time, it is a staggered sweep. In the provision it’s on page 166 if you’d like to read that, I think that will clarify that issue. [SPEAKER CHANGE] Thank you Senator Brown. Senator Goolsby. [SPEAKER CHANGE] Thank you Mr. Chairman. Pleasure to be before the committee. I will go through briefly the overview and then be happy to take any questions and have staff fill in anything that I don’t have. First, if you’ve had a chance to review your budget you will see that we provide for the first time in many years step increases for the highway patrol, the magistrates, and the clerks. These are people that in my other life I deal with on a daily basis and I’m very happy that the big chairs were able to provide that this year, it’s extremely important. These are the folks who are doing the real grunt work out there in criminal justice and to see our highway patrol, magistrates, and clerks get the raise is wonderful and I would also like to acknowledge my other chair Senator Newton and Senator Randleman and appreciate their help and help of staff. They’re here also to help. Let’s see, number two, you will see that we require economies and administration and technology at the administrative office of the courts. That is a reduction in the AOC’s technology services by 24% to 11.9 million and the appropriation for administration by 5% to 28.2 million dollars. There are currently 153 employees in IT at AOC, 109 of those are programmers. Number three you will see a transfer in the state bureau of investigation and state crime lab to the department of public safety. The consolidation of state law enforcement agencies into one department we believe will result in savings in future years for more efficient operations of the criminal information system, both purchasing of law enforcement, equipment, shared resources such as armors and training facilities, and co-location regional offices. The director of the SBI will also be appointed for an eight year term by the governor subject to confirmation by both chambers of the general assembly. Next number four you’ll see removal of all misdemeanants from the state prison system currently offenders with sentences between 91 and 180 days serve their sentences in county jails, the budget removes misdemeanants with sentences longer than 180 days out of the prison system into the local jails. In addition we fund two dedicated facilities for offenders who violate technical conditions of their probation and we also remove those offenders from the prison system as well. This allows the department to close two additional prison facilities, that’s Fountain Correctional Center for Women and North Piedmont Correctional Center for Women, and convert a third, that’s Eastern Correctional Institution, into a lower custody level saving us an additional $15 million in the first year of implementation. And lastly we’re providing additional funds to probation and parole officers, their vehicles, and we’re providing additional funds to state highway patrol for vehicle purchases and uniforms. I’ll be happy to try to take any questions that the members might have. [SPEAKER CHANGE] Thank you Mr. Chairman and thank you Senator Goolsby for your summarization. What I want to know, I don’t know if you can answer this question, maybe the staff can answer this question, but with the funding of the highway..

Will this settle the lawsuit the Highway Patrol has with the state of North Carolina? [SPEAKER CHANGE] Staff can't answer that. We need legal counsel the answer that. Staff? No. We will try to get you an answer for that Senator Ford. I can't comment on the lawsuit. [SPEAKER CHANGE] Follow up? What would it take to make the state Highway Patrol whole as it relates to its contractual obligations with the Highway Patrol and the state? To me, Mr. Chairman and Senator Goolsby and for those that are in attendance on this provision committee, I know we have a lot of needs and teachers is the loudest voice right now, but we've got men and women who patrol our highways and keep us safe and this to me is extremely important that we take care of the men and women of the Highway Patrol. [SPEAKER CHANGE] Senator Goolsby? [SPEAKER CHANGE] Thank you. I definitely agree. I deal with State Troopers on a daily basis as I said in my legal practice and I hear from them constantly and encourage them to talk with me. The biggest thing that I've heard from the leadership is the step increases and being to take care of the young troopers that are coming up in line and we're happy that the chairs the full chairs have found us the money to be able to do that. That's extremely important. Not only for them, but also for our magistrates and clerks who again need to be paid properly for the hard work that they do. You'll also see Senator Ford, as I spoke of earlier about the Highway Patrol, we've put a substantial amount of additional money for new vehicle increases by a $456,754 to a total of 5.9 million and then we've also funded fully their request as I recall for $823,984 for the uniforms for Highway Patrol. So we're doing all that we can to take care of our men in gray. [SPEAKER CHANGE] Mr. Chairman [SPEAKER CHANGE] Senator Brown. [SPEAKER CHANGE] Also Senator Ford you may remember last year's budget we had a 7.5 million dollar provision for salary adjustments. Most of that money was used toward the highway patrol to get them back their salaries up as well. So this is on top of that money that was used last year. [SPEAKER CHANGE] Senator Robinson [SPEAKER CHANGE] Thank you Mr. Chair. Senator Goolsby on page I5, Prison Misdemeanants. Tell me how that's going to work. The state has been currently paying for those persons in the county jails and is that expense being transferred then to the counties? Explain to me, maybe I don't understand. [SPEAKER CHANGE] Sure, I can get the staff to explain that a little more safely than I could. John if you would like to handle that. John Poteet. [SPEAKER CHANGE] Thank you. Senator Robinson. John Poteet, Fiscal research. The additional misdemeanant will be paid for out of the statewide misdemeanant confinement program that's currently paying for the 91-180 day inmates. That program will now pay for all inmates over 90 days. [SPEAKER CHANGE] Follow up? [SPEAKER CHANGE] Follow up Mr. Chair. So those funds will still go to the county jails in terms of paying for those individuals? [SPEAKER CHANGE] John [SPEAKER CHANGE] Yes ma'am. The statewide misdemeanant confinement program is a voluntary program. So some counties want to receive inmates and some counties send inmates. This money will be used to support the counties that are receiving inmates. [SPEAKER CHANGE] Another question. Ok. Senator Tucker. [SPEAKER CHANGE] Just one question for clarification. This maybe for staff Senator Goolsby. This means that if there is a county with an over crowded jail, they can transfer inmates to lesser crowded jails and that jail in the adjoining county or wherever they move them will receive the funding. Is that the possibility? [SPEAKER CHANGE] If I may Mr. Chair. What we're actually doing is we're removing the misdemeanants serving those sentences from the state system and putting them in county jails where they wish to house them, where they have the facilities to do that. If you've got local jails that are over crowded because of mismanagement of the court system, whatever it might be. That's their problem and we're not dealing with that issue at all. They deal with that locally by finding another place and actually having to pay to have those people held somewhere else and that typically comes out of their own fund. So that's not our Bailey-Wick here. That's a county problem. That's a county issue. There maybe some state funds there I'm not aware of. All we're trying to do is, we have capacity within our local jails, many of them. And don't forget our crime rates, since the 1970's in North Carolina, has gone down 50%. Violent crime we've seen across the board since '92 is down 50%.

We’re a much safer state. We’re a much bigger state now, but at the same time we have a number of counties with overcapacity and we’ve realized we can save money by shipping these inmates and having them stay in county jails and being able to close big state facilities. That’s why we’re seeing this kind of savings but as far as what you’re asking sir, we’re not addressing that. [SPEAKER CHANGE] Other questions from committee members. Senator Blue. [SPEAKER CHANGE] Yes, Senator Goolsby I was looking at the special provisions and starting on page ten there’s extensive rewrite of the criminal law and items that would normally go through a judiciary committee rather than being put in the budget and I raise that question because over a fifteen year, twenty year period we reformed the process so that that wouldn’t happen routinely and the budget would relate to budget items rather than major substantive changes in the law. But starting on page ten. [SPEAKER CHANGE] Page ten sir? [SPEAKER CHANGE] Page 210 of the special provisions there’s several criminal statutes that are being enacted anew or are being amended and I wonder what is the rational for that? Why wouldn’t they go through a normal judiciary committee process? [SPEAKER CHANGE] Senator Goolsby. [SPEAKER CHANGE] Yes sir, if you’re talking about possession of drug paraphernalia, particularly possession of marijuana paraphernalia, we transferred a number of those to items similar to that to class three misdemeanors last year. This is one that we left out. There’s a cost savings in that when it’s reduced to a class three misdemeanor there is no requirement that the person’s charge, since there’s no ability for them to go to jail on the first three offenses, to actually have indigent services supported to represent them so we have a cost savings there. I know that one specifically. If you’re dealing with the next item which is the differed prosecution, that was request from our prosecutors to make sure that is someone enters a deferred prosecution currently in a 1996 which is a drug diversion program you have to plead guilty in order to enter into that and then if you don’t fulfill the requirements, you’ve already plead guilty so we don’t have to prosecute you. We currently don’t have that on class H and I felonies so it’s another cost to the system if someone doesn’t comply. It was a technical change which simply means that now that they’ve entered into that agreement, they don’t comply with it, they come back into court they can’t then demand a jury trial. They’ve already plead guilty and they get sentenced. That was a request from one of my local prosecutors. [SPEAKER CHANGE] I understand that and it’s not that I’m in disagreement with any of it, but these are matters clearly that from a substantive standpoint, policy standpoint, that would be examined by a judiciary committee just for consistency’s stake and matters which the budget really has no real bearing. It may save money but I’m just wondering whether all of these statutory changes that you’re affecting in this budget should not be reviewed by a judiciary committee? Whether it’s a three judge panel or the various other things on constitutionality of statutes so that you have the kind of robust discussion in the judiciary committee that these kinds of changes whether I agree with them or not really deserve if you’re changing the substantive statutes. [SPEAKER CHANGE] I think Senator Blue, the chairs, and I all saw these as non-substantive changes that would be directly related to the budget and budget savings items and I have not heard any controversy over what we’ve done and I’m happy to talk to you about any specific concerns you might have as far as anything you might see as a substantive change to the law. [SPEAKER CHANGE] Senator Brown. [SPEAKER CHANGE] Thank you Mr. Chairman. Senator Blue, I think we have really worked hard to try to clean this budget up. Provisions like you’re talking about aren’t in there. If you remember many years ago these budgets had more provisions than you could ever count and we have really cleaned these things up to where they’re pretty substantive. I think this is a whole lot cleaner budget than you’ve ever seen and pretty straightforward than what we used to see years ago. [SPEAKER CHANGE] Thank you Senator Brown. We’re going to try to limit the question to committee members. We’re trying to get this thing expedited. If we have time we’ll come back. I do what to mention the names of the new, we have a new fresh batch of pages and you all would stand up when I call your name. Lucy Mae Rasco.

Scott Stump? Charlotte Thomas? Trey Matthews? Brenner Daniel? And Connor Cochran. Thank you all for serving, appreciate it. Alright, Senator Stein? [SPEAKER CHANGES] Thank you, Mr. Chair. Senator Goolsby... [SPEAKER CHANGES] Yes Senator Stein? [SPEAKER CHANGES] Just a couple questions, alright. Did the highway patrol ask to have seventy-five positions eliminated? [SPEAKER CHANGES] Those were positions that were not filled. And staff can correct me if I'm wrong, they were vacant positions, yes. I'm correct. [SPEAKER CHANGES] At any given time, are there always going to be vacant positions as people come and go? Just because it's vacant doesn't mean that it's not used. I'm asking did they ask to have those positions eliminated? [SPEAKER CHANGES] I am not aware that they asked for that. Can staff tell us how long those positions were unfilled? [SPEAKER CHANGES] Yes, mam? [SPEAKER CHANGES] Thank you, Mr. Chair. Christine Leggett with Fiscal Research. I think in the [??] it says that about fifty of them have been vacant for more than six months. [SPEAKER CHANGES] Alright, follow-up question, sir? [SPEAKER CHANGES] We need to move on, I need to give you committee members. You can ask me what time at the end of the session. [SPEAKER CHANGES] Alright, that concludes J.P.S. General Government. Senator Davis? [SPEAKER CHANGES] Thank you, Mr. Chair. And Senator Tucker and I would also like to acknowledge our staff that did a [??] job on our budget. I have a lot of departments to cover and so I'm going to do it pretty quickly. The Den-Gov Budget represents about a 2 percent increase in spending or 8.7 million dollars for a total of about four hundred seven and a half million. Many efficiencies have been taken in the areas of position eliminations and operations reductions. Thirty-three vacant positions were eliminated and there are eighteen new positions filled. First I'll go to Department of Cultural Resources and you'll find those on pages J1 and '2, eliminates vacant and filled positions for savings of six hundred and ninety-four thousand dollars. You can find those Items 1, 3, and 7. J2, it closes the House and the Horseshoe Historic Site in Sanford, Item 7, effective July 1, this year and eliminates three positions for savings of about a hundred and twenty-eight thousand dollars. It reduces both the Museum of Art and History by 2 percent as a flexibility cut and each of these entities have strong foundations and assets available. J3 reduces grants to libraries by 2 percent, that's a two hundred and eighty four thousand dollar reduction and we're capping the grants that are issued by the state to four hundred thousand dollars so essentially this covers only Wake and Mecklenburg Counties. Roanoke Island Commission is reduced by 2 percent or nine thousand dollars, leaving the park with four hundred forty-one thousand dollars in appropriations and a special fund with about three million dollars. Moving on to the Department of Insurance in J5, it eliminates vacant and filled positions and reduces operations for savings of about six hundred fifty-four thousand dollars. On J6, you'll find that the budgets receipts not previously budgeted for license fees paid by collection agencies, once netted with [??] accounts no longer receiving revenues. The amount budgeted is two hundred thousand dollars. And this is a reduction to operations in anticipation of these conditional receipts. Special appropriations on J12, it assists local programs with building a domestic violence shelter, and rebuilding outdoor facilities of one hundred seventy-five thousand dollars. Department of Revenue, J14 and '15, eliminated positions vacant for more than three hundred days for savings of about six hundred twenty-seven thousand dollars. And moved expenses to receipts support and that amounts to about 2.3 million dollars. J15 we provided two and a half million dollars to the department for new scanners, the reason for that is that the present ones run on Windows XP and Microsoft is no longer going to be supporting those. J16, it authorized the expenditure...

… of 1.4 million from the Collection Assistance Fee for technology upgrades to the Taxpayer Assistance Call Center. J16, allow the department to spend up to seven and a half million dollars a year to contract with a third party to collect overdue tax debts. J19, it will authorize the expenditure of 11 million dollars from the Tim’s Benefit Stream Account for maintenance of the functioning portion of the system, and five million dollars from the account for implementation of a collections case management system. J19 also, it authorizes the expenditure of seven and a half million from the Collections Assistance Fee to provide more e-service and move away from paper. J20, revise the budget to reflect changes in the I.T. section of the contract and changes due to ending the contract with CDI. Moving onto Secretary of State, J22 eliminated two vacant positions from the Corporations Division. Also, J22 eliminated three positions from the Publications Division, leaving two positions there, and this division is responsible for the North Carolina Manual, the directory of state and county officials, North Carolina State Constitution and the North Carolina Governmental Organizational Chart. We anticipate most of those are going to be placed on the web and we won’t have to have printed copies. State Controller on J25 have provided funds for contract increases of IBM and Oracle products and ongoing maintenance of the cash management system. J25 also provided 2.1 million nonrecurring to update the hardware for Beacon, the state’s Human Resources and Payroll system. J26, it reduced operating and line items for communication and processing – that amounted to about 520 thousand dollars – and eliminated three and three quarters filled and one vacant positions for savings of about 532 thousand. Department of Administration, J29, eliminated ten vacant positions. J30 reduced the certified Utility Budget by 1.2 million dollars, reduced the Janitorial Service Contract by 300 thousand, eliminated the county aid to veteran service offices. Moving onto Department of Administration from J32 to 39, it correctly budgets the Veterans’ Trust Fund, Parking Fund, Motor Fleet Management Fund and Temporary Solutions Fund. Housing Finance on J40. It reduces both the recurring appropriations to the Housing Trust Fund and Home Match by two percent, appropriates ten million dollars to create a workforce home loan program that will provide loans throughout the state for low-income housing development. Moving to the Treasurer, J42. Here we appropriate 12 new positions in the Investment Division that will enable the state to internalize investments, and these investments are currently contracted out to third party venders. The Treasurer anticipates that this will result in considerable savings. Of course the savings will not be realized in the general fund; it will be realized in less overhead for maintaining retirement funds. The Fire and Rescue Squad, National Guard Line of Duty Death Benefit Pension Funds on J44 makes reductions to the Fire and Rescue Squad Workers’ Pension Funds and the National Guard Pension Fund to meet the annual required contribution rate. For the Fire and Rescue Squad Workers’ Fund, the annual required contribution rate reductions take into account the end service contribution changes, and all those remain viable funds. Special Provisions you’ll find starting on page 221. Section 20.1, the end service prohibition is removed from the Firefighters and Rescue Squad Pension Fund. The effect of that is those that qualify in service years but still work in the field of rescue will now be able to receive the monthly pension benefit just like the volunteer firefighters policy. And additionally, the fire department’s grand program match requirements are lessened for the smaller entities to allow those funds to be easier utilized. Moving to page 224, section 22.1, it creates a Joint Legislative Oversight Committee on General Government. That will allow members to stay abreast of issues, it will monitor implementation of laws, and oversee the budget.

Page 226, section 25.1 requires the treasurer to send funds to the state auditor in order to audit funds held for the retirement system and it's anticipated that this will be done about every four years. Page 227, section 26.2 instructs the Department of Revenue to report to the General Assembly on the necessity of opening a second call center. Page 228, section 30.1 follows the money and eliminates the grant program to county veteran service officers. And also on page 228, section 30.2 requires that veteran service offices remain open in Garner and Wilson and that was in the governor's budget as cuts. That concludes my presentation, Mr. Chairman, I am the staffer available for questions. [SPEAKER CHANGES] Thank you, Senator Davis. Senator Ford has a question. [SPEAKER CHANGES] Yes sir. [SPEAKER CHANGES] Thank you, Mr. Chairman. Sir, listening to the presentation it seems that a theme has developed throughout this budget of either cutting or eliminating vacant positions and I'll ask you a question, sir, have you consulted with staff or departments before making these proposed eliminations in these open, in these vacant positions? [SPEAKER CHANGES] Staff has consulted with each of these departments before eliminating them. Not every department is happy with the cuts but we're trying to react to economic reality. [SPEAKER CHANGES] Follow-up, Mr. Chair? [SPEAKER CHANGES] Follow-up. [SPEAKER CHANGES] Thank you, sir. It seems to me, and I've only been here for 30 days, that you're driving the bureaucracy when you eliminate or cut these positions I can only get the sense from being here for the short period of time that staff would rush to fill a vacant position for fear of losing it or hiring somebody who is less qualified for fear of losing that position. I would just ask for special consideration going forward as you make these tough budget cuts, making sure what the impact this is gonna be on our system. [SPEAKER CHANGES] Mr. Chairman, if I may. [SPEAKER CHANGES] Sure. [SPEAKER CHANGES] I think those, your considerations are valid and we were of those when we eliminated some of these positions. We didn't eliminate all the vacant ones but you raise some good points that we took into consideration. [SPEAKER CHANGES] Senator Blue. [SPEAKER CHANGES] Yeah, just, just on page J-38. Temporary solutions, I take it, as an internal agency within I guess general government or administration that, that serves as a clearing house through which you get temporary employees? Exactly what is temporary solutions? Is it a formal entity or is that just a descriptive term of what they do? [SPEAKER CHANGES] Mr. Chairman, I'd like to refer that to staff if I may please. [SPEAKER CHANGES] Alright. Senator Davis do you want to answer that question? Okay. Who's gonna answer that with staff? Alright, Lisa. [SPEAKER CHANGES] Mr. Chairman, Lisa Hollowell with the ?? School Research Division. Temporary solutions is an internal service that's provided within the Office of State Human Resources and there was governor's executive order about a year and a half ago that requires all agencies to go through temporary solutions. Temporary solutions finds the temporary personnel. They provide any benefits that awarded to those temporary staff. So they are the clearing house for it. It is an internal, it is not an outside entity and what this particular budget item does is it correctly budgets the amount that's needed for next year as a result of that executive, the governor's executive order last year. [SPEAKER CHANGES] Thank you, Lisa. Senator Davis. [SPEAKER CHANGES] Thanks, Mr. Chair. I wanna first, with regards to the veterans, commend your for supporting the veteran's homes as well as, let me ask my question. Looking at this, it's a very small reduction from the County Veterans Services Offices. My question is, being that certain counties do not have those would there be any further consolidation of the county offices? [SPEAKER CHANGES] Senator Davis. [SPEAKER CHANGES] Thank you, Mr. Chairman. I think this was about, staff correct me if I'm wrong, that was about $135,000 budget item? 138? And so it was essentially a little over a thousand dollars to every county and so we just took it out. [SPEAKER CHANGES] Further questions, comments on general government?

Alright, thank you Senator Davis, appreciate it. Now we'll go to Transportation. Senator Meredith is coming to the podium. It's hard to miss. Welcome, Senator Meredith. [SPEAKER CHANGES] Good morning. Members of the committee I'd first like to thank my co-chair, Senator Rabin, and my staff. This is my first rodeo so they were very helpful and very understanding. So with that I'll get started. Budget summary on Transportation. The combined state Transportation budget is 3.1 billion, an increase of 4.3% from the current certified budget, and these are due to revised revenue forecast. Forecast Revenue is 3.8% higher reflecting less of decline in motor fuel consumption and a rebounding of highway use state taxes, tax collected. Highway Funds appropriations total 1.9 billion, an increase in 3.5%. Highway Trust Fund appropriations total 1.6 billion, an increase in 5.7%. Major Highway Fund budget changes, Department Staffing Efficiencies, which is K2, K3, and K6, item 7,9,10, and 27, this eliminates 300 positions in DOT of which 296 are vacant. The majority of the vacant positions have been vacated for longer than 180 days. Construction and Maintenance, Maintenance Preservation, which is K6, item 28, establishes an 80 million dollar recurring pavement preservation program. Aid to Municipalities, which is K3, item 11, increases the appropriations for municipality street maintenance to 9.5 million. Division of Motor Vehicles, K12, K14, and items 13-17, realigns existing funds to support production cost for the new format driver's license and allocates additional funding to reduce the backlogs and medical review and ignition interlock programs. Information Technology, which is K4, K5, which is item 19-25, provides an additional 10.4 million to modernize DMV's legacy system for driver services to include online renewal for eligible drivers. Intermodal, K6, which is item 26-27 reduces funding across the intermodal division by 6.7 million to maximize available funds for the pavement preservation program and captured cost efficiencies resulting from the sale of the Division of Aviation's Sikorsky helicopter. Transfers, K8, item 38, makes a driver education transfer nonrecurring, which Senator Tillman spoke about earlier in the Education budget, with the intent to reduce future transfers of transportation revenues from the Highway Fund. Major Highway Trust Fund Budget Changes Strategic Prioritization Program, which is K9, item 41 through Unexpected Revenues, Tax Cap Changes, and Administrative Reductions, this budget increased fundings to the landmark Strategic Transportation Investment program by 73.6 million this year. Over ten year funding for STI will increase 822 million which, broken down, the statewide portion will be 329 million, regional and division will be 246 million each of an increase. These funds, on an average of nine, these funds on average of nine new statewide projects and eight more regional projects and eleven more division projects. State Budget Provisions, moving on, section 34.6 of the highway use tax and fuel excise tax changes, we've proposed to use the highway use tax for commercial vehicles, currently set at $1,000 and for recreational vehicles which is currently set at $1500. The cap increases to $2,000 on January 1, 2015 and to $3,000

thousand on July 1st, 2015. We're gonna raise the Highway Use Tax on out of state vehicles from $150 to $250, effective 1, October, 2014, generating about $3,225,000 annually. This cap is based on vehicle registration records that show the North Carolina vehicle average value to be $8,134. Once fully implemented the increased caps are forecast to raise 11 million dollars annually. By changing these caps an additional 142 million can be programmed into DOT's ten year work plan for projects prioritized under the Strategic Transportation Investment Act. Section 34.8, Remote Driver's License Renewals, authorizes the DMV to renew driver's licenses online enabling the DMV to address anticipated surges in transactions while maintaining or reducing wait times across the offices. Section 34.11, Payment Preservation Programs, this creates a recurring fund focusing on maintaining North Carolina's deteriorating roads while encouraging pavement contractors to expand their businesses to include pavement preservation treatments. DOT is directed to hold workshops and training sessions with the goal of outsourcing 90% of pavement preservation activities in five years. The funds dedicated to this budget will treat 6,000 lane miles across the state and 5% of the secondary road system and extend the life of these treated pavements by an average of seven years. Section 34.13, Outsourcing of Pre-Construction Activities, this is going to advance the efforts made in the last three years to the reduce the amount of pre-construction work that is performed in-house by shifting work to the private sector. This will increase the work performed by small businesses, especially for highway and bridge design and environmental analysis. Mr. Chairman, that's my overview of the report. [SPEAKER CHANGES] Okay, thank you Senator Meredith. [SPEAKER CHANGES] Yes sir. [SPEAKER CHANGES] Senator Ford. [SPEAKER CHANGES] Thank you again, Mr. Chairman. Senator Meredith, thank you for your presentation and welcome to your leadership position over in transportation. [SPEAKER CHANGES] Thank you, Senator Ford. [SPEAKER CHANGES] This is probably a question for staff, 'cause I'm not gonna tax you with it, is going over to case 6 looking at the number 26, the 4% reduction in aviation rail public transportation and ferry operating systems to the tune of 6.7 million. Can staff bring further clarity for me on that? On what exactly those reductions entail? [SPEAKER CHANGES] Staff? [SPEAKER CHANGES] Mr. Chairman, Bryce Ball with Fiscal Research. [SPEAKER CHANGES] Yes, Brian. [SPEAKER CHANGES] Senator Ford, that 4% reduction, there is flexibility afforded to each of the divisions that is affected by that reduction. Accordingly implementation is at their discretion. [SPEAKER CHANGES] Thank you for that clarification. Can you provide, excuse me, thank you, follow-up. A little bit more detail as it relates to, what I'm most concerned about, Mr. Chairman, is the rail, the aviation and the, excuse me, not the rail but more importantly the intermodal part of it. Because I look at those divisions in the Department of Transportation as economic development tools. Taking reductions right now, to me, doesn't seem to be the wisest thing. And again, you folks are smarter than I am, I'm just looking for further clarity. [SPEAKER CHANGES] Senator Meredith, do you wanna try to respond to that? Or Bryce? It's probably a policy. Go ahead bry-, go ahead, Senator Meredith. Alright, Bryce. [SPEAKER CHANGES] Again, Bryce Ball with Fiscal Research. Can provide information based on the Governor's recommended 2% reductions and how those were proposed to be implemented as a proxy for potential implementation by the department. For the Division of Aviation the reduction would be to the grant program for airport aid. For the Public Transportation Division the Governor has proposed primarily reducing the Statewide Grant program as well as the State Maintenance Assistance Program. For the Rail Division, the Rail Division had proposed implementing an across the board reduction for all of the line items within that budget, and for the Bicycle and Pedestrian Division the proposal for the Governor's recommended 2% reduction would have affected the grant programs principally for municipal sliding-scale grants. [SPEAKER CHANGES] Last follow-up, Mr. Chair. [SPEAKER CHANGES] Follow-up. [SPEAKER CHANGES] Again, I just wanna stress the importance of the economic drivers in this state, which are gonna be our airports. Last th

… I think we need to do in this economy and this environment is to negatively impact our rail system, our inter-mobile systems and our airports, and I ask for, as this budget process goes forward and maybe in finance, that we look at ways to make sure that we enhance the Department of Transportation’s ability to fund economic development all across this state because to me that should be a nonpartisan issue, and it should be an issue of economic development so that we can continue to put folks back to work. Thank you very much, sir. [SPEAKER CHANGES] Thank you, Senator Ford. Senator Tucker. [SPEAKER CHANGES] Just a question, and this is suited probably for staff. How many employees do we have in DOT? [SPEAKER CHANGES] Bryce. Amna. [SPEAKER CHANGES] Hi, Amna Cameron, Fiscal Research. There are about 14 thousand. [SPEAKER CHANGES] He had asked how many total employees, Amna. [SPEAKER CHANGES] That is correct. [SPEAKER CHANGES] Thank you. [SPEAKER CHANGES] Follow-up? [SPEAKER CHANGES] Follow-up. [SPEAKER CHANGES] So with the move toward private contractors doing paving, with the move toward outsourcing development, civil engineering, etcetera at DOT, what reduction is there going to be in personnel? Or are we going to keep that same 14 thousand and do all this outsourcing and still keep the same folks, or will there be a reduction? I know you already outsource a lot of the tree debris cleanup – roadways, keeping them clean, outsourcing those by private contractors. Is there a reduction going to be across the state as a result of this move toward privatization of employees? [SPEAKER CHANGES] Senator Meredith, you want to respond to that? Amna, do you want to respond to that? If not, I will. [SPEAKER CHANGES] Senator Tucker, again, Amna Cameron with Fiscal Research. There are several provisions in the Senate budget that deal with how to reduce the size of DOT. One is a staffing study. There’s also a section for pre-construction activities that gives DOT the authority to riff within certain categories. [SPEAKER CHANGES] Thank you, Amna. Alright, further questions on transportation? Alright, thank you very much. You act like just an old pro. And to you, Senator Brock. This is a very simple subject; it shouldn’t take long. [SPEAKER CHANGES] Thank – [SPEAKER CHANGES] Nothing about down home. [SPEAKER CHANGES] Mister Chairman, can we have order in this committee? I tell you, I’m tired of the peanut gallery. We’re looking at how do we restructure I.T. It’s a 1.3 billion dollar issue in the state and we’re looking to create better oversight in both the development of those contracts and execution. Briefly we cut our budget about 13 percent in the I.T. technology fund from 42 to 36 million, and our I.T. internal service fund is supported by agents who receive it’s maintained at 190 million. Some major things that we’re doing is looking at the initiative to refresh our equipment to make sure we update our systems like the scanners for Department of Revenue, GIS function for ?? Consolidated under ITS… We have an additional 5 million dollars for GDAC, or the Government Data Analytic Center, to continue the state’s efforts to develop and enterprise business intelligence capability, and CJLEADS is provided with an additional 1.1 million to continue its support of law enforcement in the courts. Basically we’re standing on task with the Chief Information Officer to make sure that we have reports and a better oversight of what we had in the past decades of our endeavors as a state, because it’s where we as a general assembly lost control of these programs and they spun out of control and cost us hundreds of millions of dollars. So now we’re looking at ways to put in those safeguards so that we in the general assembly and those in our agencies can actually select products and services where we’re spending money in a more wise and prudent manner for the state of North Carolina and its citizen instead of wasting it on bad contracts. That completes my report. [SPEAKER CHANGES] Senator Hise, did you want to add anything to that? [SPEAKER CHANGES] No, I think that’s fine. [SPEAKER CHANGES] Okay. Ya’ll have questions or comments in the committee? [SPEAKER CHANGES] Great report. [SPEAKER CHANGES] Alright, great. We’re going to take about a 30 minute recess. We will reconvene at 11:25. We’ve got…

...12 amendments to review, and we will come back at 11:25 to review those amendments, to vote on those amendments. Alright, if the members will have their seats. We got some amendments to go through. The first amendment we're going to take up today is ALH63, and Senator Ford, this is your amendment, you want to describe it? [SPEAKER CHANGES] Thank you, Mr. Chairman. Real simply, this is a non-appropriating amendment. It is a request for additional information in forecasting in this budgeting process which I think will be extremely helpful and useful to us as members as well as to the staff as it relates to expenses and revenues going forward on a five-year basis so I commend the amendment to you. [SPEAKER CHANGES] Questions or comments? [SPEAKER CHANGES] Mr. Chair? [SPEAKER CHANGES] Senator Brown. [SPEAKER CHANGES] I think this just provides more transparency. I think the provision might need a little more work, but I'm okay with the provision and I ask that we support the amendment. [SPEAKER CHANGES] Other comments? Questions? Alright, we have the amendment [??] ALH63, all in favor say aye. All opposed say no. Alright the amendment ALH63 passes. [SPEAKER CHANGES] Thank you, Mr. Chairman. [SPEAKER CHANGES] The next amendment to consider this morning is ALG45 and the sponsor of this amendment is Senator Tucker. [SPEAKER CHANGES] Thank you Mr. Chairman. This does not have any impact or appropriation on the budget, just a VCR study that look at the feasibility of taking over the Avansburg Battlefield as a state historic site. This request by Senator Rabin, R-A-B-I-N, thank you. [SPEAKER CHANGES] Any questions or comments from the committee? Seeing none, all in favor say aye. All opposed say no. Alright, ALG45 passes. The next amendment is ALH64, Senator Apodaca. That's the one with Senator Apodaca's name on it. [SPEAKER CHANGES] This is [???] [SPEAKER CHANGES] It's number four in our list. [SPEAKER CHANGES] Thank you. What does it talk about? [SPEAKER CHANGES] Appalacian State University, in-state need-based scholarships. [SPEAKER CHANGES] Thank you Mr. Chairman. Now I remember, and I forgot before to get it in the other budget so we need to put this in to help that App. get their science building moving forward. It's two million dollars and non-recurring. I ask for your support. [SPEAKER CHANGES] Alright, any questions or comments from the committee? [SPEAKER CHANGES] Mr. Chairman? [SPEAKER CHANGES] Yes? [SPEAKER CHANGES] Question, what's the position of the chairs on this request? Since it involves money? [SPEAKER CHANGES] It's actually a transfer of money. [SPEAKER CHANGES] Okay, that's right. [SPEAKER CHANGES] It's a net zero...yeah. All in favor say aye. All opposed? So ALH64 passes. Next amendment is AMH49, Senator Brock? [SPEAKER CHANGES] Thank you, Mr. Chairman. This is part technical and part substantive change. It restores the farmer's market to the previous form of how we were funding it. Senator Blue, and if you look at other items this is how we're taking the additional fees and fifty percent [??] that was returned to people not wanting to pay for the fee. It's very conservative in dropping the fee and get some money that we need to restore all the other farmer's markets. Also, if you continue on down there's a million dollar special fund that we did not touch with the purpose of giving agricultural safety net in case the receipts are different than the anticipation of what we anticipate. And a lot of nineteen and twenty three [??]... [SPEAKER CHANGES] Senator [??] has moved for approval. Any further discussion or comments? [SPEAKER CHANGES] Yes, Mr. Chairman, I'm not getting copies of these amendments. If I could please have copies it would be nice. Alright, I'm part-time. I'd like them here. [??] Senator Brock? [SPEAKER CHANGES] Well someone hand him, while we're here...since...since, you don't have them? [????]

Senator Bryant says she doesn’t have one. Senator Pate? [SPEAKER CHANGES] Most recent one I have is ALG 45. [SPEAKER CHANGES] We’re going to recess just a minute until we make sure everybody’s got AMH 49. Bryant? Has everybody got the amendment now? AMH 49? And Senator Bryant, this is revenue-neutral, I understand. [SPEAKER CHANGES] Yes, this just takes it back to as it was before the budget. [SPEAKER CHANGES] Any questions or comments on AMH 49? All in favor, say “Aye”. [SPEAKER CHANGES] Aye. [SPEAKER CHANGES] All opposed, “No”. Alright Senator, Amendment AMH 49 has passed. The next amendment is AMK 63, Senator Tillman. Carolina Center for the Advancement of Teaching. [SPEAKER CHANGES] Yes ?? [SPEAKER CHANGES] Speak into the microphone. [SPEAKER CHANGES] When did we start that? Senator, I’m reading this a little differently. Mine says the North Carolina Center for the Advancement of Teaching and for the Eastern North Carolina School for the Deaf. Both of those are in this amendment. Is that what you have, sir? Yes. These are to be held harmless according to this amendment and I ask for your vote. [SPEAKER CHANGES] Further discussion or debate in the committee? All in favor, say “Aye”. [SPEAKER CHANGES] Aye. [SPEAKER CHANGES] All opposed, say “No”. Amendment AMK 63 has passed. The next amendment is also for Senator Tillman – AMK 64. This is… you know about that? [SPEAKER CHANGES] Yes sir, I certainly do know about this one. This is for the Technology Center in the Manufacturing Solutions Center. We started a program there that was related to technical fields in the jobs that are out there. We did this to begin with with the Kolpin Foundation matching monies and we got the program set up. We didn’t put the second component in there, and that was the training of these folks – the technical training, and then the placement of these folks into these jobs that are waiting. It’s very much job-friendly and I ask for approval. [SPEAKER CHANGES] Discussion or debate in the committee? Amendment AMK 64 is before us. All in favor, say “Aye”. [SPEAKER CHANGES] Aye. [SPEAKER CHANGES] All opposed, “No”. That amendment has passed. [SPEAKER CHANGES] Excuse me, Mr. Chairman? [SPEAKER CHANGES] Yes, Senator ?? [SPEAKER CHANGES] Can you give the folks an opportunity to catch up with you as it relates to passing these amendments out? We’re just a hair short prior to them being introduced. Thank you, sir. [SPEAKER CHANGES] That’s alright. Let me just review the ones that we’re getting ready to vote on. The next one is AMD 57, Sergeant-At-Arms. And AML 13. You got that? AML 13? [SPEAKER CHANGES] We’re good to go. [SPEAKER CHANGES] Alright, let’s see. We’re on AMD 57, Apodaca. [SPEAKER CHANGES] Thank you Mr. Chairman, members. What this does is a matching public-private partnership to come up with a study for the future use of the Broughton facilities in Morganton. We don’t fund anything until they raise the 200 in private monies, and this will come out of the Department of Commerce roll, Economic Development Division. I ask for your support. It’s very important to that area, and this is being done for Senator Daniel. [SPEAKER CHANGES] Further discussion and debate on AMD 57, the Broughton Facilities? All in favor, say “Aye”. [SPEAKER CHANGES] Aye. [SPEAKER CHANGES] All opposed, say “No”. AMD 57 has passed, and the next one is AML 13. Senator Brown. [SPEAKER CHANGES] Thank you, Mr. Chairman. What this does is it deletes the provision directing DHHS to remove the enrollment cap for the Program of the All-Inclusive Care for the Elderly, or the PACE Program. It requires DHHS to extend the current imaging utilization management contract to achieve savings, and to issue a future RFP to achieve additional savings. It allows ?? to be reimbursed for costs associated with the…

Real property for inclusion in a state park on or near ??? and it provides $70,000 in DENR’s budget to assist with the management cost for Camp Sertoma. [SPEAKER CHANGE] Alright thanks Senator Brown. Any further discussion or debate in committee? Alright all in favor of AML13 say aye. All opposed no. Alright AML13 has passed and the final amendment for today is AMH50. Senator Davis. [SPEAKER CHANGE] Thanks Mr. Chair. Members, this has no fiscal impact and what it does is in, addition to challenging the board of governors to study feasibility of dissolving any constitute institution, it adds language that would also task the board to study the possible solutions of reversing declining enrollment. I would emphasize that it does not necessarily exclude the ability to study feasibility of dissolving. [SPEAKER CHANGE] Discussion and debate in committee? [SPEAKER CHANGE] Mr. Chairman. [SPEAKER CHANGE] Senator Apodaca. [SPEAKER CHANGE] Thank you Mr. Chairman. We have battled over this language in the budget we brought forth and we tweaked it and worked with the board of governors. I’d ask that we vote this down and leave the language as it is in the budget please. [SPEAKER CHANGE] Further discussion or debate? Senator Ford. [SPEAKER CHANGE] Mr. Chairman, the language that Senator Apodaca’s referring to, can I get a summary of that? [SPEAKER CHANGE] It’s in the budget bill, he has it. You want to review that? [SPEAKER CHANGE] Can you give me one second? [SPEAKER CHANGE] Sure. [SPEAKER CHANGE] Mr. Chairman thank you for consideration of a position about how to go about accomplishing a whole and I think it’s the language and I’m sensitive to it. I just want to make sure that the folks are trying to help a university be successful versus trying to help it close. [SPEAKER CHANGE] Thanks Senator Ford. Senator Robinson. [SPEAKER CHANGE] Thank you Mr. Chair. I’d like to ask Senator Apodaca a question. [SPEAKER CHANGE] Go ahead. [SPEAKER CHANGE] He’s not listening yet. [SPEAKER CHANGE] I’m listening to every word Senator. [SPEAKER CHANGE] Senator Apodaca do you recall the HPCU day on last year in the general assembly in making remarks? [SPEAKER CHANGE] Yes ma’am. [SPEAKER CHANGE] Okay, do you recall.. [SPEAKER CHANGE] Follow up. [SPEAKER CHANGE] Follow up. Thank you, I’m sorry Mr. Chair. Do you recall some statements as to the fact that we were not closing any universities? [SPEAKER CHANGE] Senator Apodaca. [SPEAKER CHANGE] I do and we haven’t since then. [SPEAKER CHANGE] Okay, I don’t remember any time limits on that. Senator Apodaca my other question is have you entered since that time in any discussions with the board of governors regarding where that study is now? [SPEAKER CHANGE] Senator Apodaca. [SPEAKER CHANGE] Not that I recall, I did not. [SPEAKER CHANGE] Follow up. [SPEAKER CHANGE] Follow up, I’m sorry. And so Senator Davis’ amendment talks about having some time to enter into those discussions, does it not? [SPEAKER CHANGE] It may. I read it a little while ago, I can’ t remember now. May I maybe help move this along? [SPEAKER CHANGE] Sure. [SPEAKER CHANGE] This is dealing with one specific institution that has been a chronic problem and it’s just trying to get our language right to get the board of governors to take a look at it and see what we can do and there’s some options out there they’re talking about from my understanding from staff who have conversed with the board of governors. So we’ve got the language how we wanted it and I just prefer to leave it like it is, but that’s at all it is. [SPEAKER CHANGE] Alright. Senator Davis. [SPEAKER CHANGE] Mr. Chairman may I ask a question to Senator Apodaca? [SPEAKER CHANGE] Sure. [SPEAKER CHANGE] Senator Apodaca if there’s possible alternatives..

That’s being discussed in the lieu of any conversations with the language that’s going into the provision. This will simply make it clearer because it adds language that simply says to study possible solutions and it does not exclude the solution. [SPEAKER CHANGE] Senator Apodaca. [SPEAKER CHANGE] To me that kicks the can down the road. We had the tendency around here to not face reality with certain situations. Now if we want to go down that path, that’s fine, but there’s been study after study done on this particular institution, I think Senator Robinson can attest to that. They’ve tried to find ways to make it go. If you all want to do it, that’s fine, but sooner or later we’re going to have to come to the realization that this institution is not able to stand on its own and we’re giving the board of governors the authority to make that decision. I don’t care how you want to vote on this. I’m going to vote against it. [SPEAKER CHANGE] Senator Davis. [SPEAKER CHANGE] Thanks Mr. Chair. Members, I would ask for your support of the amendment. This does not eliminate the ability to dissolve and in fact this is a pressing issue. If enrollment’s not able to turn then perhaps we need to look at the solution; however, there have been some various sort of efforts that are currently under way such as exploring how to market the aviation program and so forth at Elizabeth City State University. Again this does not distract and take away from the ability to still, if the board of governors conclude, of dissolution and I would ask again for support of the amendment. [SPEAKER CHANGE] Senator Tillman. [SPEAKER CHANGE] Mr. Chairman it is now and always has been in the purview of the board of governors to make recommendations and so far over the years they have tried everything under the sun to keep it open All we’re saying is we’ve played around with this thing, we’ve tried all your other things, you have not tried a study on closing or consolidating. We’re just simply trying to do that with this amendment, Senator Apodaca’s amendment not the one now. I don’t think there’s anything that would preclude them from showing another option but we are asking them for a plan and we’ll never one get one until we do. I don’t think it precludes anything that you want to do Senator Davis, I just don’t see that. [SPEAKER CHANGE] Further discussion? Senator Robinson. [SPEAKER CHANGE] Yes, thank you Mr. Chair. Senator Apodaca to you again, I think you remember during my time on the board of governors we had some similar situation with the UNC Asheville, do you remember? Declining enrollment, small school. You don’t remember that do you? [SPEAKER CHANGE] Honestly I don’t. [SPEAKER CHANGE] Well to your point Senator Davis we did the same thing on the board of governors. It was declining enrollment and this body gave the board of governors the time to look at alternatives in terms of what you can do and today UNC Asheville is a flourishing institution and I just want to say that in support of Senator Davis’ amendment. [SPEAKER CHANGE] Senator Ford. [SPEAKER CHANGE] One quick question either of Senator Apodaca or maybe even staff. Have the board of governors been consulted on this language and if they have then are they supporting this language? [SPEAKER CHANGE] Any answer over there? Did you all hear the question? [SPEAKER CHANGE] Denise Canada from fiscal research. I’m not sure that due to the restrictions of staff legislative confidentiality that I can discuss the Chair’s consultation or lack of consultation with the UNC Board of Governors but if a member were to give us permission to do so I would. [SPEAKER CHANGE] Thank you. Anybody in the committee want to respond to that? [SPEAKER CHANGE] Follow up. [SPEAKER CHANGE] Senator Ford. [SPEAKER CHANGE] I would think that would be a very very important and I have tremendous amount of respect for the board of governors and their decision making process and I understand what Senator Apodaca and Senator Tillman are trying to do with move this conversation along and I want to support it, but I want to do that in concert and harmony with the board of governors. One last point Mr. Chairman, I have been in contact with one of the leaders. [SPEAKER CHANGE] Mr. Chairman I think the staff member was going to answer the question if Senator Ford would let her.

is she gonna answer it? [SPEAKER CHANGES] I don't either. [SPEAKER CHANGES] I told her she could. [SPEAKER CHANGES] She said that she'd, it'd violate confidentiality so she wasn't going to answer it. [SPEAKER CHANGES] Apodaca just waived that. [SPEAKER CHANGES] You don't want to take up to that. [SPEAKER CHANGES] Let's just vote it, okay? I'm ready to vote it. You all ready to vote? [SPEAKER CHANGES] Vote it. [SPEAKER CHANGES] You all ready to vote? [SPEAKER CHANGES] I just have a brief comment. [SPEAKER CHANGES] Okay. [SPEAKER CHANGES] And that was just only in response to Senator Apodaca. I agree that it's important to send a strong message. I think this provision does while at the same time will tamp down on the panic that is now already running through northeastern North Carolina given the prior provision. And I think this just creates a more balanced approach that allows people to work on the problem and also understand that decisions have to be made at the same time. [SPEAKER CHANGES] Okay, thank you Senator Bryant. Alright, let's go ahead and vote on AMH