The pageants get settled. We get started. Everybody settle down. Everybody settle down, we get started. Can you hear me? can you all hear me? I don't think so. All right, everybody settle, we get started. There have been technical difficulties this morning. First I would like to recognize our pageants. On the senate side it's katland Avery from Winterville senator Davis. w e have got Marissa Bishop from Kerry Senator Barringer. Regan Weitz from Raleigh Senator Barefoot. Rachel Bass from Raleigh Senator Alexander and Elle Stevens from Morrisville Senator Curtis. And on the house side we have Mashantha Blue from White county Rep Hurley, Mile Hunks from white county Rep Gill, Gates McConnell from Chatham county Rep Reeves, Riana Moore from Rutherford Rep Hager and Mary Stewart Sloane from Mecklenburg Rep Bradford. Our Sergeant of arms today on the senate side we have Young Bay, Regis seals, Marvin lee , warren Hawkins and Joe Crook and on the house side Kent Louis, Matt Ervin, Charles Mercedes and Larry Hancock. So, I got it backwards, sorry. But anyway, appreciate the sergeant of arms for all they do for us. Today, we have with us the state budget director, Lee Roberts, who is going to go over the Governor's budget. Also from [inaudible] we have David Brown, Donna Cocks, Mercedy Blinton, Pam Lyman, Adam Berger man, Brian Comrad Pamkin Patrick, Nathan Naughman, Eren Maddson, Joe Callidey, John Sparrow and Jennifer Streak for questions later. I hope you get all your questions together as we move forward . and with that I ask you Lee to come forward and give your presentation. Thanks for being with us. [Speaker Changes] Glad to be here to present the Governors budget for the next biennium . I am Lee Roberts the state head director. Glad to be here with rest of the team from the office of the state budget management and before i get started i would like to thank them for all the hard work for pulling this budget together as most of you know, i am relatively new in the job as i started on the Labor day and i certainly wouldn't be able to do this without the hardwork and commitment of the professional team
in the budget office, so the state is fortunate to have them as a resource, in all matters relating to the state's budget. What I'm going to do is give a quick overview of the priorities in the budget and then talk about each one in just a little bit more detail. So, the most important thing we think about in this budget is that it's a disciplined budget, it's a conservative budget, it does not raise taxes. North Carolina's got a AAA bond rating from all three ratings agencies. There's only ten states in the country for whom that is true, and we have stronger credit metrics. We have better debt service ratios than the average of those ten states. So it's not an exaggeration to say that we're in the top five states, the top 10% in terms of the overall health of our balance sheet, and we'd like to keep it that way. This budget grows more slowly than inflation and population and obviously it's a balanced budget, consistent not only with the Constitutions, but with sound and conservative budgeting principles. As you all know, most of the general fund is already obligated by statute, we spend more than $3 billion a year on the retirement system and the health plan for state employees. Of the new spending in this budget, about 76% goes in three areas, it goes to Medicaid, the increases in Medicaid, it goes to funding enrollment in the K-12 system and the UNC system, and it goes to the pay raise for K-12 teachers, getting them all to a minimum of $35,000 a year. 76% of all new availability. Medicaid, we spend about $3.8 billion, 18% in Year 1, greater than 18% of our total budget in Year 2. We'll try to reduce spending where we can, if you're not going to increase taxes then you'll have to balance the budget managing spending is your only took, we sought efficiencies where possible. As you know, our revenue estimates are a consensus, revenue estimate generated by our office in conjunction with the Fiscal Research Division. There's a lot of talk obvi8ously about the revenue picture and our projection, the consensus projection is still just a projection. We'll know significantly more as we move into March and April and get the results from the individual tax return filing season. If we have more revenue than is currently projected, obviously we can revisit some of our priorities. One thing that I know everybody here knows, but I think is useful to just repeat is that this is not our money, and this is something that everybody in the administration, starting with the Governor, takes very seriously and that we think about everyday in the Budget Office. So, we'll collect almost $44 billion in taxes from hardworking North Carolina taxpayers over the next two years, and we have an obligation to use that tax money as efficiently and as accountably and as effectively as possible, and to spend it where it matters most. And if we can't spend it efficiently and effectively we should give it back. There's been some criticism of the budget for making tough choices, in the Governor's words, and in my mind, the day that the government officials have enough tax revenue to do everything they might ever want to do is the day that taxes are too high. Hard working North Carolina taxpayers have to made tough choices about their budgets everyday, every small business has to do that, and we believe the government should have to do that as well. In terms of spending money where it matters most, 56% of our budget goes to education, 70% of that is the K-12 system, 25% of our budget going to the Department of Health and Human Services, two-thirds of that is Medicaid. Another 11% going to Justice and Public Safety, that's DPS and the court system, and every law enforcement and corrections function. And so when you take those three priorities, that's about 92% of our budget. You take debt service out of that and everything else we do in government accounts for about 4% of our total budget, obviously excluding the Highway Fund and Highway Trust Fund spending. Fulfilling the pledge made in the last session to get all teachers to a minimum of $35,000, that spends about half a billion dollars in new funding, combined with the enrollment increases and some other increases in K-12 education in the budget. Combined with the $305 million that was spent in the last session on teacher's salaries, over a billion dollars spent on K-12 teacher's salaries
Is between the last budget and this proposed budget. We're also proposing increases in correction officers' salaries, that costs $60 million, a little bit less when it's fully phased in. We're proposing phasing that in in three years, beginning in Year 2. The corrections officers have not had an adjustment in their pay schedule since the mid 1980s, there's no reflection in the salary schedule of the danger of the prison in which they work, and so we believe an adjustment to the salary schedule for corrections officers is overdue. The step increase for the Highway Patrol, a reminder that we fund longevity for 40,000 state employees, and we're proposing an $82 million Salary Exception Fund, which we're calling the Salary Exception Fund, in contrast to a Salary Adjustment Fund, because we believe that the best way to spend limited dollars for salaries is to target them, rather than propose across the board raises, to target based on how difficult a position is to fill, how effective an employee is, the kind of leadership that a particular employee represents, and some of those positions include engineering, accounting and information technology, among others. Not in this budget, but something the Governor has talked quite a bit about and that you will see proposed from the administration shortly is bond financing, both for transportation infrastructure, and for general government infrastructure. These are targeted long-term investments, they're vital to the continued competitiveness of a rapidly growing state. We'll be paying for assents over 20 years that will last for 50 years. It's obviously a historically favorable time to issue debt from an interest rate perspective, and the size of bonds that we're proposing has been sized with the Debt Affordability Study in mind, and will not do any thing, in any way, whatsoever come close to jeopardizing our credit ratings. The budget also fulfills our commitment to help the disadvantaged, to help those who can't help themselves 18% of our population is supported by Medicaid, there are investments in this budget proposed for mental health, and for pre-K, and for other social services like Adoption and Foster Care. Just to go into a little more detail on each of those items. This is the growth picture, the budget does grow more slowly than population and inflation. Population plus inflation is the blue bar, the proposed appropriations are the mustard colored bar there, and we are continuing to enhance our reserve, strengthen our reserves. We allocating an additional $47 million to the Rainy Day Fund in this budget. The total reserves in excess of $650 million. I mentioned the revenue picture, the consensus forecast is for a shortfall between what was projected and what we now expect, of 1.3%, that's about $270 million. That's actually less than the average annual forecast error going back to 1987, the average error's been, annual error's been about 2.5%. This would represent a forecast error of 1.3%, and obviously is still just a forecast as I say. One key point from this page that I think often gets lost in the debate about revenues is that revenues are still growing very strongly, so the difference between what was budgeted and what we now expect is in the context of strong revenue growth. The anticipated growth in this budget, Base Growth in the first year of 3.9%, in the second year of 4.1%. And then just a little more detail on revenues, a number of these tax credits are scheduled to expire at some point during the biennium, mostly in the second year which is why you see larger costs on this table in Year 2. The credits are in effect in Year 1, but those are not new costs where you reflect existing law in the budget unless we're proposing a renewal of particular credits. We are proposing a renewed and modified Historic Preservation Tax Credit that costs about $18 million over the biennium. The Renewable Energy Credit is scheduled to expire next year. That's a very expensive credit the way it's currently designed, and our proposal is to renew it just for non-solar project. Solar projects account for about 90% of the cost of that credit, and that's projected in the out-years to start costing as much as, the range is
Five to five million dollars a year. so a very expensive credit if you knew it for solar much less expensive if you see if you knew it for non solar. we believe it's the non solar areas that I could still use support in the incubation period , the solar industry is much more matured. R & D credit, a key competitive credit that most of competitor states have a similar credit. you see that there renewing the credit for purchasing data sonar machinery and equipment purchases. There has been a lot of talk about the aviation fuel credit and then a small credit for parts and fuel in the motor sports industry, obviously a critical industry in North Carolina , one of which we have significantly competitive advantage. so these renewals Mr Juror are all reflected in our proposed budget. I mentioned the significant commitment to K3- 12 funding which that gives you a sense of growth and appropriations and recommended appropriations looking at the biennium. There has been a significant improvement in chartered school enrolment. we just thought this was an interesting data and that's projected to continue over the next two years. It's not quite as easy to project as it is to project a traditional school enrolment. but the forecast from, there has been very strong growth already as you see the forecast the green bars is from the department of public instructions is for continued strong growth that's reflected in our enrolment numbers for k3-12. Other highlights from the K3-12 BUDGET, I mentioned the teacher pay increased $35000 minimum. and then moving the funding movement along the salary schedule for all teachers that cost about $ 223 million over the biennium. all these numbers are biennial numbers. Funding fully funding the projected enrolment growth from the DPI 1400 new teachers , $307 million funding teaching assistance. $128 million over the biennium almost 2000 teaching assistants. and then our proposal to award highly effective teachers continuing the work that was begun in the last budget with creating the endowment to recognize and reward highly effective teachers proposing $15 million over the bi to continue that phase in. $17 million for class room material that includes instructional supplies, text books, IT equipments and IT resources including the home based program that includes significant local discretion on that relative mix of spending. And then continuing to fund Pre K which serves less than 27000 4 year olds across the state On higher education. A couple of things here. There are some targeted increases for U & C system and the community college system. There is also a reduction proposed in two areas of the U & C system and I will talk more about that later. $16 million over the bi , $8 million each year proposed for the medical school in Greenville ADCU. Fully funding projected enrolment growth about a $130 million in state division for the veterans over $11 million and allowing the community colleges to count the summer enrolment inner enrolment the formula which is a significant increase in funding for the community colleges. As you know they are funded on a different basis than the universities and K3-12. they are funded on actual enrolment rather than projected enrolment. And funding community college technology both their operations technology as well their technology and equipment to teach science technology, engineering and Math which obviously are critical in need. The upper right there, limiting the subsidy on private fund raising. We are proposing that no school in the U & C system would be allowed to spend more than a $1 million of tax payers money in funding their private fund raising efforts per campus. That saves about $18 million a year. It affects 12 campuses. There is also a proposed net real reduction of about 1.1% in the U & C budget , 1 % of the general fund appropriation , less than 0.1% of their total funding, come back to this in a minute. North Carolina spends a greater percentage of its tax revenues on higher education than any other state. And we believe as most people do , the University of North Carolina has been critical to our success and prosperity literally since colonial times. it's going to be vital for our continued competitiveness going forward. And that's reflected in.
[SPEAKER CHANGES] Commitment that North Carolina's taxpayers have made to the system, and that they will continue to make to the system under this budget. We believe that the 1% in general fund appropriations can be identified through efficiencies through shared services in IT, and back off as functions without in any way impacting academic quality or the classroom experience. This chart shows general fund expenditures per student against the ten most populous states, and we also threw in South Carolina and Virginia. This is a blended number that includes the community colleges. The community colleges are funded at about $2000 per student. UNC's funded at about $14,000 per student, and you see the per student average there significantly higher than the national average, and higher than any of, any of the other peers. Just moving back to what we'll propose on the Governor's Innovation to Jobs suite of proposals. The idea here is that we have a tremendous resource as I said in our, our universities. Our research universities are among the best in the country. They are highly productive in terms of their, their research. Where we have not done as good a job as maybe some other places is in turning that research into high-paying jobs. And so the, the Innovation to Jobs Initiative is designed to, to try to address that through a series of, a series of approaches, some of which are outlined here, of intermultiplier fund. Our proposal is not to use general fund dollars for this, but rather to use the escheats fund. This would be invested alongside private sector dollars. This is not the government picking winners and losers. This is acting as a multiplier for private sector investments into early stage, high growth companies. $5 million for the NC RISE program, which is a network for entrepreneurs and investors, and 7.5 million on selecting and helping to develop technologies developed in the universities and that are promising targets for commercialization. In terms of the transportation funding, obviously most of this not in the, in the general fund, $4.8 billion. Some of the highlights, $135 million in critical infrastructure, $51 million in road maintenance, $36 million in capital improvements, $10 million to ease congestion, particularly in rural and small urban areas. Our NC GEAR initiative, which most of you are aware of. This was something that was passed by the General Assembly shortly after the, the governor took office, is a, an effort to identify areas where government can be made more efficient, more accountable, save money. And importantly, this program runs out of the budget office, and we call it a program deliberately. It's not, it's not a one time project. If this is a report that sits on a shelf, then we haven't done our jobs properly. Our hope, and our aim is to institutionalize the effort of continuing to identify ways in which government can run more efficiently, and with better customer service. In the initial report, we've identified about 60 recommendations. They save $14 million in year one of the biennium, a little bit less than $60 million in year two. They save over $600 million over ten years on a present value basis, not on a, on nominal basis. And as I say, we intend to keep the effort moving. Some of the proposals, and as I say there are 60 of them, but some of the highlights include the proposal to combine the, the natural resources function of the Department of Environment and Natural Resources with Cultural Resources. The vital records function, which requires significant upgrading and modernization, doing a better job collecting debts owed to the state, rationalizing state-owned vehicles, getting much more proactive and, and assertive in managing workers' comp claims, which were a significant cost to the state, and encouraging local school districts to leverage their, their buying power to, to save money. Happy when I'm done with this, to take any more questions about NC GEAR obviously, or anything else. We've tried to, in this budget, bolster our reputation, of which we're proud, as the nation's most military
Very friendly state, a key part of that is the creation of a new Department of Military and Veteran's Affairs, which is designed to consolidate our existing efforts which are scattered across a whole series of agencies to provide better coordination, better customer service to active duty military and to veterans to do a better coordinated job in an effort to protect our bases and protect our military mission. This builds on the executive order that the Governor issued at the beginning of his term, funding for in-state tuition for veterans, $11.3 million. I would note that every comparison state that we looked at has a Department of Military Affairs, Veteran's Affairs and most states do not, that we looked at, provide an additional appropriation for in-state tuition for veterans. We are proposing that here, $11.3 million, so that's a boost to the UNC System that most states are not providing that we've seen. Encouraging the development of additional veterans treatment courts which have been successful so far, and a small amount of money to support a pilot program to train veterans to help fight internet crimes against children, a promising pilot program that takes veterans, specifically Special Forces veterans and gives them important job training. In the DPS budget, I mentioned Correction Officers salaries phase in over three years, beginning in Year 2. $21 million in Year 2. The step increase for the Highway Patrol, $3.7 million, %5 step increase, that affects about 700 of the 1,700 State Troopers. Getting ALE and the SBI and the Highway Patrol back on a vehicle replacement schedules, there's been a significant backlog in vehicle replacement for each of them, which is becoming a safety issue and increases our maintenance costs. And $2 million to improve operations and reduce the backlog in the Crime Lab. Also on the Court System, $16 million in two years for the Court System to address some of the costs that they've identified. Small amount of additional funding for Business Courts and $9 million for indigent defense, the Public Defenders, which clears their backlogging, gets them back on a more stable footing. As you know, their backlog has been building for some time. Significant focus on mental health in this budget, mental health obviously is both a public safety and public health issue. On the public safety side, $24 million in new facilities for prisons, behavioral health treatment units at eight prison facilities, and opening another 72 beds that already exist but have not been staffed at the facility at Central Prison. And on the public health side, $82 million, about half going to community mental health services, and the other half going to state mental health services, including one-time funding to open the new hospital in Broughton, at Broughton Hospital in Morgantown. Other funding in the DHHS bucket, more than $10.8 billion in DHHS funding. There's been a lot of attention to the Medical Examiner for improving their services and replacing their equipment with a proposal of $5.3 million in increased funding. I mentioned Adoption and Foster Care, a proposal on an increase of $15 million there. The NC Fast and NC Track Systems, which are information technology platforms for patients and for providers which help manage care and deliver services more effectively, they're continuing the roll out of those two platforms. And then on Medicaid. The Medicaid re-bases, these are the boxes in the bottom here, the proposed Medicaid re-base is $287 million in Year 1, $461 million in Year 2, and then in the lower right, there you see we're also proposing a Risk Reserve of $175 million for Medicaid over two years to reflect the risk of overruns in the Medicaid budget and tried to ensure that we're protected against that. In the middle, Medicaid reforms, Supporting the Healthy and C-Plan, and the ACO delivery model, there's a small amount of funding to continue to design that reform plan. It just shows the breakdown of DHHS state funding, it said 86% of it goes to Medicaid and to mental health. I'm now going to, very quickly, just, I'm not going through each one of these slides in detail, I'm just going to, very quickly
[SPEAKER CHANGES] Blame for each section. What we did in the part of the presentation that I just went through was try to organize things in a more thematic way, in the way that we think the general public and most people think about our spending priorities. But obviously not the way that, that the government is organized internally either in the General Assembly or in fiscal research or in the budget office. We're obviously organized in the traditional categories and so, in that context we provided these slides as a way of showing what the, the appropriation picture is in, in each of the categories. I'm not going to go through the bullet points in the bottom, you have them in the handouts. I'm happy to answer questions about any of them, but I think most of the highlights on each of these slides I've, I've covered already. What you see for public education is a 2.9% increase in year one, 3% increase in, in year two not counting the incremental enrollment increase, which would take you to 4.3%. In the UNC system I mentioned the 1% cut in the general fund appropriation, less than 0.1% of UNC's overall spending. That's a 0.5% general fund net reduction in year two. For the community colleges, 1.3% net reduction in year one, 0.8% in year two, but it's important to look at that in a context of what I said earlier about the enrollment formula and allowing the community colleges to count summer enrollment, which is worth about $16 million per year to them in year two and continues to make a meaningful difference to the community colleges going forward, and we've obviously been in close dialogue with the community colleges about that. One other thing about the community colleges is we do have a proposal to increase tuition by about, by $4 per credit hour, it goes from $72 to $76 per credit hour. That's still one of the lowest in the southeast, and one of the lowest in the nation. I think we're 44th or 45th in the nation in community college tuition after this increase. DHHS a significant increase represented largely by the Medicaid rebates that I discussed, 5.56% in year one, almost 10% in year two. Importantly-I think people know this-but the year two increase is not year over year, it's over the current fiscal year. So each number-the 5.5 and the 10%-are independent. They don't build on each other. For NER, you see a significant net reduction here but that's largely driven by the movement of the natural resources functions from the Department of Environment and Natural Resources over to the Department of Cultural Resources, and you'll see a corresponding increase in general government. So, that's not a net real reduction in the services provided. It's just shifting them from, from NER over to, to general government. Public safety a slight increase in year one, about 0.9%, and then a larger increase, 3.9% in year two, and that's the effect of the correction officer salary increase kicking in in year two, that $20 million. This is what I mentioned the, the increase-significant increase in general government represented largely by the movement into cultural resources of the natural resources function inside of DENR. The establishment of the Department of Information Technology, which we've talked a lot about, saves money through consolidation. We are proposing $2.7 million each year for the Military Affairs Commission recommendations. There is some other detail in here on the Innovation to Jobs Initiative. There's funding in here for the Housing Finance Agency. Most of that year one funding is proposed to come from the recent settlement that was reached with Standard & Poor's over the mis-classification of certain mortgage-backed securities. That's about $19 million in availability that's not a, that's not prospective money, that settlement's already been reached and agreed and Housing Finance Agency funding is, is scalable. They can spend less or more in a given year depending on how much, how much funding they have. Transportation a slight increase in year one, slightly greater increase in year two, 2.9%, and then capital improvements just quickly, 5% each year for
Resources with Florida's bruins $10,000,000 in Federal funding small amount of money of a typical Cement's voters Federal funding you're one and greater manure to four National Guard readiness centers and we'll talk about that in the context of our proposed bond issue as well $47,000,000 in armor from an so the city that prepared remarks to the MN was from afford the fifth amendment 0.5 for a job like all right to question its questions relate to resign under thank you (SPEAKER CHANGES) Mr. Chairman of ICN sub O question to ask about the university badge a nine is paid 17 idiots like 33 MG sale that more about the leverage of non state 5 to 36,000,000 ants and 27.9 million and I have another question of ill health like followed him so I thought here is meant to bury Islam is about $50,000,000 a year in taxpayer money being spent by the UNC System in their private fundraising efforts and our proposal is to calm and sites $32,000,000. News $32,000,000 spent in our proposal is to say that on a per campus base is no campus can spend more than $1,000,000 in taxpayer money in a private fundraising efforts benefits 12 of the 17 campuses the five that are not affected or ones we're currently spending less than $1,000,000 per campus him in taxpayer money and the thinking here was a bit two million dollars in taxpayer money is is quite a bit of money to go out and raise private money from your 19 and other supporters it sees $18,000,000 a year you think of the context of the calm of the correction officer increase for example and about pays for your of the correction officer increase simply asking universities to not too fond through their private fundraising efforts com the money they spend on the private fundraising efforts guides to follow up with dow look as though I get one million dollars since at the same amount for every campus regardless of the unsigned said the endowment to pay him will have done is capped each campus and $1,000,000 so under five it's been less than $1,000,000 in series of others did spend a little bit more than $1,000,000 and says CA, a relatively small reductions of most of the reduction comes with 17 reduction comes a handful of campuses their spending from significantly more than nine million dollars in taxpayer money so use Carolina would see a reduction in about $3.2 million from its he stayed about 5.8 million at UNC Greensboro about 3.1000000 thousand of the largest calm markets affected barrel racing very significant amounts of private money and therefore should have the availability from a private fundraising efforts to reform was I thinking about a distant you wouldn't mind a little question, but I don't think you (SPEAKER CHANGES) I've been very pleased to CV infusion of money into our mail Health System I regret that we made so many mistakes in the past that we're having to put mental health 90 into our prison system included in our community services earlier we would not be doing and IOO understand that was tenderly reconstructions but my question is do with factory's senses and a meeting of all services said city search meat markets party that there isn't anything that finding related to transferring ID get money over to the Illinois in CS is in about 42,000,000 artifacts notes not thank you consider 4 minutes ago chairman of other questions concerning the highway patrol in one nurse like 26 your proposed $3.7 million as of 45 percent step increase for all the state trooper should each year does that make the trip personal and settled in a legal action against a state does...........
Fund the whole 5% increase. Whether that results in a settlement of their legal action, I don't think we can answer that. I'm not sure they could continue to demonstrate harm with this funding, but I'm not sure I feel comfortable commenting on what they will decide to do with their legal action. [SPEAKER CHANGES] Follow up? [SPEAKER CHANGES] Yeah, follow up. What I'm looking for, you can respectfully understand you say in the way of a legal action, but can you or staff speak to monies owed to the troopers for not fulfilling the contractual obligations that the state has to the troopers? [SPEAKER CHANGES] I think we're gonna have to follow up with you on that, Senator. [SPEAKER CHANGES] Okay, Representative Hurley? [SPEAKER CHANGES] Thank you, Mr. Chair. My question is on page 10, slide 20. It looks like $42.5 million is going for an innovation, for the jobs innovation and you said it was coming from this SG Fund? Is that a loan, and will it still leave $200 million in there? [SPEAKER CHANGES] So, it's not a loan, but the idea is that, so only the $30 million is proposed to come from the SG Fund. The $5 million and the $7.5 million, those are proposed appropriations. So it's just the $30 million for investment, and the reason we think that's appropriate is, it is intended to be an investment, and if it's done properly that money is returned with a gain. And obviously there's no guarantee of that, but the idea is that this money will be invested along side private investors who have significant skin in the game and who themselves are incentivized according to the returns they generate for their investors. So, we're not replacing our judgement for that of the market, we're simply trying to amplify the impact of early stage investment in the state. [SPEAKER CHANGES] Follow up? [SPEAKER CHANGES] I'm gonna follow up. Does that still leave $200 million? I know the Treasurer was very concerned about leaving at least $200 million in that fund because it's not our money. [SPEAKER CHANGES] I think it ends up leaving at least $200 million in the fund, yes. [SPEAKER CHANGES] Representative Blackwell. [SPEAKER CHANGES] Thank you, Mr. Chairman, if there's time, I've got two questions, one relates to what you were just discussing about investing in education. I think you made the comment that this wasn't the case of the government picking winners and losers. If the government is not going to decide who gets these funds, who will? [SPEAKER CHANGES] So, our, this is on the Venture Multiplier Fund that we have up here, and the Innovation to Jobs Program was the work of a private and public sector task force that was a group of investors, a group of representatives from the universities and a number of people from the administration coming together to try to identify reasons why we haven't had the same kind of culture of private equity venture capital investment in the state, the same success commercializing innovation technology that comes out of the universities. So, if you look at a place like Silicon Valley or the tech corridor around Boston, we have what they have in terms of excellent, world-class research universities. What we don't have is the same amount of capital, or the same tradition of investors identifying promising technologies in the universities and figuring out ways to commercialize them. So that's the context in which the Innovation to Jobs initiative was launched. The idea behind the Venture Multiplier Fund is that we would set up with a group of private equity firms, North Carolina based private equity firms who were already established and already had a strong track record, an investment approval process in which they would be making investment decisions for their capital, capital that they raised from their investors and from which they have to achieve significant returns. And that we would invest along side that through some kind of formula, where we would, and that's still to be determined, but where we would match, say, for every two dollars they put in, we would put in an additional dollar. So, that's what I mean by not substituting our judgement for that of the private sector, we would require that these investments pass that private sector test from the third party investors who are incentivized to achieve strong returns. [SPEAKER CHANGES] Follow up? [SPEAKER CHANGES] Follow up.
But now I can still not be under senior comment from I understand that you have the private equity into cheese presumably coming to you and asking for money to help with whatever they had come up with what if I come up with Don mcquay as for more money than this year who decides which ones to get funding is that knocked somebody in the government will hold it is breaking the ones that are to be funded and others which will not get funded the finest in your court question correctly with what we're not proposing that more money would be a bill beyond what was proposed here so did the investment effort would have to make sure that it's allocating its resources to me to the highest and best use food not knew they would not have an unopened claim on artificial resources roof on this initiative with the amount that will propose to no more war followed by a moment of the Internet line of questioning I'm getting my second question I make up on page 15 I think it's like 30 coffee with reference to fast and she tried to chairs replaces legacy IT systems to more efficiently serve citizens and I providers and there's an increase of 22.9 million is actually play since the facts and seek rights because they are working towards the 22.9 to get them to work the way they were supposed to work after years ago is the latter it's to continue the role of an implementation and subtract are almost all the ones the spec going to do differently this time to be sure that the 22.9 gets the job done that we have been unable to two previous way, and that's a fair question and(SPEAKER CHANGES) I say those of been troubled programs are designed to replace programs that were they were much less effective and a rollout in the implementation is not gone the way I think of anybody originally hoped or or planned I think there is a sense from from dhhs me with this. Incremental funding bit but these programs will get on track and end at the end of the remedial work that's needed. To get these programs rolled out I think they are renting apartments and they are actually working better now than when they were in the past but as of Wednesday in your skepticism about the active in person fish and game of the season and are unwelcome to North Carolina State government Mr. Roberts thank you and Santana limited, sincerity about one and your mom correct an important and will manifest,(SPEAKE4R CHANGES) take licenses to chairman of 29 and not this message has to deal with the targeted from P increases for a bomb to city able to recreate O O people into state gov't outcry air levels of pain at wondering if this is done business with taking it seems like it's taking the place and across the board increase in pay for state employees and an island lighting Malik gets this is what the department's request that if you have heard from departments that this is what they preferred woman in the first five your questions bet that's correct we are proposing is in lieu of an across the board. Trees resize the import from the amount of money they would be required to do across the board pay increase 3000000 dollars in year one and $72,000,000 a year to a 1% across the board increases about $72,000,000 spent so we arrived at the money in your queue but you may, in an environment of significantly constrain availability our view is that the highest and best use of this money is rather than using across the board views were we have the most mean those are in these com of hard to attract for drinking fields was a significant of private sector demand for those those skills with respect to what the department's one at saint Mary's pretty widely so some departments, every department needs auditors calm and have trouble hiring and retaining those every department needs(SPEAKER CHANGES) I keep people vote from the nineties 1,000,000 people is thickened. And, some departments need other specialized skills like engineers, but not all women and there's there's more from specialized skills would appoint a former SP your windows three ..........
Broad bucket, so I think it really depends on the particular department and what they've been seeing on their efforts to attract and retain and motivate personnel. [SPEAKER CHANGES] Follow up? [SPEAKER CHANGES] And thank you, Mr. Chairman, and the other question has to do with the Standard and Poor's settlement. While I'm almost giddy at the prospect of General Government having an infusion of money into our little tiny pot of money in our budget, I have a feeling it's going to get chipped away at over time from other places. But, what I'd like to know is, you talked about a phasing in of that money or a, that it wouldn't come to us all at once, if I understood you correctly, that we would only get small amounts of it, or is it coming to us all at once, or? [SPEAKER CHANGES] It's coming to us all at once. [SPEAKER CHANGES] Oh, I think I heard something about some sort of measured infusion there. I don't know, maybe I just misheard. [SPEAKER CHANGES] Well, even if it did, I think that would not frustrate the intent of what we've proposed, since we're allocating much of it in our proposal to the Housing Finance Agency which couldn't put it all at once, anyway. But, that's not my understanding of how it comes in, it's a lump sum settlement of $21 million of which $2 million is a fine, so that creates another $19 million in availability. We though the Housing Finance Agency was an appropriate proposal for much of that funding given that the settlement was related to the misselling of mortgage backed securities during the financial crisis. The Housing Finance Agency, we believe, is a highly effective agency, leverages federal funds, creates jobs, puts people in homes. And what I did say is it's scalable in the sense that you're not, what we don't want to do is create a recurring obligation with non-recurring funds, so these are non-recurring funds. The Housing Finance Agency obviously would like to be funded at a particular level every year but it's not like most programs where if you don't fund it at the same level every year the program fundamentally changes. HFA just builds more or fewer houses depending on how much money they have, so that's what I was getting at. [SPEAKER CHANGES] Senator Bryant? [SPEAKER CHANGES] I have a question that a little bit follows onto Representative Fisher's question, and this is about the transfer of agencies to the Department of Cultural Resources. I'm assuming in that batch transfer is the Grassroots Sciences Museum, would that be correct, and then I have a follow up? Are they in that? [SPEAKER CHANGES] I don't think so, no. [SPEAKER CHANGES] Okay. I was just concerned though about that, that's good. The second question I though is, I worry that when we make this transfer, that there's some kind of commitment to adequately funding the General Government area, because as Representative Fisher says, at least in the almost ten years that I've been here, that part of the budget continues to get the short end of the stick, and I have historical sites, significant historical sites in my district that are all languishing. In fact, most of the one's I'm familiar with are languishing and I worry that then they get in the Gen-Gov area, resources lessen and they all leveled into a languishing category, and is there any response to that, or has that concern been raised or though about? [SPEAKER CHANGES] Well, it's a good question. Our proposal is driven by the fact that we care about the sites, both the natural resources sites and the cultural resources sites, not that we don't care about them. We're trying to put them in the best environment to succe3ed. And one thing we found was that within DNER, you've got two very different missions, two people doing fairly, two sets of people doing fairly different things. What the Natural Resources people and DNER are doing is very similar to what the Cultural Resources people are doing in terms of their management of their third party friends groups, for example. Cultural Resources is actually, in some ways, better than DNER is, or at least has had more success in some some areas. So, if you look at the friends groups for the parks, for example, they have not done very much to build up their friends group for the parks. Their 100th anniversary is coming up and we think there's an opportunity for them to really develop their private sector fund raising efforts which Cultural Resources is very good at. Cultural Resources obviously understands how to protect very valuable, irreplaceable state assets
Which includes not only the assets they manage now and the ones they'll be taking over from Natural Resources. We're bringing the expertise, the particular expertise over from Natural Resources, and we do think that they, as they start to review how they charge for some of these resources is, they do some comparison work with what similar attractions charge in neighboring states, that there will be an opportunity for them to generate more revenue on their own, as well as to develop, as I say, their private fundraising efforts. But this in not primarily designed to save a bunch of money, it's designed to make the management of these sites more efficient. From my office window, I can look at the History Museum and the Natural Sciences Museum. They're right next door to each other, I see school kids going in and out everyday, but they're managed by two different government departments, and to us that didn't make sense. [SPEAKER CHANGES] Senator Hise? [SPEAKER CHANGES] Thank you, Mr. Chairman. I wanted a few questions, because I haven't seen part of this, about the retirement system and what was the additional site contribution this year to the retirement system. And if you could follow up on that, how does that move us towards being a fully funded system, and what's the impact expected on future liabilities? [SPEAKER CHANGES] That's a good question, Senator, there's actually not a, there's not an appropriation for the retirement system in this budget, so what the retirement system, I'm trying to find the relevant page in the budget itself to refer to for you. But, what the retirement system does, this is page 5 of the budget for those of you who have it, what the retirement system does is comes up with a regular actuarial calculation of how much funding is required, similar to what you see for the heath plan. And the actuarial calculation for the retirement system, and now that I've brought you to the page, I realize it's not in this summary version. You do see it for the health plan there, and the reason, down at the bottom Salaries and Benefits, and the reason you don't see it for the retirement plan is there's not a new appropriation for it in the proposal. Their actuarial calculations are done by third party actuaries, as they're required to do, health plan does the same thing, and their calculation was that there was $45 million in excess funding for the retirement plan for the next year or so. The short answer is, I'm sorry to be confusing about this, but the short answer is there's no net new funding required, based on their actuarial calculations. [SPEAKER CHANGES] Follow up? [SPEAKER CHANGES] Follow up. [SPEAKER CHANGES] So, that would indicate that we've reached a fully funded retirement system, the obligations and inputs, if we return the seven and a half expected by the Treasury Department? [SPEAKER CHANGES] For this year, but it's a moving target. They have to do their actuarial calculations every year, and those change based on demographic considerations, based on the design of the plan. The health plan actuarial calculations, they change twice in the process of putting the budget together, so it's a moving target. [SPEAKER CHANGES] Senator McKissick? [SPEAKER CHANGES] Over here. First, I want to thank you for a really excellent presentation. You've arrived relatively recently and you're well steed to the details and I appreciate that. Two questions, you talked about this $82 million that is going to be established for salaries for exceptional employees. Of course, we know over in a number of vacancies in state government they've had these contracts, which have been non-competitive contracts where we've been paying people the equivalent of $475 an hour, and in some cases up to the equivalent of $800,000 a year for specialized services they've been providing. How do you see this particular fund working and functioning, because it's across all of the state governmental agencies, whereas you have unique positions within many of these agencies where we really need to get people in there with the correct skill sets, so that we don't enter into these contracts with outside firms paying excessive rates for basically skill sets that we could hire year-round employees to perform. So, how do you see this functioning and operating, and how, would an agency be able to actually access those funds to fill those unique positions within their respective agencies? [SPEAKER CHANGES] It's a very good question, because I do think they are related. A big part of what was seen it the, in our view, excessive use of these personal services
contracts. And when we talk to agencies about it, they say that part of the reason is that the difficulty in attracting and retaining some of this specialized talent. Our view on the personal services contracts, for what it's worth, is that they should be rare, but they--it's difficult to eliminate them entirely because there are some specialized services where it doesn't make sense to have somebody on staff, full time. A full-time FTE in state government is a very expensive long-run proposition. And when it comes to interpreters, for example, or real-estate appraisers, there's often specialized knowledge required that is best accessed through a personal services contract. But we share the objective of reducing significantly the abuse of those contracts, and making the use of them very rare. And I think giving targeted money to the agencies to spend on some of these high-demand positions is one way to do that. In terms of the method by which they would access the funding, the Office of State Human Resources has gone through an effort to revamp our performance-management system. They're redoing all job classifications, consolidating the grading and the banding, and that process is identifying a lot of these difficult-to-fill positions, difficult-to-retain positions. They have much better data, not only about turnover by job classification and about comparable private-sector salaries, but also about individual job performance. And so we think that gives us the tools to allocate this money where it can be used most effectively. SPEAKER CHANGES One quick follow-up, Mr. Chair, if I could. SPEAKER CHANGES Follow up. SPEAKER CHANGES One thing which I notice was missing from the budget, and we discussed it briefly on a prior occasion, but that's money specifically targeted toward the, what's been identified as the failing schools in this state. I mean, we've got 30% that have been rated at a D or an F level, where they serve student populations that really deserve quality education. Many of them are low-wealth students, but they're also students that deserve the quality of education that our state constitution compels us to provide. And it seems to me that there should be funds specifically targeted toward not just incentive pay for teachers to go into those schools, but programmatic changes that can really help them perform effectively in serving those student populations. If you could help address that, if you could. SPEAKER CHANGES Sure. I'll tell you a couple of things. First of all, we believe that there's a significant commitment made to K through 12 education generally in this budget. I mentioned the 2.9% increase in year one, and obviously half a billion dollars being spent in new availability on the K through 12 schools. So we think that reflects a meaningful commitment to improve the schools and help the schools succeed. I think another theme that we've had in trying to pull together this budget is trying to get away from one-size-fits-all policies, whether that's one size fits every LEA, or one size fits every teacher. And so the salary, the endowment for highly effective teachers, $15 million--we've asked the LEAs for ideas, for proposals on how that money could be spent most effectively. So each LEA, depending on the issues that it faces, can make proposals for how it should be spent. And our view is that people sitting in offices in Raleigh are not going to have the best idea of how to spend that money in the LEAs. And so that addresses some of the individual needs on a per-LEA basis that I think you're referring to. The other part of that is the $70 million in instructional supplies. So those have previously been allocated by fairly rigid formulas that are prescriptive with respect to what kind of supplies that are being funded for LEA. And what we've tried to do is consolidate that, so different LEAs can make different decisions about what mix of supplies and technology and instructional materials are appropriate for their particular school district. And so I think that theme of greater individual choice for the LEAs, hopefully combined with increased funding, hopefully helps address the issue that you mentioned. SPEAKER CHANGES Thank you for those comments. I would just hope that as this budget moves forward through the House and Senate there's a true dedicat
Of resources targeted for those failing schools. Thank you. [SPEAKER CHANGES] Representative Pendleton. [SPEAKER CHANGES] Yes, sir, welcome on board. [SPEAKER CHANGES] Thank you. [SPEAKER CHANGES] I have two questions, Mr. Chairman, I’d like to ask. One of them, has this administration given any thought in this budget to allowing correctional officers to be put under the law enforcement officers retirement. These people are locked inside of prisons all day long with the dregs of our society and the mental abuse they suffer is unreal. I just wonder has that been addressed? [SPEAKER CHANGES] I have not heard any discussion about that. It’s obviously something we’re happy to discuss. I do think that everybody recognizes the challenge that the corrections officers work under, which is why we’re proposing a new salary schedule that when phased in, fully phased in will represent close to $60 million a year for funding for correctional officer salaries. [SPEAKER CHANGES] Follow up. [SPEAKER CHANGES] Follow up please. [SPEAKER CHANGES] And was any thought given to trying to correct the low salaries that professors and instructors have in our community colleges. We’re right down at the bottom of the 50 states and was any thought given to that? [SPEAKER CHANGES] That was something that was discussed and something that we talked about with the community colleges and I think the new enrollment formula is going to, allowing them to count the summer enrollment is something that they’ve wanted for a long time. It’s as I mentioned $16 million for them in year two and I think as that kicks in that just creates more funding for the community college system generally and obviously one of those needs is for professor pay in some cases. So we do not have a specific proposal on that in this budget, but we think we’re putting the community colleges on a better long-term financial footing to address whatever needs they have including professor salaries. [SPEAKER CHANGES] Representative Michaux. [SPEAKER CHANGES] Thank you, Mr. Chairman. Mr. Roberts I have a couple of questions. One, you’ve talked about targeted pay increases for our state employees. Who’s gonna make that determination about who’s gonna get those raises and what are you gonna do about the other employees who have dedicated their work lives to the state and have done a good job. [SPEAKER CHANGES] So in terms of who determines, I think we have better tools to determine that maybe than we used to through the new performance management system and through better data from the Office of State Human Resources about competitive salaries for high demand positions. In terms of the other employees, we’re in an era of limited availability and so we have to spend the money where it makes the most difference and our view is that its highest and best use is to be spent in a targeted way rather than across the board without any reference to performance, without any reference to how hard a job is to staff and retain somebody in. I would also say that it’s not as though there’s not significant money going to state employees in this budget, so if you look at the big picture what the state budget is is Medicaid and personnel costs generally, and we spend, as I mentioned, $3 billion on the health plan and on the retirement plan. We’re funding 40,000 employees’ longevity pay which is something that most people in the private sector haven’t heard of and so there’s a significant commitment to state employees generally in this budget overall. [SPEAKER CHANGES] Follow up. [SPEAKER CHANGES] Yes, but the longevity has always been there for state employees anyway so there’s nothing, basically nothing new. Let me ask you about the teachers’ payroll if you will. Have you eliminated the cap that teachers can make as a result of the last move made on teachers’ salaries. We’ve got a cap of about $50-60 thousand right now. Have you removed that cap and how have you done it? [SPEAKER CHANGES] No, the same salary schedule remains in place. We’re funding movement on the salary schedule which hasn’t always been done and we’re holding harmless the teachers at the top end of the range so that nobody’s making less than they were the previous year under this salary schedule. We haven’t changed the salary schedule. It still remains in place so there’s a top end in that schedule. [SPEAKER CHANGES] Senator
One day, 16 and banking Mr. Roberts I just a couple of questions ID education: the top here a movie is going back from that if the sentencing of Atkinson gates for one man was stabbed to death about it and think it's a couple of games and turns of a disk goals and we know that there was called safe bets ability before been allowed the schools lost teacher assistants else we talk about involve a brawl and (SPEAKER CHANGES) Agassi and by Jim Brady is a robbery she would be shelved T chairs was Keith Connell and we know that the children and our employees are the ones who need health teacher assistants but I don't see an astounding rank any increase in terrace this is the any glaring consideration Moines creek CT Care assistance since 1970S think you saw the puzzle is to define the existing teacher assistants with the preparation will propose a man include teacher assistants in the enrollment formula going forward so they would be funded as as part of growing and follow gets cancer, and as I read the ones we should all birds to bomb BU University system by June 2 to question being action will eat up and down innovation of university innovation bring its phenomenal landslide days I just remember discussing it I sense it is going to be maximum length and today (SPEAKER CHANGES)I think you indicated its net will be manage privately with me if Lonnie RE Albers siding terms are whenever that broke the A's are taking purple tools are making sheared a university is about one to have an opportunity to be in the poll on the base LA Palma evening in terms of how the investments are made and are our idea and a lot remains to be fleshed out one on this proposal may look forward to working with you and your colleagues to do that but our idea is that the com, and the private sector would be we wouldn't put money into something that private sector investors one plane around money into but that doesn't mean that they're making me that there are solely running the program or solely making the investment decisions so when envisions from public sector control over public sector funds that no private sector from a body would have the ability to commit state farms were the same IP but they wouldn't be committed the most private sector investors are also committing funds number one and 10 number two and answer your question of universities affidavits a good point when we don't envision that this is just limited to be a large research universities is obviously in the senate and hot new ideas coming out of universities across the system and I am it's important for this from this program to either university chance to try to take advantage of that commercial as the technology will get his wallet Monday and, in a 999 concern here is that they're at the universities and I did very top deck and innovation projects like the NT was doing call Asher long (SPEAKER CHANGES) on in the others across the state when CE sick and those projects that we want some assurance and dolls will be able to get intent to deprive the landing Sierra what they can't offer because the universe is you get to grow the economy as slowly taking evidence this program was some was really conceptualize five of the governor's chief of staff, Stephens prod graduated and see central and you back as 2° from a season from his talk a lot about exactly the point to it to the extent that we com Friday were focusing just on the largest research universities and it would be missing some some very interesting very compelling research that could be profitably commercialize to this programming and we intend to take a look across the state synergy index finger was apparently serving your Mr. Roberts could you tell me what the driver is for read the need for traveling the state health plan expenditure please so the event that 35,000,000 going into the state health plan that's very similar to start the answer idea, retirement plan which is red bell choir to have regular third party actuary at police.............
Is done, and that calculation is done according to projections on the number of inter-rollees, the mix of benefits, demographic calculations about projecting who's going to retire, when. And we just take the calculations from the actuaries and put them in our budget, we don't do an independent evaluation of whether we think their calculations are correct. In my view, it would be inappropriate to do so, they're the experts in calculating their costs, and we take their costs and reflect them in what we propose. [SPEAKER CHANGES] Follow up? Yes, so are you selling us that the driver is really for the retirees, it's not the present employees? [SPEAKER CHANGES] Well, there's a whole series of drivers of costs in the health, I mean, maybe I misunderstood your question. The number comes from the actuaries, what drives the number is a whole series of factors, it includes the cost of health care which has obviously been growing and is somewhat unpredictable, it includes the number of enrollees in total, it includes the mix of employees between those who are active employees and those who are retired, it includes the utilization of services, it includes the mix of services that are available, it includes things that the health plan is trying to do to try and incentivize behavior through things like smoking cessation programs and wellness programs and things like that. So, the actuaries are charged with factoring all that in to try to come up with a nominal cost. They then have to discount back to a present value to try to make sure that the3 plan is fully funded. [SPEAKER CHANGES] Representative Whitmire? [SPEAKER CHANGES] Thank you, Mr. Chair, and a great brief, just a question, I may have missed it, but we have a very small but highly respected division within our government, the Division of Emergency Management. In my other line of work within the Northcom Homeland Defense Command circles and the FEMA circles, it's considered the best in the nation. They are experiencing a considerable amount of turnover, upwards of 50% most recently, because their salaries, often times, they're picked off by local governments when you have someone who's a subject matter expert, and certainly the private sector. One, did I miss anything that you have visibility on that, and two, I just want to bring it up as something we want to look at. [SPEAKER CHANGES] Well, I'm glad you brought it up because I think it's a good example of the phenomenon that we were just talking about, where it's very hard to attract and retain people with specialized skills, and we've heard the same anecdotes that as soon as public safety officers are trained it's very hard to retain them. We've address that specifically through the Highway Patrol through the step increase, but there's obviously other safety experts in Emergency Management and throughout the Department of Public Safety and in other areas, and to me that points up the need for this pot of funding that can be used in a targeted way to make sure we don't lose people who we have trained and add valuable skills. [SPEAKER CHANGES] Lee, I've got a question. In the two year budget, it looks like another $750 million on the re-base for Medicaid. That's after about, close to $2 billion in the past four, five years in growth of Medicaid. Is there any kind of reform that you've proposed to control some of those costs? I don't think there's any question about this being the driver of the budget and going from a little less than $2 billion to now, almost $5 billion in costs about over five or six years, that's not sustainable. Just, your thoughts? [SPEAKER CHANGES] Mr. Chairman, thank you. It's obviously the biggest driver of the budget and the least predictable one. I'd say two things, one is the projections from the Department of Health and Human Services, that's something that because it's so important and has been so variable in the past. I'm sorry, because it's been so variable and has been so expensive in the past, they've devoted a huge amount of resource to try to make that forecast more accurate. They have a new forecast model, as you know, I think that model is robust as best as we can tell, but it's also new, and any new model, particularly with something as complicated and with as many variables as Medicaid is still, the jury's still out with respect to that model. But, we believe that DHHS has done they best they can to forecast costs accurately. There's obviously not a great history of them being able to do so, which is why despite everyone's belief in the Administration that the forecasts are getting more accurate, we've propose this $175 million Risk Reserve which is obviously quite significant. It's over 1% of claims in Year 1, it's over 3% of claims in Year 2, but I think
To your broader question, the fact that it continues to consume an every growing percentage of our budget, it does point out the need for reform, which is why the Governor has advanced his proposal for the Accountable Care Organization delivery model, and why we're funded, I think, $2.2 million over the biennium to try to design that plan and put it in place. [SPEAKER CHANGES]Okay, Representative Dollar? [SPEAKER CHANGES]Just to follow up on Senator Brown's question. It's my understanding that 90% of the amount of the re-base is due to more lives being covered, more lives being served for a whole variety of reasons, including some federal actions and other things that we have no control over. Isn't the fact that their anticipating over 100,000 more individuals this upcoming year being covered by Medicaid, an additional over 100,000 more in the second year of the biennium? [SPEAKER CHANGES]So I agree with everything you said. Enrollment is by far the biggest driver of Medicaid costs and there's a whole series of reasons for that, you have population growth, you have an increase in the eligibility criteria, so federal law has changed poverty level to 138% of the poverty level. In effect, that creates additional eligible enrollees. All of the talk of Medicaid reform creates greater awareness of the Medicaid program itself, which has driven enrollment across the country, and so that is the biggest driver, obviously. Health care costs and utilization of those healthcare services are the other big drivers in the Medicaid program. I had not heard the 100,000 people number, but whatever they are projecting is reflected in our rebates. We don't have a separate projection in the Budget Office, separate from what's been generated by the department. [SPEAKER CHANGES]Representative Faircloth? [SPEAKER CHANGES]Thank you, Mr. Chairman, Mr. Albetra, here. Director Roberts, welcome, and thanks for your presentation. You mentioned several times, the private sector compared with the public sector, and I know we have, particularly I'm speaking to the court system. We have some problems with a very antiquated computer system, we still have many people looking at green screens, and it's hard for me to imagine a public sector, successful multimillion dollar company out there who's still doing that. Can you give me some feeling how you contrast those two, and how do we catch up and stay current in that system? [SPEAKER CHANGES]Well, we agree, there's obviously been significant deferred IT investment in the courts. What they requested was $10 million, $16 million in recurring and we've proposed $10 million recurring, beginning in Year 2, $6 million in Year 1. That gets them part of the way towards addressing the costs that they have. Fundamentally, overhauling their IT system, which is probably what's required is a fairly expensive proposition and very difficult to do in the context of a single year appropriation which is partly why it hasn't been done up until now. And to us, that set of facts, something that needs to be done but is very difficult to swallow in a single year, general fund appropriation, is a perfect candidate for proceeds of the bond issue that we're proposing, where the infrastructure is desperately needed, difficult to fund in a single year, that lasts for a long time. So, in addition to the new funding, the $16 million that we've proposed for the courts, we believe that part of their needs can be addressed through the proceeds of the bond issue, and we've discussed that with ASO. [SPEAKER CHANGES]Okay, last question is Representative Turner. [SPEAKER CHANGES]Thank you, Mr. Chair. Mr. Roberts, thank you for being here today, we appreciate it and your stamina. I wanted to revisit the idea of capping the university development expenditures at $1 million. For many of these universities, that's a significant reduction, correct? And having served as a member of the Foundation Board of UNC-Asheville as well as an Assistant Vice-Chancellor in their Development Office, I know the importance of the hard work that these offices
...do and it seems that with this cap we are tying their hands right at a time when they are facing growing budget pressures. So, my question to you is: was an analysis done in collaboration with those campuses that will be affected? And how this limitation would impact their ability to generate private dollars in support of their missions. [SPEAKER CHANGES] It's a good question and the first part of the answer is that everything that we proposed in this budget we discussed with UNC general administration. One of my predecessors, as you know, is the chief operating officer for the UNC general administration and, therefore, we have a very good dialog there and we try, generally, to discuss with all of the affected agencies as we're developing our budget proposals items that affect them. We have not gone and discussed with each individual campus. Probably not practical to do that, although I have had informal conversations with representatives of various campuses across the state about this and other items in our budget proposal. With respect to the specific impact. So, there's no question that if you're spending as, for example, NC State is -- about seven million dollars in state money on your private fundraising efforts -- that you'll see a significant reduction, about 5.8 million dollars, although NC State raised about a hundred and thirty million dollars. And so our view is that, of that significant funding, the larger the impact on the university, the larger the amount of money that they're raising and that they can fund that fundraising effort from the funds that they raise just like every other private sector institution does, just like every other private college does, just like every church does, just like every other social service organization does, most of whom would probably be delighted to have a million dollars in government money to go raise money from their alumni and other supporters. [SPEAKER CHANGES] Follow up? Okay. Chairs? Any questions? Lee, thanks so much for being here. Great job. With that, we're adjourned.