On Monday afternoon, 76 days after the new fiscal year (FY) began, Speaker of the House Tim Moore (R-Cleveland) and President Pro Tempore Phil Berger (R-Rockingham) held a press conference to unveil the details of the new $21.7 billion spending agreement.

With the current continuing resolution (CR) set to expire at 11:59 p.m. on Friday, September 18, both chambers plan to vote on the measure this week. Speaker Moore and Sen. Berger stated at the press conference that they are hopeful that Governor Pat McCrory will sign the budget into law before the CR deadline passes.

The Senate is scheduled to take their first vote on the budget today, Tuesday, September 15, with the final vote on the budget taking place tomorrow, Wednesday, September 16. House rules require the chamber to release the document to the public 72 hours before taking a vote. The chamber plans to vote on the measure on Thursday, September 17, followed by a final vote on Friday, September 18. Speaker Moore stated on Monday that the chamber is considering taking the final vote early Friday morning, shortly after midnight. After receiving approval from both chambers, the budget will go to the Governor’s desk for the final signature into law.

Additionally, it is expected that the legislature will be taking up the conference reports for HB 117, NC Competes Act, and the Medicaid reform bill, HB 372, next week. The conference report for HB 117 is expected to include several other economic development policies, including details of the revised Job Development Investment Grant (JDIG) program.

See below for the highlights from each section of the state budget.

Agriculture & Natural Resources

  • Provides for $1 million in FY1 and $2 million in FY2 for tourism funding.
  • Expands the well-drilling initiative for agriculture, AgWRAP.
  • $500,000 for shale class exploration.
  • Funds for dredging of the coastal inlets.
  • $13.6 million for the Biotechnology Center.
  • Protects the oyster industry. Prohibits oyster shells from being used in commercial landscaping.

Economic Development & Taxes

  • $3 million for the OneNC Small Business Fund.
  • $30 million for the Film and Entertainment Grant Fund.
  • $2.5 million a year for Rural Economic Development Grants.
  • Funds the Job Maintenance and Capital Development (JMAC) Fund.
  • Expands the JDIG program.
  • Reduces the personal income tax rate from 5.75% to 5.499% in 2017.
  • Increases the 2016 standard deduction by $500, totaling $15,500 for married filers.
  • Extends the historic preservation tax credit, which had sunset at the end of 2014.
  • Restores tax deductions for medical expenses and expands the tax deduction for all people. The policy ended during the 2013 tax reform and was for senior citizens only.
  • Expands the sales tax base. Instead of the Senate’s proposed sales tax redistribution plan, the money from the expanding sales tax base will go to rural counties that do not fare well under the current tax distribution system, for economic development and public education.
  • Allows local governments to charge a municipal vehicle tax, up to $30 per vehicle. Currently, the tax is capped at $5.
  • Continues the corporate income tax rate reduction trigger, which is expected to drop to 3% in 2016.
  • Beginning in 2016, phases in single sales factor over three years.
  • Repeals the bank privilege tax in 2016.

Education

K-12

  • Provides an additional $14 million to the opportunity scholarship program in FY2.
  • Increases the funds for Special Education scholarships by 6%, which will increase scholarship grants up to $4,000 per semester for eligible students.
  • Increases the starting teacher salary from $33,000 to $35,000.
  • Fully funds teacher assistants (TAs) and requires that those monies be used only for TAs.
  • Fully funds driver education. Includes provisions for comprehensive data collection and a study of how to improve the program.
  • Reduces class size in first grade to a 1:16 teacher-student ratio in 2016.
  • Funds the School Connectivity Initiative, which will bring broadband and WiFi to all public schools in the state.
  • Increases funding for textbooks and digital learning resources.
  • Establishes a new definition for low-performing schools and school districts. Mandates the implementation of improvement plans.
  • Allows the State Board of Education to consolidate county school districts that share a border.

Community Colleges

  • Increases tuition in the 2016 spring semester by $4.00/credit hour.
  • Funds in-state tuition for veterans.
  • Mandates the Community College System and the State Board of Education to collaborate on a program to deliver mandatory college developmental math and English classes for students in their high school senior year who do not meet specific readiness criteria.

Universities

  • Funds in-state tuition for all veterans.
  • Sets aside $2 million for the Western Governor’s University. The University will receive the $2 million for a new campus after they raise $5 million.
  • Requires the Community College and UNC Systems to collaborate in a study to establish a deferred admission program that will divert academically at-risk students into the community college system. Upon completion of an associate’s degree, the student receives guaranteed acceptance into a UNC System school.

General Government

  • Establishes a new Department of Military and Veterans Affairs.
  • Establishes a new Department of Information Technology.
  • Transfers the state aquariums, parks, and zoo from the Department of Environment and Natural Resources to a newly-established Department of Natural and Cultural Resources, in an effort to consolidate the management of state attractions under one department.

Health & Human Services

  • Establishes the Medicaid Transformation Fund, providing $225 million in funds over the biennium. This money is to be used transform the state’s Medicaid system from fee-for-service to a fully-capitated, managed care system.
  • Does not make any changes to the state’s certificate of need (CON) program. The Senate’s version of the budget proposed a phase-out of CON over several years.
  • Requires hospitals to publicly post how much charity care they provide each year.
  • Raises the foster care age from 18 to 21.
  • Includes funds for improvements to the medical examiner system.

Justice & Public Safety

  • Provides $2 million in recurring funds for expanded bed capacity for adjudicated juveniles in contracted and state-run facilities.
  • Funds an additional 72 mental health beds at Central Prison, and includes another $5.6 million for mental health behavioral treatment units at eight prisons.
  • Offers $2.5 million in grants for body-worn cameras by local law enforcement agencies.
  • Includes funds for cameras in highway patrol vehicles.
  • Provides funds for court modernization, including recurring funds for court information technology initiatives.

Transportation

  • Lays out the blueprint for the $2 billion infrastructure bond for capital projects. It is expected that NC voters will vote on the bond during either the 2016 primary or general election.
  • Repeals the transfer of $216 million from the Highway Fund to the General Fund.
  • Increases all Division of Motor Vehicle (DMV) fees. The increase in the fees will be used toward funding additional Strategic Transportation Investment projects and DMV modernization. The fee increase is the first one in a decade.
  • $440 million in additional road funding.
  • $70 million for port modernization.
  • Additional funds for the bridge program.
  • Caps the state funding for light rail projects at $500,000 per project.
  • Increases the statewide cap for turnpike projects from nine to eleven, total.

Other Areas

  • Victims of the state’s eugenics program will receive a second compensation payment of $15,000 each. Each victim has already received $20,000 each.
  • All state employees and public school teachers will receive a $750 bonus.