NORTH CAROLINA GENERAL ASSEMBLY HIGHLIGHTS: FISCAL AND BUDGETARY ACTIONS 2007 REGULAR SESSION PREPARED BY THE FISCAL RESEARCH DIVISION 300 N. SALISBURY STREET, SUITES 203 & 61 RALEIGH, NORTH CAROLINA 27603-5 25 ( 1 ) 733-4 10 www.ncleg.net-.iscalresearch FOREWORD This document provides highlights of fiscal and budgetary actions on North Carolina's FY 2007-09 Biennial Budget as enacted during the Regular Session of the 2007 General Assembly. In addition, this inaugural "Highlights" provides summaries of substantive legislation and an expanded view of the State's budget with summaries of selected program and budgetary information. Acknowledgements The Fiscal Research Division is a nonpartisan, central staff office which provides fiscal and policy information to the Legislature. Legislative Fiscal and Budgetary Highlights 2007 Regular Session Staff Assignments Director Lynn Muchmore Support Staff Debora Bridgers Agnes Perry Subcommittee/Departments/Coverage Analysts Budget Development House and Senate Appropriations Committees Marilyn Chism - House Statewide Budget Issues Karen Hammonds-Blanks Appropriations Bill Coordination - House Savings Reserve Account Susan Morgan - Senate Budget Technical Corrections Bill Coordination Evan Rodewald - Senate Joint Commission on Governmental Operations Program Justification Reviews Coordination Capital Budgeting/Planning Jim Klingler Information Technology Karlynn O’Shaughnessy Salaries and Benefits Mark Trogdon, Team Leader Marshall Barnes Stanley Moore General Government Administration Douglas Holbrook, Team Leader Auditor Amna Cameron Cultural Resources General Assembly Governor’s Office Insurance Housing Finance Agency Licensing Boards Lieutenant Governor Office of Administrative Hearings Office of Information Technology Services Revenue Secretary of State State Board of Elections State Budget and Management State Controller State Ethics Commission State Treasurer i Legislative Fiscal and Budgetary Highlights 2007 Regular Session Staff Assignments Subcommittee/Departments/Coverage Analysts Justice and Public Safety Correction Jim Mills, Team Leader Crime Control & Public Safety John Poteat Judicial Jean Sandaire Justice Denise Thomas Juvenile Justice & Delinquency Prevention Health and Human Services Department of Health and Human Services Melanie Bush, Team Leader Michele Alishahi Lee Dixon Denise Harb Andrea Poole Natural and Economic Resources Environment and Natural Resources Kristine Leggett, Team Leader Agriculture Andrew Pennock Commerce Kristin Walker Labor Transportation Lisa Hollowell, Team Leader Joseph Futima Bob Weiss Education Public Instruction (K-12) Jennifer Haygood, Team Leader Community Colleges Brian Matteson University of North Carolina Kristopher Nordstrom Richard Bostic Economy and Taxation Revenue Estimates Rodney Bizzell, Team Leader Finance Committees Barry Boardman Revenue Laws Study Committee David Crotts Economic Issues Joy Hicks State Bond Proposals Brian Slivka Fiscal Trends Commission Martha Walston Governmental Performance Audit Michele Nelson Electronic Information Management Christopher Black ii Legislative Fiscal and Budgetary Highlights 2007 Regular Session From the Director January 2008 To the Members of the NC General Assembly: The Fiscal Research Division is pleased to present “Highlights,” a compilation of selected 2007 legislative session fiscal and budgetary actions and related information. This document represents a departure, in content and form, from past Overviews of legislative fiscal and budgetary actions issued by the Division. First, since the General Assembly typically makes significant adjustments to the second year of its biennial budget, this publication will focus primarily on the FY 2007-08 budget. Additionally, past Overviews have focused almost exclusively on appropriations from general purpose tax and non tax revenues, often referred to as General Fund Availability. In contrast, this document includes information on the appropriations from all governmental or proprietary funds regardless of their source and formal classification. Specifically, this document recognizes items such as fees, gifts, and federal grants no matter whether they are deposited to the General Fund, Special Revenue Funds, Enterprise Funds, or other governmental or proprietary funds. The principal reason for this change in content is the new State Budget Act that took effect July 1, 2007. That law places new emphasis on Article V, Section 7 of the North Carolina Constitution, which (1) prohibits all withdrawals from the State treasury except as authorized by an act of appropriation, and (2) requires an accurate account of the receipts and expenditures of all State funds. The inclusion of all State funds creates a more realistic picture of legislative responsibility and authority. When General Fund departmental revenues are fully recognized, budgeted General Fund spending for Fiscal Year 2007-08 amounts to $35.9 billion rather than $20.7 billion. When all governmental and proprietary funds are recognized, the Total State Budget becomes $42.9 billion. This comprehensive view of spending should encourage more scrutiny of the State’s financial resources. The language of the State Budget Act also necessitates a clarification of key terms. Over time, the term “State appropriation” has been used interchangeably with the term “General Fund Appropriation” and has come to denote only the authority to expend money from that Fund’s general purpose revenues. This is unfortunate, as it masks the fact that the General Assembly must appropriate all money expended from the State treasury regardless of the source from which that money is derived. To be consistent with the emphasis of the State Budget Act, the term “State appropriation” or “Total Appropriation by Fund” as used in this document will denote the authority to expend any State funds. The term “General Fund Appropriation” will refer to the total authorized spending from the General Fund. And the term “Net General Fund Appropriation” will be used to refer to the appropriation of the General Fund’s general purpose revenues. Definitions of these and other key terms are included in the Glossary section of this document. iii Legislative Fiscal and Budgetary Highlights 2007 Regular Session From the Director (cont.) Finally, the change in the Overview’s content also warrants a modification in its format. The major component of prior Overviews was a modified version of the annual Joint Conference Committee Report on the Continuation, Expansion, and Capital Budgets. For the most part, the Conference Committee Report only details legislative actions that (a) modify the continuation budget recommended by the Governor, (b) expand operating programs, or (c) authorize capital spending; and then only as these require expenditures of general purpose revenues from the General Fund. Such limited scope is a source of frequent confusion among users. So while the Conference Committee Report will be posted on the Fiscal Research Division website and therefore conveniently available, the new format used in this and future "Highlights" will reflect a broader perspective. Substantive legislative action will be complemented with summaries of fiscal, budgetary, and program information for each agency and for selected programs and services within those agencies. Sincerely, Lynn Muchmore, Director Fiscal Research Division iv Legislative Fiscal and Budgetary Highlights 2007 Regular Session TABLE OF CONTENTS Executive Summary Total State Budget.................................................................................................................1 General Fund......................................................................................................................... 7 Other Funds........................................................................................................................... 17 Appropriations Subcommittee on Education Subcommittee Overview....................................................................................................... 25 Department of Public Instruction.......................................................................................... 26 Community College System ................................................................................................. 39 University of North Carolina System.................................................................................... 44 Appropriations Subcommittee on Health and Human Services Subcommittee Overview....................................................................................................... 53 Department of Health and Human Services.......................................................................... 54 Division of Aging and Adult Services .................................................................................. 55 Divisions of Services for the Blind and Services for the Deaf and Hard-of-Hearing........... 60 Division of Central Management and Support ..................................................................... 64 Division of Child Development ............................................................................................ 70 Office of Education Services ................................................................................................ 75 Health Choice ....................................................................................................................... 79 Division of Health Service Regulation ................................................................................