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Vajda: Eszter Vajda, Host
McCullen: Kelly McCullen, Legislative Week in Review
Henry: Johanna Henry, Legislative Week in Review
Easley: Governor Mike Easley
Perdue: Lt. Governor Beverly Perdue
Garrou: Sen. Linda Garrou, (D) Co-chair, Appropriations Committee
Snow: Sen. John Snow, (D) Cherokee County
Hoyle: Sen. David Hoyle, (D) Gaston County
Hunt: Sen. Neal Hunt, (R) Wake County
Berger: Sen. Phil Berger, (R) Minority Leader
Goodall: Sen. Eddie Goodall, (R) Union County
Adams: Rep. Alma Adams, (D) Guilford County
Kiser: Rep. Joe Kiser, (R) Minority Leader
Holliman: Rep. Hugh Holliman, (D) Davidson County
Stiller: Rep. Bonner Stiller, (R) Brunswick County
Cope: Dana Cope, Exec. Dir., State Employees Association of N.C.
Capps: Rep. Russell Capps, (R) Wake County
Hackney: Rep. Joe Hackney, (D) Majority Leader
Allran: Sen. Austin Allran, (R) Catawba County
Dannelly: Sen. Charlie Dannelly, (D) Mecklenburg County
Marshall: Dr. David Marshall, State Vet., Dir., Diagnostic Lab System
Aziz: Dr. Tahseen Aziz, Avian Pathologist, Dept. of Agriculture
Horner: Mary Horner, Histotechnologist
Cobb: Dr. David Cobb, Chief, Div. of Wildlife Management
Zaluski: Dr. Marty Zaluski, Dir., Emergency Programs
Vander Ark: Tom Vander Ark, Bill & Melinda Gates Foundation
Lee: Howard Lee, Chairman, N.C. State Board of Education
Miller: Todd Miller, Exec. Dir., N.C. Coastal Federation
Dalton: Sen. Walter Dalton, (D) Rutherford County
Robertson: Gary Robertson, Associated Press
Schreiner: Mark Schreiner, Wilmington Star-News
Durhams: Sharif Durhams, Charlotte Observer
McCullen: The Senate reveals its budget; we review the taxes cut, the money spent, and what happens to the budget surplus. State workers rally over pay raises; we hear what is a fair deal in their minds. And Johanna Henry follows the Department of Agriculture’s following of the bird flu, next.
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Vajda: Good evening everyone, I’m Eszter Vajda. Thanks so much for joining us.
McCullen: And I’m Kelly McCullen. Tonight a big show. State employees want a pay raise and some people want teenagers banned from chatting on their cell phones while driving.
Vajda: But we begin tonight with the Senate’s state budget.
STATE BUDGET
With a $2 billion surplus in hand, Senate leaders put together a budget in record time. The plan cuts sales and income taxes, increases pay for teachers and state employees, and raises the state’s minimum wage. The final tally on the Senate floor was 35 to 15 with a handful of Republicans voting with Democrats. Here are some of the other highlights.
Senate leaders boasted about how fast they got the budget out this session. They say the bill benefits all North Carolinians.
Garrou: This budget makes a 58% increase, percent of this budget is dedicated to education—including 8% raises for teachers, more financial aid for college students, enhanced job training at our community colleges. This investment in education is a huge one for North Carolina.
Vajda: The 58% works out to be about $9.7 billion slated for public schools, the university system and community colleges. The figure does not include proposed salary increases but does restore $44.3 million in recurring money previously cut to public schools. It has $515,000 for a pilot program to supplement pay for math and science teachers, $90 million for ABC bonuses as a part of the state’s accountability program, and there is also $127 million from the lottery proceeds that will go to school expansions. The lottery proceeds are not included in the education portion of the budget.
Also on the education front there is an 8% raise for teachers in public schools, the same that the governor proposed two weeks ago in his budget. Senators also include a 6% increase for university and community college teachers with a 2% bonus this year; $4.2 billion is slated for Health and Human Services with mental health as the biggest recipient--$430 million will go to mental health facilities, that includes two new hospitals to replace Cherry and Broughton. The budget also includes $104 million in new funding for various mental health community-based services.
In a separate provision 5% of the alcohol tax proceeds will be used for the mental health trust fund. The budget provides $1.8 billion for justice and public safety that includes more than $1.6 million to fund GPS units to help track sex offenders and $3.8 million for new positions such as new judges and 90 assistant district attorneys.
Snow: We also provided $200,000 to enhance North Carolina sex registry offenders to provide e-mail notifications to residents whenever a sex offender moves into their community.
Vajda: There are $578 million allotted for the repairs and renovations fund that includes $324 million to be used in the rainy day fund, the same as the governor’s proposal.
One of the biggest differences between the Senate’s and governor’s version of the budget is in the tax cuts. The Senate proposes the two temporary taxes be gradually rolled back. One would cut taxes on the state’s highest income earners by a quarter of a percent, bringing it down to 8%. The proposal also cuts the sales tax by a quarter of a cent to 4.25%. Taxes were raised in 2001 when the state was in a fiscal crisis and extended in 2003. The extensions are due to expire next year.
Hoyle: If the finance committee in consultation with the appropriation folks felt like it was the proper thing, the right thing to do is to reduce the income tax bracket from 8.25% to 8%. Those two taxes went on together. We feel they should come off together; both will be coming off effective January 1, 2007.
Vajda: The governor on the other hand proposed a decrease in the sales tax only. Also in the Senate’s proposed bill, state employees would get a 5% boost in pay, a bit more than the governor’s 4% proposal. Senators and the governor propose a cap on the gas tax; it is now at around 29 cents.
Besides the speed of the budget proposal, another difference in the budget this year is that it does not have many of the policy provisions that we have seen in prior budgets. Still there is a provision that raises the minimum wage from $5.15 to $6.15 an hour. The governor meanwhile proposed an 85 cent hike.
The budget also includes a repeal of the mandatory eye exams for kids entering school. Few amendments were introduced on Thursday; some of the ones adopted included tightening a provision for mental health funding and a full government audit. One amendment that did not make it in the budget but may be introduced as a solo bill was introduced by Republican Senator Neal Hunt.
Hunt: This amendment requires a criminal background check on all students admitted to the UNC system. I am concerned about an event that happened not too long ago, maybe a year or so ago, at one of our educational institutions where a young man with a violent, criminal background was admitted to a school and the evidence of his background was not really made available to the college. After being admitted this young man raped and murdered a young student.
Vajda: Senator Hunt, like most Republicans, voted against the budget. Many say that while the state’s economy may be looking up, the budget does not prepare for a downturn in the economy.
Berger: This budget is out of balance in terms of recurring revenues by $387 million. Now, we projected growth in the upcoming year that will cover that for next year, but as a practical matter we are adopting a budget that spends more on a recurring basis.
Vajda: Some Republicans add that while a quarter percent cut in taxes is good, Senate writers could have done better by rolling back both the income tax and sales tax to its original rate, especially with a surplus in hand.
Goodall: The cuts that you have in the budget are $146 million, which I am sure will be appreciated. But the $584 million, for example, in my county of Union would have meant $12 million in savings for a full year. I just want to say that is the kind of pork I would like to have taken back to Union County and I am disappointed I won’t be able to.
Vajda: As for the governor, despite some differences, during a press conference this week he praised the bill.
Easley: Their budget is very good on education; it is the best education budget that we’ve seen come out of the Senate in my lifetime.
Vajda: The House gets the budget bill next. We spoke to House Appropriations Committee chairs this week. They say the Senate’s version of the budget needs some work. They also say it should be stripped of all special provisions. Meanwhile some House Republicans we spoke to say they would vote for the budget as it is right now.
As a matter of full disclosure, 45% of UNC-TVs budget is funded by the General Assembly. Kelly?
McCullen: The House debate on a minimum wage hike kicked off Thursday afternoon. It is House Bill 2174 and it would raise the minimum wage to $6.15 an hour. The bill is amended to allow further increases should the federal government raise its minimum above the state’s $6.15. It passed second reading 68/39.
Adams: Today’s $5.15 an hour for those minimum wage workers will not do what the wage of $4.25 did in 1995. Mr. Speaker, it is nearly $2,500 less than the federal poverty level for a two-person family.
Kiser: There is a lot of technology out there that can take the place of workers. And that technology is going to be implemented and people are going to be out of jobs.
Holliman: A raise of this dollar is about 2% per year if you look at the last nine years and we would all be appalled if we didn’t give our state employees and our teachers and everyone else a raise of that manner.
Stiller: A wage increase would not reduce the number of jobs. Those jobs will still be there. It may reduce who is receiving those jobs and it may reduce that it is legal taxpayers that are being reduced and that those jobs may go to more illegal folks representative than they currently are.
McCullen: Debate resumes next week. Now the Senate wants the minimum wage raised by $1. The governor says 85 cents is enough but he is flexible and opponents say it will hurt business. You answered our survey and overwhelmingly you say it should be raised by $1 per hour. There you see it, there were the choices there; about 81% of you said the dollar, 13% said 85 cents.
Well, the North Carolina state employees see this year’s budget surplus as a time for a pay raise. About 150 workers met lawmakers Wednesday. State employees, mostly non-teachers, rallied at the Capitol then lobbied lawmakers for pay raises Wednesday. They are watching the Senate’s budget, the governor’s proposal and several House bills.
Cope: We are very glad to see that the Senate budget did better than the governor submitted, right? The governor submitted a 4% pay raise; the Senate said no, we are going to go at 5%. We are very hopeful that our friends in the House will throw back to the Senate for discussion purposes a bill that will include a 7% pay raise.
McCullen: Leaders in both chambers of both parties appear supportive.
Perdue: I am as proud to see the 5% in the Senate budget. I know there is going to be discussion in the House.
Kiser: For the past few budget years the employees, the state employees, have not been given raises that would be comparable to the increase in their family’s insurance. And we need to really do something for, to correct that.
McCullen: Legislative negotiation will decide what is a fair pay increase. The Senate, House, and governor are offering different percentages but agree on the issue. The State Employees Association is eying that 8% pay raise proposed for public school teachers but it expects a minimum 5% increase and hopes House negotiators can prevail with 7% hikes.
Perdue: We really do want state employees paid fairly and that is what this budget process is about.
Cope: Those things, right, that we prioritize need to be equitable and fair. We need to show respect and dignity to all of our public servants in North Carolina. And we appreciate the fact that our teachers are going to be receiving a high pay raise. But so should the rest of state employees and retirees for that matter.
Kiser: I don’t like different levels and never have. I believe that our state employees are valuable employees and they should be treated like teachers and everyone should get the same percentage increase in salaries.
Vajda: In other news a bill [House 1848] banning the use of blank checks when making political contributions is making its way through the House. The bill requires that checks be completed with dollar amounts, recipient’s name and date. The measure also dictates how a middle person handles checks when transferring it between a donor and a legislator. Lawmakers would keep private records and stay on top of any changes.
Capps: A lot of this is the appearance of misbehavior. Certainly I think it will take care of that part of it. Hopefully it will take away the perception so that people will say, “Maybe we can trust our elected officials.” I hope that is what it will say.
Hackney: The concern is getting innocently caught up in some situation and where one can be an intermediary and perhaps not realize that they are regulated by the law.
Vajda: This is one of the many ethics and campaign finance reform bills the committee is working on. The proposal stemmed from questions concerning campaign contributions made to Speaker Jim Black.
McCullen: Yes, House Speaker Jim Black now says he will back a phase-out of North Carolina’s video poker industries. Speaker Black has long defended video poker as a job-creating industry. But he says lottery ticket sales could now offset job and revenue losses should video poker be eliminated. The Speaker told the Charlotte Observer that it is a compromise and that is what the legislature is all about. Video poker machines may pay up to $10 in merchandise only and there are about 10,000 machines throughout North Carolina.
Vajda: A bill [Senate 1289] to ban kids under 18 from talking on cell phones while driving had a lot of senators talking during committee this week. Bill sponsors say the biggest cause of death among kids ages 15 to 17 is car accidents. They also say teens do not have the ability to multi-task as adults do. The bill has the support of AAA of North Carolina, the Commissioner of Insurance, and the Child Fatality Task Force. There would be not penalties or insurance points for kids caught but there would be a court fine of $125. Senators question the cost and why the bill does not include all drivers.
Allran: The question is would that be something that we could get done that is not so controversial? And if you check to see who is against this, if there is somebody against it, I will tell you who is against it—only people under 18.
Dannelly: In my opinion the bill does not go forward even though it may be quite a struggle to get what we really need. And that is that no person, teenager or old-ager, will use a hand-held phone while driving.
Vajda: Now because there were so many questions and comments during committee, a vote on the bill was postponed until next week.
QUESTION OF THE WEEK
And that brings us to our question of the week: Should teens be banned from using cell phones while driving? Log onto our website at unctv.org/legweek and let us know what you think; we love hearing from you.
McCullen: Three Democratic House Members want to cap the gas tax. Representatives introduced a bill [House 2384] this week doing just that. Taxes would be allowed to fall should gas prices drop. And only lawmakers could lift this particular cap. The legislation also expands a state of emergency to include economic well-being. That would allow state price-gouging investigation should the economy collapse or falter. Gas stations could not sell gasoline above market price during states of emergency when there are no alternative sellers.
Well, the Department of Agriculture makes up less than 1% of the state’s overall budget.
Vajda: But this time around in the face of avian influenza and other potentially devastating diseases, they have asked for some additional money. Johanna Henry has been on the forefront of the fight against the flu. Johanna joins us now. Johanna?
BIRD FLU
Henry: Eszter and Kelly, the North Carolina Department of Agriculture and Consumer Affairs are asking for a few million dollars of an $18 billion budget. They say it is a piece of the pie we can’t afford to ignore. It seems everyone is talking about avian influenza, or bird flu. The loudest squawking is about what to do before North Carolina birds become sitting ducks.
Marshall: Rapid detection, because that allows rapid response and you minimize the impact.
Henry: That is the motto of Dr. David Marshall, the state veterinarian with the North Carolina Department of Agriculture and Consumer Affairs. And this is the frontline of defense for avian flu and other diseases that would devastate North Carolina’s $60 billion agriculture industry.
Marshall: It is forcing us to store a lot of these large pieces of equipment, refrigerators and freezers, in the hallway.
Henry: Rollins Veterinary Diagnostic Lab houses the people running surveillance on these diseases and the equipment they need to find it.
Aziz: What we do usually, the first step what we do is just supply the bird with kind of this infectant. And the purpose of this is to prevent the feather from getting into the air and also to prevent any kind of, if there are any bacteria to get into the air.
Henry: If this were a possible case of bird flu Dr. Aziz would keep the birds under glass during the necropsy—an animal autopsy. While that isn’t the cause of death in this case, the lab has tripled its bird testing in the last three years from 85,000 to more than 200,000 last year. And starting in January, 11 birds from every flock are tested for disease before they are sent into the food supply.
Marshall: Well, I think it is just time that our state steps up to the plate and get really serious about our animal health and public health infrastructure. And the keys to that are sound diagnostic lab systems.
Henry: And that is why the department is asking for a piece of this year’s budget.
Marshall: Typically every year we are asked to revert money or do permanent cuts in our operating budget or give up positions to try to address the budget deficit.
Henry: They want to hire a nationally-recognized lab system administrator, renovate a section of the chemistry lab for more advanced molecular DNA testing, and the biggest chunk of money, $1.25 million, would go to study an expansion of the lab system. The total price tag is $1.6 million.
Horner: There is nothing routine any more. There are so many things coming through. You have to be, you have to have good equipment to get good results.
Henry: Mary Horner and the others in this lab make the bird samples into slides.
Marshall: If we don’t have the most modern technology we may not be able to detect a catastrophic disease as quickly, which may allow it to get out of control, which may have more impact on addressing it and eliminating it.
Henry: There are several ways avian influenza could reach North America and North Carolina, one through migrating waterfowl like ducks and geese. That theory says wild waterfowl migrating from Russia would bring the disease to Alaska and the west coast and from there it would spread east. But that is just one possibility.
Cobb: I am a waterfowl hunter and so for example I certainly plan to waterfowl hunt again this year for a whole host of reasons, not the least of which this disease has not been found in the U.S.
Henry: Dr. David Cobb is chief of the Division of Wildlife Management at the North Carolina Wildlife Resources Commission. He says they will collect samples from game birds this upcoming hunting season.
Cobb: Some of the other possibilities could be the movement of commercial poultry, could be the illegal movement of birds in general, whether they are domestic birds or wild birds, and there is a fairly significant illegal bird trade in the world. It could be legal wild bird trade. And certainly it could be migratory birds of several types. And lastly it could be the movement of either contaminated equipment or supplies or foodstuffs or those kinds of things.
Henry: Currently the Wildlife Commission sends the bird samples it collects to a lab in Georgia. Dr. Marshall says with more space some of those tests could be done at the lab in North Carolina. Dr. Cobb agrees convenience is a good thing.
Cobb: It is always beneficial to us to have a, you know, as timely a testing as we can get. In all honesty with some of the wildlife disease issues, some of the labs both in the southeast and across the country, they get a lot of samples. And so the timeliness of those tests sometimes varies between labs.
Henry: One other piece in the puzzle of avian flu preparedness is a huge computer database that allows the Ag Department’s Emergency Programs Division to track even the smallest outbreak.
Zaluski: You are able to use the map to understand what premise or at what facility is positive then you can look at the map and see which other facilities are in the area so that way you can see where you’d like to conduct additional surveillance and then check for positives or negatives.
Henry: Dr. Marty Zaluski heads the Emergency Programs Division. He says updating the system is a good value of taxpayer money. The department asked for $1 million for the database but they will probably end up with about half of that amount.
Zaluski: The economic engine of North Carolina is agriculture. So we feel that spending this very modest but yet critical investment on agriculture preparedness really serves the need of the people of North Carolina.
Henry: Back at the lab Dr. Marshall shows us a storage room that has been turned into a specialized lab. It is the only place they could fit the technology that is advancing faster than the building it sits in.
Marshall: The problem is is you are only as good as the environment you are working in and the technology you are working with.
Henry: Everyone we spoke with said there is no reason to panic about bird flu. They said unless you see dozens of dead birds in one area, there is no reason to get alarmed. They said if you see one or two, they probably died from something else. Now as for cooking and eating poultry or wild game, they say proper cooking kills any disease. Back to you.
SCHOOL PROJECTS
McCullen: North Carolina’s high schools receive a $10.5 million gift for alternative high school teaching. The Bill and Melinda Gates Foundation is helping the state expand on revolutionary learning methods. The Learn and Earn concept and the North Carolina New Schools Project allow high school students to earn college credit or some advanced job skills while also earning a high school diploma. It is an idea that fits the Gates Foundation’s belief that American high schools need fundamental changes.
Vander Ark: We intend to be a long-term partner here and I hope we can, I hope we can come back a couple of years from now and see two things, that a high school diploma in North Carolina means that you are ready to continue learning and to get and keep a good job. And second that every child in North Carolina has access to at least one really good school.
McCullen: The New Schools Project schools teach 400 or fewer students. Even large schools are divided into groups of 400 and those groups are treated like autonomous campuses.
Easley: We have 11 of those in place, 21 scheduled to open this fall, and then 20 additional beginning next year. These are the economic development themed schools; kids work as part of the curriculum so that they see the connection between the courses they take and the job that they want.
McCullen: The Gates Foundation’s $10.4 million grant gives $1.4 million for Learn and Earn early college high schools but $9 million for the New Schools Project, that kick-starts the New Schools Project plans ahead by years.
Lee: This is a tremendous bump because when we started out I think we were under the belief that we would get the first $11 million, the state would put in $10 million and then the Melinda/Bill Gates Foundation, a few years down the road, would come back with another 10. Of course the $9 million gives us an opportunity to accelerate even faster than what we had dreamed.
McCullen: Thirty more New Schools Project schools could come online depending on enrollment. The Gates Foundation gift covers more professional training and offers more guarantees that New School students will experience better work-based studies and academics.
Vajda Oysters are a$2.5 million industry but according to the North Carolina Coastal Federation, dockside business is down from a decade ago. They say it is partly due to environmental problems on the coast and land. This week a group representing the Federation held an oyster roast to raise awareness of the issue. They say while the General Assembly has funded several programs to protect oysters, more needs to be done.
Miller: They are in trouble because of environmental declines that have occurred over the last decade since then; as our water quality has gone downhill so have our oysters. The systems are more stressed so we have to revitalize them by not only doing the right things in the water but also managing what happens on the land.
Vajda: Several bills have been introduced this session to protect and restore oysters, including money in this budget.
McCullen: The Senate’s budget now sits in the House. Eszter speaks with Republican Senator Neal Hunt and Democratic Senator Walter Dalton.
INTERVIEW WITH SENATORS HUNT AND DALTON
Vajda: Senator Neal Hunt, Senator Walter Dalton, thanks so much for being here. It has been a busy, busy two weeks. Senator Dalton, the budget came out and it passed in record time and some supporters and some critics say that this is a good thing. What led to this quick crafting of the bill?
Dalton: Well, this is a bi-annual budget; we are coming back for the short session to fine tune the budget so it shouldn’t take that long really. We spent a long time last year crafting a two-year budget. We came back in—we were determined to move as rapidly as we can but as responsibly as we can and I think we came out with a good budget. It had the most bipartisan support that I have ever seen for a budget since I have been here. It saves for the future, it invests in the future, it gives tax relief to our citizens, the governor was very complimentary of it—thought it was the best budget he had seen. So we acted quickly but I think we acted very, very responsibly.
Vajda: Senator Hunt, Republicans have said in the past that the budget process is too fast and not transparent enough. What do you think of this year?
Hunt: Well, as far as I am concerned I still don’t think it was very transparent. I think some of the Republicans that were committee co-chairs were more involved in the process than your average Republican senator. For example, I would say I had minimal input on the budget process. And I think most of the Republican senators would say the same thing.
Vajda: Could you explain one of the issues that Senator Phil Berger brought up on the floor was that the budget finished before the actual fiscal deadline for bills to be filed. Can you explain that?
Hunt: I think he was just referring to the fact that we had additional time to discuss it, you know, if we had taken the time we could have—the Republicans would have like to have a little more input. We knew it was time to do that.
Vajda: Senator Dalton, there are very few special policy provisions in this budget as in prior years. Even though there is the minimum wage rate and the minimum wage from prior years, there were some policy changes. Why is this budget this year different?
Dalton: Well, again we wanted to move as expeditiously as possible. We tried to keep out any policy changes. There are one or two things, that generally happens, but it usually happens to a much greater degree. Back in response to the questions about the rapidity in which the budget passed; remember that a lot of local government cities and counties rely upon state dollars to do certain things. They have to craft their budgets also, so we are determined to, if at all possible, to have a budget by June 30th so they can rely on that, they can responsibly do their budgets and they don’t move forward in an oblivion not knowing what is going to happen. That is one of the reasons we were very focused on moving this process as quickly as we can. I think the people expect us to do that. You can’t win in this arena, you know it is either too fast or it is too slow, but we think that we have done what is right by the people in an expeditious manner. We are looking forward to working with the House to come up with the final budget.
Vajda: Senator Hunt, what about the special provisions? Was that something that fellow Republicans were looking for, in other words less special provisions in the budget?
Hunt: Well, let me go back quickly and respond to the last point. You know we are delighted that it was done expeditiously. I think that is important. You know but we’ve been here, too, and it would be nice to be included in that process.
As far as special provisions are concerned, I think just in general let me say that I think the budget has some great items in it, as you would expect that it would. When you’ve got $2.4 million extra to spend you would expect that we would be funding some good things and we absolutely did. But my complaint of course is that you know, how can we continue to spend at 8% last year and 9.5% this year when our population grows at 3% or so. It just won’t work—eventually we are going to have to pay the piper.
Vajda: Senator Dalton?
Dalton: The budget is totally imbalanced; we have made great strides over the last few years and fiscal responsibility. North Carolina has a triple-A bond rating. Only about five states have a triple-A bond rating. It shows our fiscal responsibility. USA Today has rated us the fourth most fiscally responsible state in the union. Again the budget is imbalanced. Contrast that to what has happened in Washington, the Congressional Budget Office in the year 2000 projected a $5.6 trillion surplus in the last six or seven years because of the Congresses’ policies, that has reversed to a $3.5 trillion deficit; that is a $9 trillion negative swing. Look at what we have done in the state government during the tough times that every state had a problem with recurring sources of money. Contrast this second year to two years ago, that gap was $1.2 billion. We have narrowed that by 150%, moving in the right direction. Every dollar that we budgeted will be there and again I think it is a budget that does save for the future; we put more money in the rainy day fund than we ever have before, close to $350 million in rainy day and disaster relief. The rainy day fund is over $650 million now, the healthiest I have ever seen it. We invested money in repair and renovations—we had some tough years we weren’t able to address some of the needs of the buildings that the state owns that are used to provide services to our people, so we invested $225 million there, gave tax relief on sales tax, gave tax relief to small businesses, froze the gas tax, stopped the transfer from the Highway Trust Fund, did all of those things and in addition we invested for the future, $100 million to our mental health system which is in dire need of those resources, we hired 90 DAs and 16 judges to work on sexual abuse, domestic violence, the methamphetamine problem. We invested in education, funding the enrollment growth, repaired a reduction we had to take during the tough years of about $45 million to the local school systems. So we have done a lot of good things plus teacher pay was an 8% increase to try to get us up to the national average, get people to go into education—we are having a hard time recruiting teachers. And state employees received a 5% pay raise. So that is the reason I think we got bipartisan support and there was bipartisan input as Senator Hunt has said. We have co-chairs who are of his party that are working on the budget, so again I think that is the reason we had a good vote and the governor is complimentary of it.
Vajda: Senator Hunt, is the budget good for everyone as Senator Dalton just—
Hunt: The fact is we had a huge surplus. And the other fact is we just spent it. So we had a great year. We had some huge unprojected revenues. Are we going to have those revenues next year? I doubt it. I can’t think of a single business I know that has a good year and spends all their money. Because what happens when the economy turns down? You are stuck with those pay increases, you are stuck with that spending, it is not something you can say, “You know we had a bad year last year so instead of your 7% raise, we had to cut you back.” You don’t cut back people’s salary so my point I think is that we should have saved more.
Vajda: Senator?
Dalton: Well, I, I would say we don’t project that we will have those revenues next year. We had a 12% growth in revenues this year, totally unexpected. Several things that factor into that—I won’t go into that—but our growth for next year we projected a very conservative 3.2% growth. So we are being very conservative in our projections. That is one reason perhaps we had as big a surplus as everyone was looking at is that we were conservative in our projections last year. So what we budget we want to make sure is there. And I think it will be in this budget. In fact I am confident of it.
Hunt: I think the average citizen will recognize if you have growth and spending in the 8%, 9%, 10% range and the population is increasing about 3%, that is not going to work. It is, this is just a basic difference in economic philosophy, political philosophy. You know do you want government to grow in excess of your own population growth? Or do you want government to grow in accordance with your population growth? If you want government to do more and more and more then I guess spending at 10%, 9% is appropriate. But if you want to have a lean government that allows citizens as much opportunity as they can have, then I think we are crazy to spend all this money.
Dalton: We didn’t spend all the money; we saved in the rainy day fund as I said. But what was it that he does not want to spend? I mean does—to not—they agreed with about a billion dollars, if I understood the argument on the floor, they liked the rainy day fund; they liked the disaster relief fund, the repair and renovations. They liked all the tax reductions; that is about a billion dollars. So what they would be doing is not giving the pay raises that we are talking about giving, they would not be investing in mental health, they would not put those DAs on the street to prosecute the criminal cases, they would not invest in education. I mean, you’ve got to take it from somewhere. So we felt those investments were important; they are going to build an economy. Again I would say to you that we have been fiscally responsible and always are fiscally responsible. His party in Congress is the one that created that $9 trillion turnaround. And that is because the Congressional budget does not have to be in balance; we have a Constitutional mandate that ours must be in balance and it is and that is the reason I think we got bipartisan support and I think the people will be very receptive of this budget and I think it builds a good future.
Vajda: Senator Hunt?
Hunt: Let me just say that we added approximately 6,700 new state employees; most of them were teachers. At the same time we didn’t lay off anybody. Now that just does not make a lot of sense. What we would like to do is be involved in the process so we could look at some of these departments and find out if there is any waste, is there anyplace we could cut? That just doesn’t seem right to have no cuts at all.
Dalton: We’ve been laying those people off for the last four years. We haven’t had net reduction in state employees except for teachers because we have such a growing student population. So, and talk about the reductions, I indicated that one of the spending items he talks about is really a restoration to our public schools of about $45 million that we had given a discretionary cut in years past. We restored that so they can invest in more things like technology and have the flexibility to use that money.
Vajda: Senator Hunt, besides the cap in spending, what else would you have wanted to see in that budget?
Hunt: Well, more tax reduction. You know that is what drives our economy, that is what generates all of this additional revenue is private enterprise generating this, these tax revenues. We are driving people away, driving corporations away, because of our high tax rates. Now we did stop the temporary tax.
Vajda: Both of them got cut.
Hunt: They did, and that is a good thing. And in fact there are several good things in this budget and I don’t mean to imply that it is all that bad but I just think—you asked me what I think we should have done, I think we should have more tax cuts.
Vajda: Senator—go ahead.
Dalton: I would just say we did have tax cuts, again for small business and the sales tax and freezing the gas tax, but if you wanted more tax cuts that means that you would not have given the pay raises to state employees and teachers and the mental health and the justice system that we did. We felt those were important. Any time you do a budget it is always a balancing process. But again we’ve been through some lean years, state employees and teachers have not received the raises that I think are justified, so that, that is part of the debate.
Vajda: Senator Dalton, let me talk to you about the state employees’ pay raise because the governor proposed four, you folks proposed five, and the House wants seven—are you willing to compromise?
Dalton: Well, we are anxious to see what the House does. State employees in years past have been pushing for a 5% pay raise, the governor had 4%. We thought it was important to try to hit that 5% for them. And the governor’s recommendation is what we followed on the teacher pay at 8%. Again we are trying to get that up to the national average and we have a very difficult time hiring teachers. In fact we are hiring a lot of teachers from out of state because we don’t graduate enough in our own programs in North Carolina. State employees, there is a great demand for those jobs but those people do an excellent job for us and they have been very, very patient. So we will see what the House comes out with.
On the community colleges and universities you will notice that there was also a bonus provision in there, because that is non-recurring money. We are very attentive to what Senator Hunt is talking about on the recurring/non-recurring issue, and again we’ve improved that 150% over the budget two years ago. And I think North Carolina looks very good when compared to other states on that issue.
Vajda: What else do you see as a stumbling block with the House while negotiations are going on?
Dalton: I never like to predict what another body is going to do. I think the pay will be an issue. I think the issue of low-wealth funding versus discretionary restoration will be an issue with them. We have had a great relationship with our House counterparts; we worked with them early in the process talking about the availability issues and some of the major issues that were out there. We anticipate that we will be able to work well with them once they get their budget. I think they will have some struggles finding what to do with that budget. We think it is so good that they just ought to approve it, send it right back, and then we can all go home. And I think the people would like that but I know they will put their fingerprints on it and we look forward to getting together with them.
Vajda: Senator Hunt?
Hunt: I just wanted to comment on that. You know I just, I don’t know of any organization in the world that would give one group of employees 1% raise increase and another group another percentage. That just, it just, it is a formula for bad morale in the institute, corporation or government or whatever it is. I have—I really like the idea of giving these folks a raise because they do deserve it, no question about it. But some of it needs to be based on merit pay as opposed to just an across-the-board increase so your bad employees, your bad teachers, get the same pay as the good teachers, bad employees in the government get the same as the good ones; it just doesn’t make sense. To generate the best you can get out of your employees you need to have incentive pay, merit pay.
Vajda: Senator Dalton?
Dalton: There is a salary adjustment fund that can be used in certain instances for that. As far as the discrepancy between the state employees and teachers, again it is a matter of supply and demand. I understand their argument; they feel like perhaps they haven’t been treated fairly but we are hiring teachers from Pennsylvania, West Virginia, because we don’t have enough here in North Carolina. We need to encourage students to go into the teaching profession; we need to get up to the national average. There is a great demand for most state employee jobs—that is not true across-the-board but in most of those jobs—and they are actually above the national average as a group overall. So again, you have tough decisions to make when you are working on a budget. It is easier to throw stones at a house; it is hard to build one.
Vajda: Senator Hunt, final question to you. Not many amendments by Republicans, in fact not many speeches on the floor during the debate, why?
Hunt: Well, we had a few and I think we covered the turf with the speeches we had. We did have an amendment that Fletcher Hartsell put forward; I think it was a great amendment, to accommodate audits being done in departments to accommodate the savings that we’ve been talking about. Let me just add one more thing, the governor I think proposed expendive capital at 5% to 5.5%. And last year we went 8%, this year 9.6%; this is after setting aside all of the reserves that Senator Dalton has talked abut. So I think we are spending an excess in that capacity.
Vajda: Senator and you?
Dalton: Well, just quickly—we are under the governor’s cap by $16 million. So I just wanted to make that clear and I agree with Senator Hartsell’s amendment; I think—I supported that; I think all the Democrats did.
Vajda: Thank you both for a fantastic discussion.
McCullen: The House is expected to unveil its budget by June 16.
Vajda: For more on this week’s happenings, Kelly sits down with three members of the Capitol Press Corps.
ANALYSIS SEGMENT
McCullen: We are joined by Gary Robertson with the Associated Press, Mark Schreiner with the Star News out of Wilmington and Sharif Durhams with the Charlotte Observer. Good to have you on gentlemen. Well, we are going to start with you, Gary; size-up the size of the budget this time around.
Robertson: Well, it is a significantly higher budget this year compared to a year ago. I believe this budget for the fiscal year ending July 1 is going to be $17.4 billion; this coming year’s budget is going to be $18.8 billion. A lot of it has to do with the fact that we have a surplus, a surplus of roughly $2 billion. So a lot is going to be spent. Things that really stick out to me are the sizeable numbers of construction projects, not including that there is also some borrowing that will be done on two mental hospitals and the sheer number of dollars spent on mental health services to help kind of move the mental health reform movement a little ahead. So it is a pretty significant budget increase.
McCullen: Mark?
Schreiner: Well, the Senate budget moves things ahead like Gary said—dollars and cents-wise there is a lot of policy provisions in there, too. And it was supposed to be a year when they weren’t going to do that and I also suppose that what is notable is what is not in there which is—where is all the pork? Senators filed dozens and dozens of special requests and as part of their strategy they didn’t include very many.
McCullen: Sharif, you’ve written about the so-called pork in the budget. How did you assess the issue when you looked over it and wrote an article on it?
Durhams: Well, it is funny, by weight alone there is a lot less pork in the budget, this was a lot thinner document than we usually get in these years and what happens is there are usually a lot of little allocations, $100,000 to a YMCA, $25,000 to this, you know, good programs that a lot of people support but that individual lawmakers go in and ask for. And a lot of that was not in the budget this time. Some Senators have been grumbling about it, some House members, too, because they don’t want to have all of the weight of putting those kinds of projects on their shoulders.
McCullen: Well, what is missing as far as special goodies in the budget as you see it covering Charlotte and the—
Durhams: For instance for my area, there had been a pledge a few years ago to give $1 million a year to this Johnson and Wales University, it is a private university that came in as part of economic development and the leaders of both chambers said, “We are going to give you $10 million in order to come in here, boost the economy, boost the tax base, and we are going to get more out of it than we have given to you. That is—you know a million dollars could have been given to that university but this year’s cut is not in the Senate budget.
McCullen: What about from the eastern North Carolina angle? What is in the budget that affects you down Southeast?
Schreiner: Well, Gary brought it up. One of the things that is kind of rare I think is that there are a number of major capital projects that maybe paid with cash. And among those are some big university projects and one of them is a new School of Nursing at UNC-W with $27 million, a sizeable chunk. So that isn’t to say that satisfies every need; one of the things that went on in the legislature this week was a lot of talking—as Sharif said it moved over to the House side saying, “When your version let’s come out, let’s get our special requests in there.”
Robertson: The Senate has also been look, we wanted to do some things for our local folks back home but we just decided there were to more important things to do with education and mental health and school construction and one Senator told me, hey, we wanted to get $5 million for civil rights’ museum in Greensboro, a big, important topic there but you know I—this was a Greensboro area senator saying we just had a full back on it. Now it remains to be seen whether this is part of a larger strategy to try to ultimately get that back in there.
McCullen: Now Gary, is anyone out there speaking up against the idea of passing a leaner budget without these provisions in it?
Robertson: I think there are some people out there that are pleased to see it being trimmed down a little bit. What is interesting is that some Republicans, and if you remember this week a handful of Republicans actually voted for the budget which is unusual in the Senate—some of them said, “Hey it is great that we are spending on some important projects but we could have used more of that money for tax cuts.” One senator said, “Let’s—we should use that money to phase out the Medicaid spending that counties have to do.” So it was surprising by the bipartisanship even though there were only six of those 21 Republicans actually voted for it.
McCullen: What is the dynamic here with less partisanship there?
Schreiner: Well, it is an election year and I—part of the budget’s dredge I think is that you put together components of the budget and then present it to your opposition and say, “I dare you not to vote for this. I dare you not to vote for tax cuts and for what appears to be a pork-less budget.” And I think that was a strategy certainly in the Senate. And then there is an additional layer of strategy that is a strategy in a sense against the House saying, you know, “Let’s see what you are going to do to what we think is a perfect budget?
McCullen: From your coverage standpoint, what lines in the sand are drawn as far as daring between the Senate and the House?
Durhams: Well, one thing we are going to have to figure out is if the Senate and the House are going to agree what goes in the budget bill, for instance. We have this minimum wage that is being talked about. The house is looking at passing it as a separate bill... The Senate included it in the budget. So the question is which track are they going to take? Are they going to do it as a separate bill and these kinds of things can actually stop legislation if they don’t agree on how to go about doing these kinds of things?
McCullen: Gary could principal alone stop a minimum wage hike, where there is a stand-alone bill, part of the Senate budget?
Robertson: I think it is too much of a popular issue amount the electorate that—they will find some say to pass it but the Senate, there has been some rumbling that the Senate would be difficult to pass a stand-alone, minimum wage bill because there are a handful of conservative Democrats that are more aligned with business interest, that say that, you know, a minimum wage hike double actually cost businesses tens of millions of dollars. So I—it is hard to tell but I think ultimately it will pass.
Schreiner: It is interesting, too—the minimum wage is about dollars and cents but it is not specifically bout appropriating tax money. It is not a state budget issue. And it is thrown in there as a way of leveraging the politics of the budget. And you notice that I, there are a number of policy provisions in there that do certain things. And this is something that the legislature has been criticized for; the eye exam requirement was a policy provision that wound up in the last budget agreement, so. These policy bridges can be very influential but on the dollars and cents end they are not connected to it.
McCullen: A dollar in the Senate, a dollar in the House, and a flexible governor’s proposal or do you see a dollar—is that going to be a slam-dunk as we asked last week?
Durhams: I assume if we get it, it is going to be a dollar. And we will, there probably will be a minimum wage increase. The governor when asked about his 85 cent-per-hour proposal said, “Hey it is flexible if they want to do a dollar, you know, I will consider that and look at it.” And I don’t think it is something that would cause them to reject the budget.
Schreiner: Well, as a matter of fact I think you said, “Well, that is what they proposed last year and I am willing to go with a reasonable proposal this year, even if it is a few cents more.”
McCullen: Taking a step back, Gary, what will the House do with this budget once they get their hands on it?
Robertson: Well, I think what they will do—I think they are starting to meet next week and talk about what’s in it but you know a lot of their work is going to be to go through all of these special projects that they have filed at the legislature, hundreds of bills. You know the bill drafting office just announced late last night that there were more bills filed in the House and Senate during the past bi-annual than since 1913. I mean almost 5,000 bills. And a lot of these House bills that have been filed this year are spending bills and Speaker Black says that he will have all those spending bills heard in Appropriations so I mean it could take a long time if they really mean that.
McCullen: What do you see happening with the House? Add to it, take away?
Schreiner: Well, they are going to tinker, you know. And there is—one thing that continues to change is that availability number and it is going to go up. The amount of money that is left to spend and—or the extra money, the surplus. And so there might be additional moves to spend more money in some way or to provide tax relief. You know they are talking about; obviously one of the very popular things is some cut to the sales tax rate, also to an upper-income tax bracket. Perhaps if there is more money there could be a discussion of corporate income tax.
McCullen: How much more money does that put in our pocket as consumers?
Durhams: Well, not necessarily a lot unless you are one of the more wealthy people in North Carolina. What they are talking about right now is a quarter percent cut in the sales tax which, you know that is 25 cents on I think $1,000 or 25 cents on $100. So that is not going to put a lot of money in your pocket but there is also a cap to the gas tax that is part of the bill. And there is a cut to the upper-income, the top tax bracket, by a quarter point. All of these taxes were raised by a half point in 2001 because the economy was struggling and so they are starting to step it down. And by next year the idea is that they could go all the way down by a half cent.
McCullen: Talk about video poker, there has been a change of position out of House leadership. Explain that.
Durhams: Sure. Well, House Speaker Jim Black has been a big defender of video poker and he still defends the industry. He had a press conference this week in which he said, “You are potentially losing hundreds or thousands of jobs if you get rid of this industry.” But a lot of people want to get rid of it; the Senate has voted three or four times in the past few years to get rid of it. And Jim Black has finally said, like, “Well, let’s finally ramp this down, let’s have a year-long period in which we start getting rid of some of the video poker machines and phase it out.” Part of the reason he says that this is okay now is because we have the lottery and perhaps some of these people who work in the video poker industry could work selling lottery tickets.
McCullen: What does Speaker Black’s change of heart mean, Gary?
Robertson: What does it mean? It means that the video poker industry may have to look for different work. It also reflects, and I am sure Sharif wrote this about the fact that he has had some legal troubles related to donations that he has received in the video poker industry, some of that money that donors contributed illegal money. And the speaker apparently wasn’t made aware, wasn’t aware of that. But that is part of the dynamic here that maybe lead to his change of heart.
McCullen: What about the point that he makes that the lottery coming in would offset any job losses and lost revenue for small business, Mark?
Schreiner: It is a rationale. And he is going to need one to change that point of view other than to say, “Well, I changed my point of view.” One of the—he has been a defender of video poker and his line of defense has been that it is a business like any other with workers, particularly those who do menial kinds of work or make low wages, and that it didn’t seem fair to eliminate the industry and eliminate jobs. And so the rational now is, well the state lottery is a form of gambling and it will provide jobs for these folks.
McCullen: Well, it brings up the ethics, the ethics bills flew across the floor it seems last week. This week Representative Hackney slowed it down a bit to digest some of the larger reform bills. How complicated does lobbying reform get and ethics reform get in the short session with all of the legislation?
Durhams: Well, it is always complicated and I think part of the reason it slowed down is because you have to deal with some of these other issues like minimum wage, like getting the budget through. I would imagine there is going to be some kind of ethics reform that comes out because the Democrats desperately need it, partially because of these things that we’ve been talking about with Speaker Black. Video poker is not the only trouble that he has. And this reflected on the Democratic Party and everyone is going into elections and so they are going to have to pass some kind of ethics reform.
Robertson: And it is a tremendous undertaking because they spent the whole session last year just to deal with one part of it, which was a revamp in the lobbying laws. Now they want to change those again and they are dealing with overhauling the executive and legislative ethics. So there are a lot of pieces in this puzzle and they realize this week there are a lot of what-ifs about what will happen in certain situations involving lobbyists they need to look at.
Schreiner: Right, and on top of that is the other final piece which is campaign finance reform, which is where all of this started and they had a discussion this week about requiring training for campaign treasurers which is something that came up in a reform bill last year but was sort of watered down to where the Board of Elections would send out a DVD to treasurers as opposed to requiring formal training. And so, yes, it is complicated. And one thing I hear when I talk to some lawmakers is, there is a little grumbling about unintended consequences, are we going to get unfair accusations after these things come out? And I think part of that comes from the speed at which things are moving and the inability to sort of absorb all of that and ask all of the possible permutations and what can happen if these bills pass.
McCullen: Gentlemen, thank you so much for being on Legislative Week in Review.
Vajda: Finally tonight a sad goodbye to a friend and an integral part of Legislative Week in Review. After 12 years with the show, associate producer Mary DeMollie is moving on to new opportunities.
McCullen: She is the little voice in our little earpieces that talks to us during the show. Mary, thank you and we will miss you.
Vajda: We certainly will.
McCullen: If you have any questions or comments about our show e-mail us at LegWeek at UNC-TV.org. That is our show for this week. I am Kelly McCullen.
Vajda: And I am Eszter Vajda. Have a terrific weekend everyone.
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