Final Budget Released: Cause for Concern for NC Children

The final legislative budget does not prioritize children.

The budget puts almost no funding back into public education, letting stand the harsh cuts that were enacted last year. A five percent increase to Health and Human Services is mainly due to increases in Aging and Adult Services and Medicaid. No restorations are made to NC Pre-K and only conditional restoration is made to Smart Start. No restorations are made to tobacco cessation and prevention program funding. Additional cuts are made to the juvenile justice system.

On a positive note, NC Health Choice (the state health insurance program for children) and an important high-risk pregnancy clinic at ECU are both funded. These are key Action for Children priority items.

The final budget increases total funding for state government by just over one percent when compared to the budget approved last year. The Governor’s proposed budget increased funding by 4.9 percent. The legislative budget does not include the temporary sales tax increase that allowed the Governor to invest more heavily in public education.

Below are highlights from the Health and Human Services, Public Education and Juvenile Justice sections of the final budget. A detailed line-by-line comparison of the Health and Human Services and K-12 Education portions of House, Senate and final budgets are available on Action for Children’s website (

Health and Human Services

The final budget increases Health and Human Services funding by 5.1 percent over the budget approved last year, but, like in the Senate budget, most of that funding is in Aging and Adult Services, whose budget is more than doubled, and in Medicaid, for repayments to the federal government and other payments. 

Other highlights by division include:

Division of Central Management and Support

  • Senate “Flexibility” cut not included: The Senate proposal to cut $34.3 million from the HHS administrative budget (more than 60 percent of the budget) due to “unachieved reductions” was fortunately not included in this budget; however, several expansion items (actually restoration of funds cut in previous years) in Mental Health, Public Health and Early Education are not to be allocated until January 2013, and then only if the funds are not needed by Medicaid. Since at least $74 million of the “savings” in Medicaid are merely projected savings, it is likely that these items will not receive their budgeted funding in January.
  • Nonprofit funding: $9.2 million in nonprofit funding is changed from recurring to nonrecurring, meaning the dollars will have to be re-appropriated each year. The final budget also includes a special provision that would eliminate $5 million in funding for nonprofits.

Division of Child Development and Early Education

  • Smart Start: $7 million shift from state funds to federal funds and $3.5 million for specific uses — pilot literacy program, helping rural partnerships with fundraising, etc. Caveat: Smart Start only receives the $3.5 million after January 2013, and then only if they are not needed by Medicaid. In addition, the $7 million in federal funds comes out of funds that would otherwise be used for childcare subsidy, thereby reducing the funds available for that purpose.
  • NC Pre-K: The final budget makes no investment or reduction of the cuts made last year.
  • NC Pre-K Pilot Program: NC Pre-K is instructed to create a pilot program that provides funding on a per classroom basis (current funding is on a per-slot basis).

Division of Public Health

  • Tobacco Prevention, Cessation: No investment or reduction of last year’s cuts.
  • High Risk Pregnancy Clinic at ECU receives $375,000 — this is an Action for Children priority item.
  • County Health Departments: $4.9 million, about half what the House proposed. The Division is directed to reduce contracts with outside vendors for family planning services, presumably to eliminate state funding to Planned Parenthood.
  • Public Health only receives the funds for community wellness programs after January 2013, and then only if they are not needed by Medicaid.

Division of Medical Assistance

  • Funding for federal payments: The budget includes $55 million to repay the federal government funds owed for an overdraw and for changes in a drug rebate program.
  • Managed Care Organization schedule delays: The final budget includes $1.7 million to pay for delays in the statewide expansion of managed care organizations — $9 million less than the House proposed.
  • Projected savings: The final budget includes more than $73 million in projected savings in Medicaid, to be gained by eliminating fraud, waste and abuse, implementing CCNC, and making pharmacy changes. These numbers are large and possibly overly optimistic. As mentioned above, the final budget includes a clause that several key programs in other areas of HHS are only to receive funding in January 2013 and only if the funds are not needed by Medicaid.

NC Health Choice

  • Open enrollment should continue. Estimations are that enrollment will increase from the current 148,000 children to 153,000. This is an Action for Children priority item.

Division of Mental Health

  • Reduce Community Services funding: $20 million — this is twice the reduction that the House proposed.
  • Community beds: $9 million to increase beds by 45 — this is half what the House budget proposed.
  • Cherry and Broughton hospitals: $3.5 million each for more beds and staff.
  • Mental Health only receives the funds for Broughton Hospital and the $9 million for additional community beds after January 2013, and then only if they are not needed by Medicaid.

Division of Aging and Adult Services

  • Transition to community living and short-term assistance: The final budget includes $50 million to transition adults with severe mental illness from hospitals to community living arrangements ($10.3 million) and to establish a fund to provide temporary assistance to adult care and group homes as they transition to the new community living plan ($39.7 million). This is $15 million more than the Senate budget proposed, and more than doubles the budget for the agency.

Public Education

Much like the Senate budget, the final budget increases funding for public education by only 0.8 percent over the budget approved last year. The Governor’s budget proposed increasing public education funding by 7.6 percent, and the House budget proposed increasing it by 3.3 percent. 

Highlights include:

  • LEA adjustment:  Compared to the House budget’s restoration of 66 percent of the funds that would have been taken away from local school systems based on the budget approved last year ($333 million), the final budget restores only $143 million. This is more than the Senate budget proposed; however, $16.4 million of the $143 million would come from the state lottery, which means those funds are pulled away from other educational needs.
  • “Excellent Public Schools Act”: The final budget provides $27 million ($20 million less than the Senate proposed) for the first year’s implementation of this Act, which aims to improve reading skills, using a test-based system and requiring retention of any students who do not pass the assessment. Budget bills typically do not include major policy changes such as this Act.
  • Residential Schools: The final budget restores $4.7 million to keep all three residential schools open.
  • Teacher raises, reduce class size, assessments not included: The Governor’s budget included $132 million for these items. The final budget does not include them.
  • Teacher mentoring and the NC Center for the Advancement of Teaching not included: Governor’s budget included $12 million for these two items. The final budget does not include them.

In the special provisions, the NC Teacher Corps is established to recruit and place recent grads as teachers in high needs public schools. No funds seem to be allocated.

Juvenile Justice

On juvenile justice, the final budget unfortunately takes the worst of both the House and Senate budgets.

Like the Senate budget, the final budget requires a two percent cut from the Public Safety Department, which houses the Division of Juvenile Justice. No cuts are specifically marked to come out of juvenile justice; however, the final budget does not include the language included in the House budget that no reductions are to be taken from community programs in the Division of Juvenile Justice, including multi-purpose group homes, residential treatment providers and Juvenile Crime Prevention Councils. We can therefore assume that the Division of Juvenile Justice will bear some of the cut to the Department of Public Safety.

Like the House budget, the final budget closes the Edgecombe Youth Development Center as of January 1, 2013 ($1.7 million) and eliminates 57 positions. Eight beds are to be moved to the Chatham and Lenoir YDCs. The expected impact of this closure is unclear.

The final budget now moves on to the Governor for signature or veto. 


Action for Children North Carolina