April 6, 2010


Senators Foriest and Stevens

Representatives Glazier, McLawhorn, and Rapp

Agency Presentations:

President Erskine Bowles of the University of North Carolina began by reviewing his top priorities: students, financial aid, and protecting the academic core. The alternate tuition increase as recommended by the Board of Governors includes $130 for in-state undergraduate students and $461 for out-of-state undergraduate students. Board of Governors is requesting the additional revenues remain on campus with 51 percent dedicated to financial aid, 25 percent to retention and graduation and 24 percent toward other critical needs. The Legislature proposed $180 for in-state and $200 for out-of-state and the revenue would flow to the state’s General Fund. Financial aid is critical since 71 percent of students are applying for aid, more than ever before. President Bowles is also requesting $34.8 million for need-based financial aid. He noted general administration costs were cut by 18 percent and limited cuts to academic core. More than $294 million was cut in 2009-2010 of which $162.5 million were permanent cuts in administration. There was an additional 5 percent holdback by the Governor last year right after the budget passed, which meant that there was a 29 percent holdback to the universities, while the they only make up 13 percent of the state appropriations. He requested that cuts for the coming year not exceed 2 percent or they will affect the academic mission of the Universities. Members asked about the graduation rate, which is 50 percent with a goal of 60 percent. He told members until K-12 improves their graduation rate the Universities won’t be able to improve their graduation rate. The universities are having to reme4diate 20 percent of incoming students.

Dr. Bill Harrison Chairman of the State Board of Education presented the 2009-2010 budget cuts to public schools and the proposed cuts for 2010-2011. The major cut is the LEA adjustment fund, which was $225 million last year and will increase to $304 million in 2010-2011. Driver training funding ($33 million) was also on the list needing to be funded by public schools. Last year’s cut was 9.5% and this year’s is projected to be at least 12 percent. The retirement contribution rate is scheduled for 10.5 percent, but the rumor is the Retirement System has lost more than $20 billion this past year, and will need a larger infusion of funds. The Treasurer may propose a contribution rate of 12.5 percent. The Hospitalization cost last year was $4,527 and it is scheduled to increase to $4,929 this year. He shared with members where the LEAs cut funds, with respect to the $225 million LEA adjustment. More than 2,460 teachers were released (59.6 percent of reduction) and 108 instructional support personnel and more than $44.1 million in teacher assistants (19.6 percent of the reduction). Since 90 percent of the budget is staff school systems will need to make personnel cuts by June 1 30 days before the beginning of the 2010-2011 budget year that begins on July 1, 2010. Dr. Atkinson Superintendent of Public Schools addressed the committee on the loss of funds to the Department of Public Instruction. They had to cut 64 positions last year, as well as the loss of operational funds. After the budget passed the Governor required a holdback of 5 percent ($4 million) for all state agencies to handle the continuing revenue losses. In 2010-2011, they are expected to cut an additional 36 positions and $800,000 in operations. The impact to DPI was shared in the areas of transportation, new accountability model, professional development, web site updates and IT functions. Members discussed double funding to public schools and community colleges for students in Learn and Earn programs and NCVPS. Local budgets are also being cut for schools.

Scott Ralls president of the Community Colleges was the final presenter to discuss state funding and priorities as well as the impact of the last year’s budget cuts. Community College enrollment is funded the following year and this continues to be a major problem unlike the universities and public schools. This year in spite of the enrollment reserve fund enrollment increased 14 percent which used all the reserve and more.  Last year the colleges were forced to cut $28.6 million as a management flex cut and they had to revert another $29.2 million. They budgeted for $4,917 per student and they actually had $4,034. In order to manage these issues they have increased class size, limited travel, deferred equipment purchases, increased faculty workloads, used part-time faculty instead of full time, eliminated positions, eliminated programs or sections, administrative staff teaching courses, using instructional funds to support programs previously supported with state funds. President Ralls shared his major requests for 2010-2011 including: enrollment growth ($85 million), equipment funding ($5 million), forward funding for enrollment ($14 million) and summer developmental programs ($12 million). Sixty-four percent of 2008 NC high school graduates enrolled at community colleges took at least one remedial course. Remediation funding is critical for summer programs to increase the student success and probability they will complete their education. The Community Colleges are facing unprecedented growth and increased funding is going to be critical to providing students with the skills needed to succeed.

Fiscal Staff Presented:

Brian Matteson shared information about K-12. The Average Daily Membership (proposed for 2010-2011) can be adjusted down by $10 million based on lower student projections. Average salaries (proposed for 2010-2011) can be reduced by $20 million since the numbers are coming in below budgeted figures. The State Fiscal Stabilization Fund may need some tweaking to conform to federal guidelines and since this is simply supplanting funds there will be no direct impact this year. The LEA adjustment figure of $305 million may need to be increased if additional cuts are required. Lottery revenues are expected to be $51 million more than the budgeted amounts. The technical corrections bill provided for those counties not in the 35 percent tax effective bracket (eligibility) to divide up the additional revenue. If this were to occur it would be more per pupil than if they were funded as meeting the 35 percent requirement. It would take $31 million to give the LEAs that are out of the 35 percent bracket the same funding. This would leave $20 million for other purposes, but the legislature would have to make a change to the law to send those funds elsewhere. The Lottery Reserve Fund which was raided to pay State bills last year may be where some or all of the $20 million in funds end up being distributed. NC Virtual schools was supposed to submit a funding formula and what was sent by DPI was not a formula, however there were some discussions by the SBE in November 2009 and it’s possible the General Assembly may adopt one of these formulas for next year. The final item was the Race to the Top funds that NC did not receive in Round 1. They plan to apply for Round 2 in June, but it will be September before the Round 2 awards are announced, well after the state budget has passed.

Joint Education Appropriations Subcommittee Schedule Next Week:

April 12: Driver Education and Prison Education Programs

April 13: Financial Aid

State Budget Calendar:

Governor’s Budget April 20

Joint Subcommittees Report April 23

Senate Passes Budget May 28

House Passes Budget June 10

Adopt Conference Report Budget June 29


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