- Associated Press - Monday, June 23, 2014

RALEIGH, N.C. (AP) - Gov. Pat McCrory said Monday he’s confident that he and legislative leaders will make progress this week on final adjustments to the North Carolina budget - but just in case, he’s preparing to run state government next week without those adjustments.

The House and Senate have passed rival $21 billion spending plans for the new year starting July 1. The two houses differ with each other and with McCrory on spending levels for Medicaid, public school teacher raises and the use of lottery funds. Negotiations have proceeded slowly partly because of an uncertain Medicaid forecast.

A two-year budget is already in place through mid-2015, so the state government can continue operating without a final plan to adjust the second year’s spending. Still, State Budget Director Art Pope told state agencies in a memo Monday to plan for less money for the new fiscal year while lawmakers work out differences.

“I’m continuing to direct my agencies to spend conservatively,” McCrory told reporters. He added, “I’m confident we’ll make more progress during this week, but it’s my job as governor to prepare for all options.”

Pope’s memo says agencies will receive a July disbursement that reflects the biggest reductions in the House or Senate versions of the budget so state government won’t overspend.

The lone exception, the memo said, is the Senate’s proposal to reduce spending earmarked to local districts for teacher assistants, or about $233 million. The Senate budget plan targeted that cut to provide funds for much of a large teacher pay plan. The budgets for the House and McCrory contain smaller pay increases for teachers than the Senate but preserve teacher assistant positions.

“I do not believe that we ought to be cutting teacher assistants at the expense of our education for our young people,” McCrory said. The memo also tells agencies to prepare for proposed job eliminations that are contained in both plans.

Until there’s a budget deal, state employees and teachers will not see pay increases, as both chambers and the governor propose differing increases. But McCrory said he expects “pay raises for teachers and state employees will be enacted as promised.”

McCrory said he and the two chambers still have serious differences on Medicaid and education. McCrory, who would be asked to sign any budget bill into law, expects there will be agreement on forecasts for Medicaid spending and lottery revenues.

He said he also doesn’t believe it’s time to reduce current Medicaid coverage. The Senate proposal would eliminate automatic Medicaid eligibility for about 15,000 people.

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