- Associated Press - Monday, June 15, 2015

RALEIGH, N.C. (AP) - The Senate’s version of the North Carolina budget announced Monday spends less on operating government than the House proposal does, and proposes more significant policy changes to health care, taxes and education.

Republicans in charge of the chamber rolled out most of a plan that, all together, would spend nearly $21.5 billion next year, or nearly $700 million less than what the House agreed to spend to operate government last month.

Senators set aside $400 million more than what the House earmarked for two government reserve funds in the new fiscal year, meaning fewer funds for the Senate to spend. The Senate also incorporated additional individual income- and business-franchise-tax cuts beyond the 2013 tax law changes already taking effect, leaving senators less revenues with which to work.

Even with a $400 million surplus this year, Brown said, overall spending in the Senate plan would increase 1.8 percent compared to the current year. The House budget proposes an increase of 5 percent.

“Voters expect us to keep our promises and … maintaining the budgeting and spending disciplines and commitment to pro-growth tax reform,” said Sen. Harry Brown, R-Onslow, co-chairman of the Senate Appropriations Committee.

The full Senate is likely to approve its plan by the end of the week, which would give Republicans less than two weeks to work out a final two-year budget for Gov. Pat McCrory to sign before the next fiscal year begins July 1.

Meeting that deadline appears less likely, given that the Senate has added substantive health legislation to the House version of the budget and reworked the proposed public education spending.

The Senate, as expected, recommends a Medicaid overhaul package that would replace the current fee-for-service payment system with one that would provide a fixed monthly amount for each patient.

Unlike the House, which only wants these organizations run by doctors and hospital networks, the Senate envisions a hybrid system with managed-care companies running statewide networks along with regional “provider-led” entities.

As they did last year, Senate Republicans also are trying to pull the $13 billion Medicaid program out from under the Department of Health and Human Services. This time, senators want to put Medicaid into a separate “Health Benefits Authority” run by an eight-member board. The House and McCrory administration don’t like the concept.

The Senate budget also raises teacher pay by an average of 4 percent, and gives larger raises to early-career teachers so that their minimum salary would rise from the current $33,000 to $35,000. Republican legislative leaders and McCrory promised such an increase.

While teachers with five to 24 years’ experience also would see higher base salaries, teachers with at least 25 years wouldn’t see their base pay grow from the current $50,000. More salary details were expected Tuesday as the full Senate budget was released. The House budget gave raises of some amount to all teachers.

The Senate plan makes dramatic changes to education funding by reducing by $214 million the money that local school districts could use to hire several thousand teacher assistants - in addition to the $113 million that would be eliminated from state lottery profits for the assistants.

Instead, Senate Republicans want to spend $273 million more through mid-2017 for thousands of additional K-3 classroom teachers designed to reduce the teacher-student ratio.

Sen. Josh Stein, D-Wake, said the Republican plan to reduce corporate taxes at the same time teacher assistant funds are cut “represents upside-down priorities” by the GOP.

Community colleges - and not the Department of Public Instruction - would now operate the state’s driver-education program for young motorists, under the Senate plan. A $65-per-student cap on drivers’ education fees also would be eliminated, meaning students’ families could be required to pay around $300, according to subcommittee debate.

In transportation, the Senate budget also would stop transferring $216 million in dedicated highway funds to the state’s general operating fund, used primarily to fund the Highway Patrol. Along with 20 percent increases in Division of Motor Vehicles fees - the House proposed 30 percent - there would be more than $300 million for more road-building, Brown said.

“This is a better plan than bonds,” Brown said, referring to McCrory’s proposal to borrow $1.4 billion for new highway projects. Senators are cool to the idea.

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