House and Senate Democrats reached a deal on a state budget Monday that would cut spending across state government by more than 3 percent but would use money from the state lottery to save teachers' jobs.
The budget would include another round of cuts to cope with the very real possibility that $518 million in federal Medicaid money won't be coming. Those cuts, which would take effect in January, would amount to another 1 percent and would cut Medicaid provider rates while raiding various reserve funds.
The state was already facing an $800 million revenue shortfall because of the recession, and the loss of another $518 million would have blown a huge hole in the state's budget.
The budget was expected to be published late Monday night on the legislature's website, www.ncleg.net. The first votes on the plan were expected to come today. .
The budget calls for spending 3.3 percent less in the coming year than the legislature expected to spend when it approved a two-year budget last summer. The legislature draws up a budget every two years, then adjusts it just before the second year begins.
Budget writers said they had to make difficult cuts.
"There's not enough money down here for anybody to be proud," said Sen. Martin Nesbitt, an Asheville Democrat and the Senate majority leader. "We're all having to do things that we don't want to do."
Rep. Mickey Michaux, a Durham Democrat and the senior House budget writer, confirmed that the budget compromise uses money from the state lottery to avoid cutting teacher jobs. House Democrats have said that could save more than 1,600 teaching positions statewide.
"We saved a whole heck of a lot of teacher jobs," Michaux said.
Republicans have objected to both chambers' budgets, saying Democratic legislators and Gov. Bev Perdue didn't cut state spending enough and should never have counted on the federal Medicaid money in the first place.
Democrats control both chambers of the legislature and write the budget. The House and Senate had already adopted budget proposals, and a committee has been meeting to hammer out a compromise. Those negotiations were stuck over a few small points, including a subsidy on scholarships for out-of-state college athletes.
House Speaker Joe Hackney and Senate Leader Marc Basnight met Saturday to break through that point, which is worth $9 million, a minor monetary detail in an $18.9 billion budget. But like any piece of the budget, it had supporters and detractors. The scholarship provision has been a perennial point of contention, with supporters saying it helps smaller schools and athletic programs.
The budget would end the five-year-old subsidy, which allowed public universities and their booster clubs to pay the in-state tuition rate on scholarships for out-of-state athletes. It protects a similar subsidy for academic scholarships.
For university athletic departments, the loss of the out-of-state subsidy brings a new financial burden. On Monday, officials were scrambling to figure out how to pay the higher tuition for incoming athletes who have already signed scholarship agreements for the coming school year.
"The impact is immediate and significant," said Dick Baddour, UNC-CH's athletic director. "This creates a very difficult situation for us for this academic year."
At UNC, in-state tuition will be $4,066 this fall, while the out-of-state rate is $21,954. That means UNC's athletics department and its booster club, the Educational Foundation, must find the difference - $17,888 - for each of more than 100 out-of-state athletes this fall.
At N.C. Central University in Durham, athletics officials need to find $400,000 to make up the tuition difference for 35 athletes who would have received the subsidy this fall.
Athletes' pacts binding
"We have binding contracts with these students for the fall," said Ingrid Wicker-McCree, NCCU's athletic director. "We will have to be very creative."
The big winners in the scholarship debate are prestigious academic scholarship programs like the Morehead-Cain program at UNC-Chapel Hill and the Park Scholarships program at N.C. State University. Both will retain their subsidy for out-of-state students.
Critics question why the state should help ease the burden on students from other states coming here for college. But officials with those two scholarship programs say that in subsidizing out-of-state scholars, North Carolinians are making their own state better.
One example: nine of the last 10 UNC-CH winners of the prestigious Rhodes scholarship were Morehead-Cain scholars from other states or countries.
"We help UNC compete with the best schools in the country for these students," said Charles Lovelace, executive director of the Morehead-Cain Foundation. "The fact that they go on and have success raises the stature of the university."
That argument makes little sense to State Rep. George Cleveland, the Onslow County Republican who has long lobbied for an end to the subsidies for both athletic and academic scholarships.
"These are bright people who come to the state of North Carolina at the expense of the people of North Carolina, get an education, and leave here," Cleveland said Monday. "I don't know what they leave here, but it isn't a lot."
At N.C. State, the Park Scholarships program would have had to enroll a smaller class if it didn't have the state subsidy, said Eva Holcomb, the program's director.
A class of 50 would have been reduced to about 42, Holcomb said. The Park Foundation, which is based in Ithaca, NY, requires that one-third of the program's enrollees each year be from another state. "They see a real value in the out-of-state students as contributors to N.C. State and to North Carolina," Holcomb said.
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