By Grace Vitaglione and Rose Hoban
On June 17, the North Carolina House of Representatives released a budget proposal for the fiscal year starting July 1. The proposal plans to increase state employee wages, allocate funds for child care needs, raise some Medicaid provider fees, and expand reimbursements for freestanding psychiatric hospitals. A significant policy change in the plan will alter how child care facilities are rated, which is crucial for working families and the economy’s health.
The $31.7 billion proposal marks the House’s initial move in the yearly budget negotiation with the state Senate, each vying to have their priorities reflected in the final budget.
Most state employees will see a 1% pay rise, in addition to last year’s biennial budget. Public school teachers will receive an average salary increase of 4.4%, with starting salaries raised to $44,000.
While the two chambers don’t need to agree on a new fiscal plan, as last year’s budget covers this and next fiscal year, adjustments are often made in the second year based on the state’s updated revenue and legislative priorities.
Senate Majority Leader Phil Berger (R-Eden) wants both chambers to agree on a spending total before deciding on fund allocation.
“[The House is] just spending a lot of money and that’s not something we’re interested in,” Berger said.
Rep. Donny Lambeth (R-Winston Salem) is hopeful for an agreement next week, stating the main contentions include public teacher pay and Medicaid provider fees.
“It’s a matter now of taking the few items that are still … I call them ‘stumbling blocks’ and resolving them as best we can,” Lambeth said on Tuesday.
Berger, however, disputed the idea that the chambers are close to agreement and indicated the Senate plans to adjourn by June 30 unless something drastic changes.
Disruption of child care centers
The House spending plan proposes changes to the state’s evaluation system for child care centers, which concerns Kody Kinsley, Secretary of the state Department of Health and Human Services, especially as many facilities face the end of federal COVID funds.
The five-star rating system determines the quality of care and reimbursement for child care centers, designed to guide parents and encourage centers to improve their quality and staff ratios.
Debate over the system has persisted for years, exacerbated by the pandemic, around difficulties in finding qualified teachers willing to work for limited compensation.
“The House budget does two things,” Kinsley told NC Health News. “One has language that provides an alternative method by which child care centers in North Carolina can achieve their star rating.”
Kinsley explained the proposal allows centers with national accreditation equivalent to three, four, or five stars to bypass the state’s process. However, he worries the budget “decouples the star ratings from what these child care centers are paid.”
Currently, higher-rated centers receive more state and federal funds. The House budget would flatten the pay scale regardless of rating. Until January 2025, centers wouldn’t need a star rating to determine subsidy payments.
“A child care center that gets five stars — if it’s going to go to what the average salary is — it’s going to take a pay cut,” Kinsley said.
If enacted, star ratings will become voluntary, and subsidies will no longer be linked to quality.
Child care changes can affect costs for families
Subsidies currently help families afford programs with three or more stars, incentivizing better learning environments and giving low-income children a head start in elementary school.
“High-quality programs — which serve the vast majority of children — will receive less money,” a DHHS spokesperson wrote. Programs maintaining higher quality may need to charge parents more.
New rules would also reduce the lead teacher-to-student ratio, allowing teaching assistants with a GED to fill positions.
Kinsley noted that nearly 300 child care centers closed last year in North Carolina.
“These are small businesses in communities and we desperately need them to thrive. Now is not the time to cut what our top quality child care centers are paid to do their jobs,” Kinsley said. “At a time when our child care system is on the brink, we cannot afford to reduce what childcare centers pay, or we’re just going to push this thing that’s on the horizon even faster.”
Child care funding is inadequate
If the budget passes, child care advocates might see temporary relief from an impending funding shortfall as federal pandemic relief funds wane.
State lawmakers extended $135 million to child care providers for the next fiscal year, with $109.5 million from federal pandemic relief funds and $25.5 million from the federal Child Care and Development Fund.
Advocates have requested around $180 million to meet child welfare agency needs for the coming year.
The House budget provides only nine months of relief before another funding shortfall.
A spokesperson for the NC Department of Health and Human Services stated that the money is insufficient to keep child care programs open and support NC Pre-K.
“While the House Budget provides some funding for stabilization grants, it does not fully fund the need and does not invest at all in subsidies or NC Pre-K,” the spokesperson wrote.
Lambeth said lawmakers would need to address child care issues again in the next legislative session.
Lawmakers also allocated $1 million to expand the Tri-Share Child Care pilot program, which splits costs between employers, families, and the state, and to fund an evaluation of the program.
Medicaid and psychiatric hospitals
The House budget allocates $9 million to increase Medicaid provider reimbursement rates for durable medical equipment and $4 million for speech-language therapy and audiology services.
The plan also includes freestanding psychiatric hospitals in the Health Care Access and Stabilization Program, introduced last year as part of Medicaid expansion, offering increased Medicaid reimbursements to hospitals, but excluding state hospitals like Central Regional Hospital and Cherry Hospital.
Freestanding psychiatric hospitals “are in as much need as an acute care hospital,” Lambeth told a House Finance Committee meeting.
NC Health News investigated Brynn Marr Hospital in Jacksonville for understaffing, violence, abuse, and falsification of patient records. Universal Health Services, which operates three psychiatric hospitals in North Carolina, was called out in a U.S. Senate report for negligence, including understaffing, assaults, improper restraints, and deceptive admissions practices.
Other selected line item adjustments in the House budget:
- Allocates $1.7 million from state reserves created by federal coronavirus relief to the Texas-based anti-abortion group, Humane Coalition.
- Sends $24.3 million to 25 mostly rural counties, predominantly represented by Republicans.
- Provides $340,000 for Narcan nasal spray for schools, $3.66 million for Narcan for rural or underserved county law enforcement, and $1 million for naloxone for statewide EMS providers.
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