Budget highlights

For those of you looking for something to do on a Saturday evening, here are some of the highlights from the $20.7 billion state budget tentatively approved today by the House and Senate:

MEDICAID RELIEF AND LAND TRANSFER TAX
The state will take over the counties’ 5 percent share of Medicaid bills in exchange for a half penny of their sales tax revenues. Poor, rural counties are expected to come out ahead on the deal, since Medicaid costs are expected to grow faster than the sales tax revenues. The counties will have the option to raise their sales tax by a quarter penny or their land transfer tax from 0.2 to 0.6 percent, but only through a voter referendum. Fast-growing urban areas had sought the land transfer tax option to help pay for new schools and other infrastructure.

More details after the jump.

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STATE EMPLOYEES
RAISES: Most state employees will receive a 4 percent raise. Judges, teachers, community college instructors and UNC faculty will receive a 5 percent raise. Retirees will receive a 2.2 percent cost of living increase. Another $70 million has been made available for teacher bonuses.
STATE HEALTH PLAN: Language in the budget will put an end to the traditional indemnity health insurance offered to state employees by the next fiscal year. Another preferred provider organization plan will be added to their coverage choices. A total of $110 million will pay for health insurance premium increases.

TAXES/FEES
SALES TAX: That temporary sales tax increase first passed in 2001? The budget makes part of it permanent. While lawmakers shaved the tax increase in half, down to a quarter-penny last year, the budget says they will keep the remainder. That will put the combined state and local sales tax at 6.75 percent.
INCOME TAX: Those in the top income tax bracket fared better. They were hit with a half-percentage point increase in 2001, which also was cut in half last year. The budget allows that tax to expire at the end of the year, putting the tax rate for upper income earners at 7.75 percent.
EARNED INCOME TAX CREDIT: Meanwhile, the working poor will receive an earned income tax credit worth $45 million that allows for some recipients to receive more in a tax break than they would pay in income tax, but the break would not exceed their overall tax burden.
TOBACCO TAX: The tax on tobacco products other than cigarettes will go up 10 percent to help pay for cancer research at UNC-Chapel Hill.
GAS TAX: The state gas tax will be capped at 29.9 cents per gallon.
COURT FEES: Various fees will increase to raise $36 million to pay for additional judges, prosecutors and court staff.
OTHER TAX BREAKS: Software publishers will get help on their business privilege tax, manufacturers and farmers will get a break on their energy bills and aircraft part manufacturers will get a refund on their sales taxes. Firefighters, those who adopt children and those who buy long term health care insurance will get an income tax credit.

CAPITAL PROJECTS
More than $850 million will be spent on 66 projects that include UNC research buildings, prison expansions, $100 million in water and sewer bonds and $120 million for land preservation. Borrowing through certificates of participation — which do not need voter approval — will cover $554 million in projects; the remaining $305 million in projects will be paid for out of the general fund. Triangle projects include $120 million for a genomics building at UNC-Chapel Hill, $38 million for a veterinary hospital at N.C. State University, and $25 million for the “Green Square” project that includes a new building for the Department of Environment and Natural Resources. Borrowing will be spread out over at least the next three years to protect the state’s credit rating.

HEALTH CARE
CANCER RESEARCH: UNC-Chapel Hill will receive $25 million this year, $40 million next year and a recurring $50 million for future years for cancer research. A 10 percent tax increase on tobacco products other than cigarettes and $8 million from the Tobacco Trust Fund will help pay for it. The budget also includes $8 million in planning money for a cancer research facility.
CHILDREN’S HEALTH: $300,000 this year and $7 million next year to expand government-subsidized health insurance for children.
MENTAL HEALTH: $20.5 million increase this year for mental health programs.

LOTTERY
The law that sets up how lottery revenues are allocated will be tweaked so that lottery officials can offer bigger prizes on scratch-off tickets. Gov. Mike Easley wanted this to try to get more people playing and increase ticket sales.

EDUCATION
LEARN AND EARN: The proposal gives $27.6 million this year to start up Easley’s EARN scholars program that provides financial aid to needy students so they can get a bachelor’s degree from a UNC college debt-free. Next year, the program will receive $100 million.
EARLY CHILDHOOD: The More at Four pre-kindergarten program will expand by $56 million.
CLASS SIZE: The effort to reduce class sizes would get $37.5 million.
DROPOUT PREVENTION: School districts can compete for $7 million in grants for dropout prevention programs.