By Grace Vitaglione and Rose Hoban
The North Carolina House of Representatives released a budget proposal June 17 for the fiscal year that begins July 1, which would raise state employee pay, set aside funds for child care needs, raise some fees of Medicaid providers and would provide expanded reimbursements for freestanding psychiatric hospitals. The spending plan also includes a sweeping policy change that changes the way the state rates child care facilities — a service essential to working families and the health of the economy.
The $31.7 billion proposal is the House’s opening game in the annual tug-of-war between that chamber and the state Senate over whose priorities will be more heavily reflected in the final budget document.
Most state employees would see an additional one percent increase in their pay for the next fiscal year beyond what was provided in last year’s biennial budget. The average salary increase for public school teachers would be 4.4 percent. The House budget proposal also raises the starting salary for teachers to $44,000.
The two chambers do not necessarily need to agree on a new spending plan for the next fiscal year, because the state spending plan passed last year allocated funds for this and next fiscal year. But lawmakers often make changes in the second year of the biennium after they have a better idea of the state’s revenue picture and additional legislative priorities.
Senate Majority Leader Phil Berger (R-Eden) told reporters he wants the two chambers to have an agreed-upon spending total before talking about where the money should go.
“[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) said he hopes the two chambers can reach an agreement next week; he says the two rooms are not too far apart. He told reporters after a June 18 House Appropriations Committee meeting that the main areas of contention 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 said he disputes the characterization that the two chambers are not that far off the mark. Unless something drastic changes, he said, the Senate plans to adjourn on June 30.
Disruption of child care centers
The House spending plan would change how the state evaluates child care centers across the state, a change that worries Kody Kinsley, secretary of the state Department of Health and Human Services, as many facilities face the end of a infusion of federal COVID funds.
The state’s five-star rating system dictates the quality of care and reimbursement for child care centers. It was designed to give parents a better idea of the quality of child care available at certain facilities and the level of education of providers, while giving centers an impetus to improve their ratios and quality of child- staff.
There has been debate for several years, especially during and immediately after the pandemic, about how to change the system because some providers had difficulty finding teachers who met educational standards and were willing to work for the limited compensation the centers offered.
“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.”
“We’ve actually worked with the industry to propose alternative pathways that if a child care center has a national accreditation that equates to three, four, five stars, then great, they can get those stars and they don’t have to they go through a secondary process,” added Kinsley.
What worries Kinsley, he said, is how the House budget “really decouples the star ratings from what these child care centers are paid.”
In North Carolina, child care centers receive more state and federal dollars if they are five-star than if they are four- or three-star, Kinsley explained. The House budget reverses that philosophy by flattening the pay scale regardless of star rating. And until January 2025, centers would not need a star rating to determine how much they are paid for participating in the state subsidy program.
“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 the budget becomes law, those star ratings will become voluntary rather than mandatory, and subsidy payments will no longer be linked to quality.
Child care changes can affect costs for families
Subsidy funds currently help families afford child care programs with three or more stars, along with religiously sponsored programs that meet health and safety standards. Those subsidies become an incentive to place children in programs that will do more to improve their learning and give low-income children a head start by the time they start elementary school.
“High-quality programs — which serve the vast majority of children — will receive less money,” a DHHS spokesperson wrote. Programs that want to maintain higher quality will likely have to charge parents higher fees.
The new rules would also reduce the ratio of lead teachers to students; lead teachers have an educational background in early childhood education. Centers can then fill those positions with teaching assistants, who are only required to have a GED.
Kinsley noted that almost 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 bill passes, child care advocates could see temporary relief from a funding shortfall expected to take effect in July as federal pandemic relief funds that support better wages and fees for child care centers. children, dusk.
State lawmakers extended $135 million to child care providers during the next fiscal year, using $109.5 million in federal pandemic relief dollars that state lawmakers had placed in a reserve fund. An additional $25.5 million will come from the federal Child Care and Development Fund, which comes to the state each year as a block grant.
Leaders in the child care space have raised alarms about this financial “cliff” for child care as federal pandemic aid dries up and urged state lawmakers to extend federal stabilization grants.
Without money, centers can lose teachers, close classes and raise tuition and fees. Advocates have requested about $180 million in funding, which would meet the needs of child welfare agencies throughout the coming year.
What the House budget offers would give the state’s child care centers just nine months before they face another funding cliff.
According to a spokesperson for the NC Department of Health and Human Services, the money is not enough 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 will have to figure out how to resolve child care issues again in the next legislative session.
Lawmakers also directed $1 million to add three sites to the Tri-Share Child Care pilot program, which splits the cost of child care between employers, families and the state. The money would also fund an evaluation of the program, which was originally funded in this fiscal year’s budget.
Medicaid and psychiatric hospitals
The House spending plan would direct $9 million to increase Medicaid provider reimbursement rates for durable medical equipment and earmark $4 million for speech-language therapy and audiology services.
The plan also includes freestanding psychiatric hospitals in the Health Care Access and Stabilization Program, which was introduced last year as part of the Medicaid expansion. The program offers increased Medicaid reimbursements to hospitals, but currently, only acute care hospitals are in the program.
The increased payments will not apply to state hospitals, such as Central Regional Hospital in Butner or Cherry Hospital in Goldsboro.
Freestanding psychiatric hospitals across the state “are in as much need as an acute care hospital,” Lambeth told a meeting of the House Finance Committee on June 18.
NC Health News investigated one such facility, Brynn Marr Hospital in Jacksonville, for allegations of understaffing, violence, abuse and falsification of patient records. Brynn Marr’s parent company, Universal Health Services, operates a total of three psychiatric hospitals in North Carolina: Brynn Marr, Holly Hill and Old Vineyard.
Universal Health Services was recently called out in a report published by the US Senate, examining it and other companies that run such facilities, which they called “warehouses of negligence.” The Senate Finance Committee document cited numerous reports of understaffing, physical assaults, improper restraints and deceptive admissions practices at Universal Health Services facilities — findings similar to allegations made to NC Health News by former patients and the staff.
Other selected line item adjustments in the House budget:
- Allocates $1.7 million from state reserves created by federal coronavirus relief to the Humane Coalition, a Texas-based anti-abortion group.
- It sends $24.3 million to 25 mostly rural counties, with few — if any — strings attached. Twenty-two of these counties are represented only by Republicans.
- Provides $340,000 for Narcan nasal spray for schools, $3.66 million for Narcan for rural or underserved county law enforcement agencies, and $1 million for naloxone for EMS providers statewide.
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