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 Rural Counts-Square-website LOGO                                                                                       Download a PDF version of this analysis.

The N.C. General Assembly's main objective during the present short session is to make adjustments to the second year of the state budget.

Not long after the session began, Gov. Pat McCrory released his proposed budget. On May 19, the House passed its version. The Senate will soon follow with its own spending plan.

Negotiations on a compromise budget will then begin in earnest. The House and Senate previously agreed to cap spending at $22.225 billion.

The Rural Center is carefully following each step of this process, particularly in light of the ways in which the budget proposals align with Rural Counts, our 10-step strategy for building a prosperous future for rural North Carolina.

Of statewide note in the House proposal:

  • The plan adds $305.5 million to the general fund appropriations made last year. In addition, another $91.1 million is added to the transportation and Highway Trust Fund budgets.
  • The plan calls for increasing teacher salaries by an average of 4.1 percent. State employees, community college and university employees will receive a 2 percent raise, plus a $500 bonus. Education-related salary increases represent an expense of about $365 million.
  • The standard state income tax deduction will increase over a four-year period. For single taxpayers, the deduction will increase from $7,500 to $8,750. For married taxpayers who file jointly, the deduction will increase from $15,500 to $17,500.

Through a Rural Counts lens: The House budget proposal

Strategy 1: Innovation in education and workforce development

  • A budget provision sets aside $600,000 to award bonuses to career and technical education teachers whose students can pass the required examinations and attain industry certifications. Students will also be provided free, one-time access to the examinations.
  • The NCWorks Apprenticeship Program is increased by $500,000 to $1.4 million.
  • Budget provisions will establish a Joint Legislative Study Committee on Cooperative Innovation High Schools. The study committee will examine policies, statutes and funding models and report by the end of the calendar year.
  • A budget provision will establish a pilot program in Rutherford County and the Hickory and Newton-Conover school systems to increase the dropout age from 16 to 18.

Strategy 2:  Stabilize and transform rural health care

  • A $7.7 million appropriation will start a rural residency program at Cape Fear Valley Hospital, in affiliation with Campbell University’s Medical School. An additional $759,000 is provided to cover the anticipated reduction in the Medicaid assessment rate that the rural program will generate.
  • A $30 million reserve is established to implement recommendations from the Governor’s Task Force on Mental Health and Substance Abuse.
  • Budget provisions will establish a “medication-assisted opioid use disorder treatment pilot program.” The three-year pilot will start with $500,000 from block grant funds. The N.C. Department of Health and Human Services will select three to five Federally Qualified Health Centers to participate. Priority will be accorded to centers that are receiving supplemental federal grants for expanding substance abuse service (with a focus on medication-assisted treatment of opioid use disorders).
  • DHHS is to study Medicaid and N.C. Health Choice rates paid to Rural Health Centers and Federally Qualified Health Centers. The study is to include a clear process by which centers may apply for a rate recalculation based on a change in scope of services.

Strategy 3: Expand accessible and affordable high-speed fiber broadband

  • N.C. Commerce is authorized to use $1.25 million in de-obligated Community Development Block Grant money to fund a proposed broadband initiative. The department is directed to report how it proposes to use the funding, providing details about how the initiative will comply with the state's broadband plan and with CDBG requirements. The report, due in February 2017 to the legislature’s Economic Development and Global Engagement Committee, will also include the type of sites to be served, the timeline for projects, the constituents to be served and the outcomes expected.

Strategy 4: Accelerate modernization of essential water infrastructure

  • About $4 million, recovered from previous CDBG grants, will be provided to the N.C. Division of Water Infrastructure to fund water and sewer projects serving public schools.
  • The Division of Water Infrastructure also will receive $3.8 million in additional funding for state water and sewer grants that will benefit rural, economically distressed areas. The additional money will increase the available funding for these state grants to $18.8 million.
  • The Clean Water Management Trust Fund will receive an additional $5 million, raising the fund’s appropriation to $18.8 million. Plus, any fund balance from the ending of the Solar Bees impaired waters demonstration will be transferred to the Trust Fund.
  • In addition, $3 million is provided to extend public infrastructure to serve the Johnston County Research and Training Zone.

Strategy 5: Expand and upgrade transportation and natural gas infrastructure

  • A budget provision will change the allocation of funding for unpaved secondary roads. The new standards will allocate 50 percent of the funding based on statewide priority, with the other 50 percent split among the 14 highway divisions, to address unpaved road priorities using the statewide priority system.
  • The budget will fund ferry operations by appropriation instead of fees. The budget provides $13.4 million for the operations, and other provisions will create a reserve to provide repairs, replacement and maintenance for the equipment and infrastructure. The reserve will be funded with concession receipts, proceeds from the sale of equipment and other revenues.
  • The funding for Rural Transit System Operating Assistance will increase by $2 million to provide $18.8 million for the fiscal year.

Strategy 6: Invest in stronger entrepreneurship and small business development systems

  • The budget will provide $100,000 to the Support Center for the Western Women’s Business Center, providing matching funds for an SBA grant.

Strategy 7: Strengthen homegrown manufacturing

  • The budget will repeal the 1 percent privilege tax on mill machinery (which includes an $80 cap per item) and will exempt the machinery and equipment from sales tax.  Provisions in this section of the budget bill expand the preferential tax treatment of certain machinery and equipment for secondary metal recyclers and precious metal processors; parts, accessories or attachments for equipment eligible for a company located at a ports facility; metal fabricators that manufacture metal products for their own use; and repair parts and replacement parts for ready-mix concrete mills, regardless of whether they are attached to a motor vehicle. The repeal will benefit North Carolina manufacturers.

Strategy 8: Develop opportunities for agriculture and natural resources, including biotechnology and value-added food processing

  • Funding is transferred from the Swine Waste Fund to support new market opportunities for farmers.
  • An initial allotment of $300,000 is provided to assist small food retailers in providing access to healthy foods in low-income areas. The sponsors hope to pair retailers in food deserts with local produce suppliers.
  • Commerce will receive $250,000 to support Regional Food Commercialization Centers. These funds will be subtracted from water and sewer grants in the Division of Water Infrastructure and will be used for consulting services that provide training and support for food companies and regional food commercialization centers.
  • Oyster sanctuaries will receive $1.5 million, which boosts the appropriation for the coming fiscal year to $1.8 million.
  • The spending plan adds $1 million to the Agricultural Development and Farmland Preservation Trust Fund, bringing the appropriation to $3.6 million

Strategy 9: Enhance regional collaborations and partnerships

  • The Rural Center will continue to follow budget negotiations in this area, but as of yet there is nothing of note.

Strategy 10: Stabilize and leverage rural development funding, capacity building and technical assistance

  • From unused CDBG funds, $750,000 is provided for training local governments in using and accessing CDBG funding.
  • The budget provides $25,000 to community colleges to create a continuing education program for local government finance officers.
  • The budget specifies that the General Assembly intends to annually appropriate funds needed to meet the cash requirements for Job Development Investment Grant and One North Carolina commitments.
  • The plan calls for $1 million to be transferred from rural economic development grants in order to provide program development and implementation to a Veterans Life Center in Vance County.
  • The budget adds $1 million to the Tobacco Trust Fund, increasing the appropriation to $4 million.
  • The budget creates a reserve of $1 million to establish a fund for site infrastructure and building development (if H 108 passes).

Other provisions of interest:

  • A provision will make Commerce the lead agency for the study of the uses of the Broughton Hospital property in Burke County — this including taking the lead for site control and disposition strategies.
  • A provision will remove 27 rural counties from the state emissions-testing program, subject to EPA approval. The N.C. Department of Environmental Quality is directed to seek approval for the change. The rural counties remaining in the emissions program are Iredell, Johnston and Randolph.
  • The Commerce budget receives $1.5 million more to contract to the Economic Development Partnership of North Carolina for tourism advertising. (The budget provision bars using the new appropriation for branding and business development marketing.)
  • Natural Heritage Program funding will be increased by $489,750. The money restores funds reduced in previous years and provides the program with a total of $939,750 for the year.
  • Funding for administration of the Connect NC bonds ($1.142 million) and debt service on the bonds ($1.25 million) is included in the budget.

Important Bill to Watch:  HB 1090/SB 826 – Prosperity and Economic Opportunity for All NC 

We are currently analyzing all 14 parts of this proposed economic development legislation and will share that analysis with you shortly.  In the meantime, here’s a synopsis of the 14 significant parts of the bill:

  • Part 1 provides access to capital for entrepreneurs, adding language about issuing securities.
  • Part 2 establishes a state level New Markets Tax Credit program. (Similar to H 14, H 305, S 35, H 920).
  • Part 3 establishes a Small Business Venture Fund using money in the Escheats Fund (the bill will define "small business" and "NC nexus" for investments and specifies not more than 33% of the funds may be invested in urban regions).  (Similar to House budget provisions)
  • Part 4 encourages inter-tier cooperation for JDIG (if a business location is between two tiers, standards for the higher tier and percentage of grants for the lower tier will apply).
  • Part 5 repeals the tax on mill machinery.
  • Part 6 authorizes electronic submission of permit applications to the N.C. Department of Transportation and instructs DOT to reimburse cable companies when DOT requires them to relocate service.
  • Part 7 authorizes two programs, Rallying Investors & Skilled Entrepreneurs of NC (RISE NC) and the University Innovation Commercialization Grant program.  [These programs were proposed in the governor’s budget in 2015.]
  • Part 8 creates a new position in the N.C. Department of Agriculture and Consumer Services that is devoted to food manufacturing, and provides $1 million to create marketing and communications programs.
  • Part 9 provides $12 million to Commerce the expand tourism marketing. (Same provisions are in S 840.)
  • Part 10 extends the Research & Development Tax Credit until Jan. 1, 2020.  (H 920)
  • Part 11 clarifies the state may lease underutilized state property, including leasing parking spaces.
  • Part 12 increases the funding for Main Street Solutions by $1 million. 
  • Part 13 provides funding for Commerce to locate community planners in each Prosperity Zone.
  • Part 14 sets up a three-year technical assistance program for 24 communities and provides the first year of funding. (Up to $34,000 is authorized for each community in the first year, but only $16,000 per community is provided).

 Rural Counts-Square-website LOGO                                                                                       Download a PDF version of this analysis.

The N.C. General Assembly's main objective during the present short session is to make adjustments to the second year of the state budget.

Not long after the session began, Gov. Pat McCrory released his proposed budget. On May 19, the House passed its version. The Senate will soon follow with its own spending plan.

Negotiations on a compromise budget will then begin in earnest. The House and Senate previously agreed to cap spending at $22.225 billion.

The Rural Center is carefully following each step of this process, particularly in light of the ways in which the budget proposals align with Rural Counts, our 10-step strategy for building a prosperous future for rural North Carolina.

Of statewide note in the House proposal:

  • The plan adds $305.5 million to the general fund appropriations made last year. In addition, another $91.1 million is added to the transportation and Highway Trust Fund budgets.
  • The plan calls for increasing teacher salaries by an average of 4.1 percent. State employees, community college and university employees will receive a 2 percent raise, plus a $500 bonus. Education-related salary increases represent an expense of about $365 million.
  • The standard state income tax deduction will increase over a four-year period. For single taxpayers, the deduction will increase from $7,500 to $8,750. For married taxpayers who file jointly, the deduction will increase from $15,500 to $17,500.

Through a Rural Counts lens: The House budget proposal

Strategy 1: Innovation in education and workforce development

  • A budget provision sets aside $600,000 to award bonuses to career and technical education teachers whose students can pass the required examinations and attain industry certifications. Students will also be provided free, one-time access to the examinations.
  • The NCWorks Apprenticeship Program is increased by $500,000 to $1.4 million.
  • Budget provisions will establish a Joint Legislative Study Committee on Cooperative Innovation High Schools. The study committee will examine policies, statutes and funding models and report by the end of the calendar year.
  • A budget provision will establish a pilot program in Rutherford County and the Hickory and Newton-Conover school systems to increase the dropout age from 16 to 18.

Strategy 2:  Stabilize and transform rural health care

  • A $7.7 million appropriation will start a rural residency program at Cape Fear Valley Hospital, in affiliation with Campbell University’s Medical School. An additional $759,000 is provided to cover the anticipated reduction in the Medicaid assessment rate that the rural program will generate.
  • A $30 million reserve is established to implement recommendations from the Governor’s Task Force on Mental Health and Substance Abuse.
  • Budget provisions will establish a “medication-assisted opioid use disorder treatment pilot program.” The three-year pilot will start with $500,000 from block grant funds. The N.C. Department of Health and Human Services will select three to five Federally Qualified Health Centers to participate. Priority will be accorded to centers that are receiving supplemental federal grants for expanding substance abuse service (with a focus on medication-assisted treatment of opioid use disorders).
  • DHHS is to study Medicaid and N.C. Health Choice rates paid to Rural Health Centers and Federally Qualified Health Centers. The study is to include a clear process by which centers may apply for a rate recalculation based on a change in scope of services.

Strategy 3: Expand accessible and affordable high-speed fiber broadband

  • N.C. Commerce is authorized to use $1.25 million in de-obligated Community Development Block Grant money to fund a proposed broadband initiative. The department is directed to report how it proposes to use the funding, providing details about how the initiative will comply with the state's broadband plan and with CDBG requirements. The report, due in February 2017 to the legislature’s Economic Development and Global Engagement Committee, will also include the type of sites to be served, the timeline for projects, the constituents to be served and the outcomes expected.

Strategy 4: Accelerate modernization of essential water infrastructure

  • About $4 million, recovered from previous CDBG grants, will be provided to the N.C. Division of Water Infrastructure to fund water and sewer projects serving public schools.
  • The Division of Water Infrastructure also will receive $3.8 million in additional funding for state water and sewer grants that will benefit rural, economically distressed areas. The additional money will increase the available funding for these state grants to $18.8 million.
  • The Clean Water Management Trust Fund will receive an additional $5 million, raising the fund’s appropriation to $18.8 million. Plus, any fund balance from the ending of the Solar Bees impaired waters demonstration will be transferred to the Trust Fund.
  • In addition, $3 million is provided to extend public infrastructure to serve the Johnston County Research and Training Zone.

Strategy 5: Expand and upgrade transportation and natural gas infrastructure

  • A budget provision will change the allocation of funding for unpaved secondary roads. The new standards will allocate 50 percent of the funding based on statewide priority, with the other 50 percent split among the 14 highway divisions, to address unpaved road priorities using the statewide priority system.
  • The budget will fund ferry operations by appropriation instead of fees. The budget provides $13.4 million for the operations, and other provisions will create a reserve to provide repairs, replacement and maintenance for the equipment and infrastructure. The reserve will be funded with concession receipts, proceeds from the sale of equipment and other revenues.
  • The funding for Rural Transit System Operating Assistance will increase by $2 million to provide $18.8 million for the fiscal year.

Strategy 6: Invest in stronger entrepreneurship and small business development systems

  • The budget will provide $100,000 to the Support Center for the Western Women’s Business Center, providing matching funds for an SBA grant.

Strategy 7: Strengthen homegrown manufacturing

  • The budget will repeal the 1 percent privilege tax on mill machinery (which includes an $80 cap per item) and will exempt the machinery and equipment from sales tax.  Provisions in this section of the budget bill expand the preferential tax treatment of certain machinery and equipment for secondary metal recyclers and precious metal processors; parts, accessories or attachments for equipment eligible for a company located at a ports facility; metal fabricators that manufacture metal products for their own use; and repair parts and replacement parts for ready-mix concrete mills, regardless of whether they are attached to a motor vehicle. The repeal will benefit North Carolina manufacturers.

Strategy 8: Develop opportunities for agriculture and natural resources, including biotechnology and value-added food processing

  • Funding is transferred from the Swine Waste Fund to support new market opportunities for farmers.
  • An initial allotment of $300,000 is provided to assist small food retailers in providing access to healthy foods in low-income areas. The sponsors hope to pair retailers in food deserts with local produce suppliers.
  • Commerce will receive $250,000 to support Regional Food Commercialization Centers. These funds will be subtracted from water and sewer grants in the Division of Water Infrastructure and will be used for consulting services that provide training and support for food companies and regional food commercialization centers.
  • Oyster sanctuaries will receive $1.5 million, which boosts the appropriation for the coming fiscal year to $1.8 million.
  • The spending plan adds $1 million to the Agricultural Development and Farmland Preservation Trust Fund, bringing the appropriation to $3.6 million

Strategy 9: Enhance regional collaborations and partnerships

  • The Rural Center will continue to follow budget negotiations in this area, but as of yet there is nothing of note.

Strategy 10: Stabilize and leverage rural development funding, capacity building and technical assistance

  • From unused CDBG funds, $750,000 is provided for training local governments in using and accessing CDBG funding.
  • The budget provides $25,000 to community colleges to create a continuing education program for local government finance officers.
  • The budget specifies that the General Assembly intends to annually appropriate funds needed to meet the cash requirements for Job Development Investment Grant and One North Carolina commitments.
  • The plan calls for $1 million to be transferred from rural economic development grants in order to provide program development and implementation to a Veterans Life Center in Vance County.
  • The budget adds $1 million to the Tobacco Trust Fund, increasing the appropriation to $4 million.
  • The budget creates a reserve of $1 million to establish a fund for site infrastructure and building development (if H 108 passes).

Other provisions of interest:

  • A provision will make Commerce the lead agency for the study of the uses of the Broughton Hospital property in Burke County — this including taking the lead for site control and disposition strategies.
  • A provision will remove 27 rural counties from the state emissions-testing program, subject to EPA approval. The N.C. Department of Environmental Quality is directed to seek approval for the change. The rural counties remaining in the emissions program are Iredell, Johnston and Randolph.
  • The Commerce budget receives $1.5 million more to contract to the Economic Development Partnership of North Carolina for tourism advertising. (The budget provision bars using the new appropriation for branding and business development marketing.)
  • Natural Heritage Program funding will be increased by $489,750. The money restores funds reduced in previous years and provides the program with a total of $939,750 for the year.
  • Funding for administration of the Connect NC bonds ($1.142 million) and debt service on the bonds ($1.25 million) is included in the budget.

Important Bill to Watch:  HB 1090/SB 826 – Prosperity and Economic Opportunity for All NC 

We are currently analyzing all 14 parts of this proposed economic development legislation and will share that analysis with you shortly.  In the meantime, here’s a synopsis of the 14 significant parts of the bill:

  • Part 1 provides access to capital for entrepreneurs, adding language about issuing securities.
  • Part 2 establishes a state level New Markets Tax Credit program. (Similar to H 14, H 305, S 35, H 920).
  • Part 3 establishes a Small Business Venture Fund using money in the Escheats Fund (the bill will define "small business" and "NC nexus" for investments and specifies not more than 33% of the funds may be invested in urban regions).  (Similar to House budget provisions)
  • Part 4 encourages inter-tier cooperation for JDIG (if a business location is between two tiers, standards for the higher tier and percentage of grants for the lower tier will apply).
  • Part 5 repeals the tax on mill machinery.
  • Part 6 authorizes electronic submission of permit applications to the N.C. Department of Transportation and instructs DOT to reimburse cable companies when DOT requires them to relocate service.
  • Part 7 authorizes two programs, Rallying Investors & Skilled Entrepreneurs of NC (RISE NC) and the University Innovation Commercialization Grant program.  [These programs were proposed in the governor’s budget in 2015.]
  • Part 8 creates a new position in the N.C. Department of Agriculture and Consumer Services that is devoted to food manufacturing, and provides $1 million to create marketing and communications programs.
  • Part 9 provides $12 million to Commerce the expand tourism marketing. (Same provisions are in S 840.)
  • Part 10 extends the Research & Development Tax Credit until Jan. 1, 2020.  (H 920)
  • Part 11 clarifies the state may lease underutilized state property, including leasing parking spaces.
  • Part 12 increases the funding for Main Street Solutions by $1 million. 
  • Part 13 provides funding for Commerce to locate community planners in each Prosperity Zone.
  • Part 14 sets up a three-year technical assistance program for 24 communities and provides the first year of funding. (Up to $34,000 is authorized for each community in the first year, but only $16,000 per community is provided).