2022 Appropriations Act
The budget adjustments bill for fiscal year 2022-2023, House Bill 103: 2022 Appropriations Act, was officially enacted into law when Governor Roy Cooper (D) gave it his signature Monday, July 11. The bill swiftly passed the General Assembly as a conference report, meaning it was offered as an up-or-down vote without the opportunity for amendments. Although the bill did not expand Medicaid, a top priority of state Democrats, it still garnered significant bipartisan support because of the investments in state workers, educators, and economic development projects. HB 103 passed the Senate 36-8 and the House 82-25.
The $27.9 billion budget for the current 2022-2023 fiscal year is nearly two-billion dollars higher than the budget enacted last year for 2021-2022 due to an increase in revenue and federal fiscal recovery dollars. HB 103 includes:
The 2021 appropriations bill adopted last year gave state employees and teachers a 2.5% annual raise for each year of the biennium. HB 103 gives state employees an additional 1%, a 3.5% total raise for the current fiscal year. Teachers will receive a higher average raise of 4.2% for the remainder of the biennium. State retirees will also get a 1% increase in their bonus, bringing it to 3% for the biennium.
Anticipating a recession in lieu of rising inflation, state budget writers invested much of the new revenue into reserve accounts to assist state agencies with a way to pay for inflation-related cost increases for construction, infrastructure, and other projects.
The budget places $1 billion into a new fund, the State Inflationary Reserve, to protect against expected cost overruns on state projects as labor and materials costs surge.
There is $250 million reserved from the State Capital and Infrastructure Fund for increased construction costs for capital projects. Another $135 million is reserved from the state Highway Fund to maintain existing transportation contracts and projects.
A top priority of transportation leaders was adopted into the budget to address the looming cash shortfalls that the Department of Transportation is facing due to an increase in infrastructure needs and a decline in motor fuel tax revenue. The budget calls for transferring 2% of sales tax revenue to the Highway Fund, which is estimated to be an annual $193.1 million. The transfer will increase to 6% in fiscal year 2024-25 and thereafter.
Although the budget did not expand Medicaid, there were reforms to North Carolina’s healthcare system to further improve the state’s transition to managed care and modernize the Department of Health and Human Services (DHHS). The provisions of the DHHS section of HB 103 makes some of the following changes:
- Continues the enhanced COVID rates for skilled nursing and personal care services. The rates will remain in place until the funding runs out. At that time, the authority to set reimbursement rates will be returned to the Division of Health Benefits.
- Provides additional funding for Medicaid Transformation contracts, projects, and programs that support the transition to Medicaid managed care, including increases for the Healthy Opportunities pilot, care management initiatives, the enrollment broker contract, and actuarial rate setting.
- Eliminates the NC Health Choice program and moves all beneficiaries to the state’s Medicaid program.
- Allows for nursing facilities to hire health care personnel who are not listed on the Nurse Aide Registry to perform nurse aide duties for up to four months.
- Provides DHHS with emergency flexibilities for certain services and facilities to temporarily waive rules and increase bed capacity during a state of emergency.
- Directs DHHS to develop and administer a two-year pilot program to gauge the effectiveness of FDA-authorized prescription digital therapeutics for the treatment of opioid use disorder.
- Allows prepaid health plans and primary care case management entities to access the North Carolina Immunization Registry.
- Requires the North Carolina Health Information Exchange Advisory Board to submit a report on the overall state of the health information exchange network, NC HealthConnex, to the legislature by March 31, 2023, and temporarily suspends the requirement for providers to connect and submit data through the NC HealthConnex network in order to receive Medicaid funds until legislation is passed in the future to designate a lead agency responsible for enforcement of the Statewide Health Information Exchange Act.
Furthermore, the DHHS section of HB 103 makes new appropriations to health-related programs, including:
- $9 million to increase NC Pre-K reimbursement rates for all providers by 5% over the planned FY 2022-23 rates. Combined with the funding already appropriated in the 2021 Appropriations Act for increased rates, childcare centers will receive a 9% increase over rates from the prior fiscal biennium.
- $6 million to increase rates paid to Medicaid PACE providers in North Carolina. PACE provides comprehensive care to seniors who are eligible for nursing home levels of care.
- $4.4 million to Federally Qualified Health Centers (FQHCs) to increase payments to FQHCs to recognize pharmacy reimbursement challenges at the centers.
- $3 million in recurring funds to the Rural Health Loan Assistance Repayment Program for the recruitment and retention of primary care providers in rural areas, bringing the total for the program to $4.8 million.
The budget makes major investments into schools, growing the total funding for education by an additional $1 billion over the amount adopted in the 2021 budget, for a total of $16.5 billion. Budget writers placed an emphasis on assisting low wealth school districts, providing more flexibility to parents, and improving school safety. Some of the major changes within the education section of HB 103 include:
- $70 million in additional funding, for a total of $170 million, for the state-funded teacher salary supplement.
- $56 million additional dollars, for a total of $150.8 million, to the Opportunity Scholarship Grant reserve. These funds are awarded to low-wealth families wanting to send their kids to private school institutions.
- $32 million in additional School Safety grants for schools to hire and train resource officers, purchase school safety equipment, and provide services for students in crisis.
- $32 million for a transportation fuel reserve for the Department of Public Instruction to pay for the rising costs of fuel for school transportation.
- $16.3 million additional dollars, for a total of $47.9 million, to the Personal Education Student Accounts for Children with Disabilities Program. This amount of funding is anticipated to clear the program’s current waitlist.
- $15 million in additional recurring funds for the School Resource Officer Grant program for elementary and middle schools. The budget also increases the state match for the program for low-wealth school districts to $4 per every $1 in non-state funds.
- Requires the Center for Safer Schools to gather data on existing school safety programs and report recommendations to the General Assembly.
- $3.9 million to cover the copays of students that qualify for reduced-price lunches. This comes as the federal government is ending the pandemic waiver for the copays.
Local Infrastructure Projects
HB 103 builds on successful provisions in the 2021 budget that helped local governments finance critical infrastructure projects.
The budget allocates an additional $883 million for a grant program within the Department of Environmental Quality for water and wastewater infrastructure projects, bringing the total amount over the biennium to $2.5 billion.
For the expansion of broadband infrastructure, the budget allocates an additional $5 million for the GREAT Grants program to assist service providers with expanding broadband access to underserved areas.
To assist local governments with recruiting economic development projects, the budget directs $36 million to counties and municipalities for various grant requests.