NC House budget overestimates lottery revenues, documents show

by John Frank, News and Observer, June 13, 2014.

The House budget that won approval Friday overestimates how much lottery money the state is expected to receive, documents show, jeopardizing Republicans’ plan to increase teacher pay.

The N.C. Education Lottery warned legislative staffers that the House’s plan to boost lottery sales by doubling the advertising budget would generate only $59 million next year – far less than the $106 million designated in the budget.

It is outlined in a fiscal memo sent to legislative staffers before the House voted Thursday and Friday to approve the $21.1 billion spending plan.

The documents, obtained by The News & Observer, show that the House’s projection didn’t take into account language in the bill eliminating lottery advertising at college sporting events and restricting the description about jackpot payouts. The lottery commission suggests the limits would cost them $47 million in sales.

State Rep. Nelson Dollar, the lead House budget writer, would not say whether he saw the projection before the House vote. But he said the analysis contradicts a legislative fiscal analysis done a year ago that found the advertising restrictions would have no effect on sales.

The lottery commission declined to discuss the analysis. A lottery spokesman said that an attorney for Speaker Thom Tillis asked the agency to first consult with the attorney general’s office to determine whether it qualified as confidential communication.

The apparent hole in the House spending plan only complicates the difficult task ahead as lawmakers attempt to reconcile it with the version approved by the Senate.

The two budgets represent fundamentally different visions for paying for the state’s priorities, and the disconnect puts teacher pay hikes, health care for low-income residents and a half-dozen major policy initiatives in limbo.

It represents the widest gulf between House and Senate Republicans since the party took control of the legislature in 2011.

“I think they are about as far apart as the distance between Atlantic and Pacific oceans,” said Rep. Mickey Michaux, a Durham Democrat and former lead budget writer. “It’s going to be difficult for them to come together because the Senate is in an intransigent mood and the House is in an ameliorated mood and … it’s going to take some time for the two to come together.”

House Republicans downplay the differences, but Senate leaders are more matter-of-fact. “We are a long way apart from the House budget,” said Sen. Jerry Tillman, a leading Republican from Archdale. “They took a different approach.”

Teacher pay will dominate

The teacher pay issue dominated the two-hour House debate on the budget Friday morning.

Rep. Alma Adams, a Greensboro Democrat, expressed concern that the lottery money would not materialize.

“We’ve got to honor the promises we make to our teachers and state employees,” she said.

Republicans defended the plan, saying teachers will get the 5 percent average pay hike regardless of whether the lottery meets projections.

In the debate, Dollar said the state already uses $220 million from lottery ticket sales to pay teachers, noting that Democrats increased the amount in 2010. “The fundamental truth is that this is a sound budget,” he said.

Seven House Democrats voted with the majority Republican lawmakers to approve the budget 77-35.

The issue of how to increase teacher pay, which ranks near the bottom in the nation, is likely to consume much of the discussion when the two chambers begin negotiations next week. Lawmakers may also take into account Gov. Pat McCrory’s budget, which differs from both the House and Senate plans on several key points.

The Senate proposed 11 percent pay hikes for teachers who relinquished their career status, or tenure rights. The Senate’s budget also cut 30 percent from the Department of Public Instruction and elsewhere in education to pay for the plan.

The House budget cuts the state education department 1 percent and allows existing teachers to keep their tenure.

“They are presenting pretty different visions for how they want to transform the salary scale,” said Brian Balfour, a budget analyst at the conservative Civitas Institute. “I really don’t know how that is going to play out.”

Policy divided on Medicaid

Equally thorny is how to approach Medicaid, a $13 billion health insurance program for the poor that continues to see cost overruns and lagging wait times for care.

The Senate removed thousands of elderly and disabled residents from the program and sought to separate the Medicaid office from the Department of Health and Human Services.

The House did neither but still managed to put less money into the program to cover the current shortfall and future growth.

“I don’t really know how to unravel that,” said Paige Worsham, a policy analyst at the nonpartisan N.C. Center for Public Policy Research. “There’s such a divide in the policy. … I don’t know how you figure that out in a week.”

STAFF WRITER DAN KANE CONTRIBUTED TO THIS REPORT.