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2021-2023 State Budget

Legislators Reveal Compromise State Budget – No Surprises for Child Care

On Monday, Nov. 15, after months of negotiations, Republican legislative leaders in the NC General Assembly finally unveiled their state budget “conference report,” a compromise budget for the two-year period that began on July 1, and ends on June 30, 2023. With the exception of some local grants using federal one-time COVID-relief funding, there were no surprises in the budget related to child care funding or policies. The two-year spending plan unveiled this week contains the same child care provisions that were included in earlier proposals from the state House and Senate. (Details are provided below in this report.) 

As of Thursday, Nov. 18, the compromise budget has passed both the State House and Senate chambers and is headed to Governor Roy Cooper who has stated he will sign the budget into law. While Medicaid expansion is not in the budget like the governor wanted, it will be studied in a committee between legislative sessions. The budget does contain some policy provisions that the governor does not like, including one that would limit emergency powers (like those used for the COVID-19 pandemic) without approval from elected Council of State members and legislators. 

The state budget would spend $25.9 billion in the current fiscal year and $27 billion in the 2022-2023 fiscal year. It would transfer $2.3 billion to the state’s “Rainy Day Fund” (Savings Reserve Account), which will bring the total balance to $4.25 billion in 2022-23. 

The complete state budget compromise for 2021-2023, totaling nearly 1,400 pages, can be reviewed online by accessing two documents via the following links:

Special Provisions (627 pages)

Money Report (761 pages)

Child Care Provisions in the State Budget Conference Report, 11/15/21

NC Pre-K Rate Increase (NCLCCA Agenda Item) – 2% rate increase in 2021-22 ($1.7 million recurring) and an additional 2% rate increase in 2022-23 ($3.5 million recurring) “to increase the salaries of teachers working in child care centers as a means to address disparities in teacher salaries among teachers working in child care centers versus those working in public schools or Head Start centers.” 

Start-up & Capital Grants for Child Care Facilities & NC Pre-K Classrooms (NCLCCA Agenda Item) – $20 million nonrecurring (federal) funding over the two-year budget “to provide grants for child care facilities and North Carolina prekindergarten (NC Pre-K) classrooms in response to the COVID-19 pandemic, particularly those located in child care deserts and low-performing and high-poverty districts.” The Division will award the grants after establishing criteria “in accordance with federal law and guidance.” The grants shall be one-time awards to assist with new or expanded high-quality child care initiatives, as follows:

      • Start-up costs associated with establishing a new NC Pre-K classroom or child care facility.
      • Quality improvements for existing NC Pre-K classrooms or child care facilities that increase the classroom or facility's capacity or upgrade its star rating.
      • Capital improvements or renovations, including adding or upgrading outdoor play and learning environments, or increasing a facility's total capacity.

American Rescue Plan Act (ARPA) Funding – Budgets $502.7 million in nonrecurring supplemental discretionary CCDBG/CCDF funds, as follows: 

1) Up to $274 million of the funds shall be used for the following:  
      • A minimum of $206 million, but no more than $215 million to reduce the waitlist for children eligible for subsidized child care who are in foster care and then tackle the overall subsidy waitlist.
      • A minimum of $50 million, but no more than $59 million to modernize and improve early childhood technology infrastructure.

2) Up to $30 million shall be used to continue to cover all copays for families eligible for subsidized child care through the end of the 2021 calendar year (Dec. 31, 2021).

3) Up to $207.7 million shall be used to build the supply of qualified child care teachers with staff bonuses and other teacher pipeline programs, including apprenticeships, stackable courses, and fast-track programs. (Staff bonuses from DCDEE shall be provided based on the number of months the teacher or staff person has worked at the child care facility with the maximum bonus being provided to a teacher or staff person who has worked at least 12 months at the teacher or staff person's current child care facility.) 

NOTE: While NCLCCA pushed for subsidy program rate increases that were not included in the budget, we also pressed legislators for funding to help increase the workforce pipeline and to be sure that child care employee bonuses target retention.

Lead and Asbestos Remediation in School and Child Care Facilities – $150 million nonrecurring (federal) funding from the State Fiscal Recovery Fund to support lead and asbestos remediation in public schools and child care facilities 

Smart Start Funding – $10 million/year in each of the two years (2021-2023) for a total of $20 million for Smart Start. The budget give Smart Start flexibility for each year of the biennium for how to use additional recurring funding. 

NOTE: NCLCCA joined with the NC Early Education Coalition and Smart Start to push legislators to include $35 million in the budget to expand the WAGE$ salary supplement program statewide, which they did NOT do. There is no designation in the budget for how the $20 million in additional Smart Start funding is to be used. 

Child Tax Deduction – Increases the child tax deduction by $500 per child.

Local Grants – 

      • $1.2 million nonrecurring grant in 2021-22 for “Ready for School, Ready for Life,” a Guilford Co. nonprofit that provides children and their families with resources for healthy development.
      • $500,000 nonrecurring grant in 2021-22 to the Child Development Center, Inc., a New Hanover Co. nonprofit that provides services to preschool age children with special needs.
      • $500,000 nonrecurring grant in each year (2021-2023) for a total of $1 million for “Reach Out and Read,” a nonprofit that works with pediatricians to provide books to children.
Subsidy (TANF) Funding – $2.35 million recurring Temporary Assistance for Needy Families (TANF) in 2021-22, due to increased availability.

Subsidy (CCDF) Funding – $1.5 million recurring Child Care Development Funds (CCDF) in 2021-22, and $1.4 million recurring CCDF in 2022-23, due to increased availability.

More Budget Highlights/Indirect Impacts on Child Care:

Public & Private Schools – 

      • 5% average raise over two years (2.5% per year) for public school teachers and state employees.
      • $1,000 bonuses for all public school teachers and state employees, plus additional $1,000 bonuses for teachers.
      • Additional $500 for all public school teachers and state employees earning less than $75,000/year. 
      • Creates a new $100 million public school funding allotment to provide funding to “low-wealth” counties to increase pay for teachers and instructional support personnel. More specifically, allots public school teacher supplemental assistance for teachers in 95 counties of 100 counties (excludes Buncombe, Durham, Guilford, Mecklenburg and Wake counties), ranging from $490 to $4,250 per state-funded teacher.
      • Implements a $13/hour minimum wage in 2021-22 and $15-per-hour minimum wage in 2022-23 for all local full-time permanent employees of public schools and community colleges.
      • Expands eligibility, increases voucher amounts and increases funding by $15 million for the Opportunity Scholarship Program, which awards vouchers to low- and middle-income families to send their children to private schools. (Currently, the state provides up to $4,200 per student, which would change in the budget to 90% of the amount the state spends per year per public school student – estimated to be $5,850. The budget would also raise income eligibility for families from 150% to 175% of the amount needed to qualify for the federal free-or-reduced-priced lunch program, or $85,794/year for a family of four.)  

Tax Cuts & Business Relief – 

      • Allows tax deductions for businesses that received Paycheck Protection Program loans.
      • Cuts personal income tax from 5.25% to 3.99% over six years, including lowering to 4.99% beginning on Jan. 1, 2022.
      • Increases zero-tax bracket (amount of income on which people pay no income tax) to $12,750 or $25,500 for married couples, up from $10,750 and $21,500. 
      • Phases out the corporate income tax over six years beginning in 2025.  
      • Simplifies and reduces the franchise tax base for corporations that have significant real and personal property investments in the state.
      • Creates a $500 million fund to disperse one-time grants to businesses impacted by the COVID-19 pandemic in the hospitality and entertainment sectors with priority to businesses who have not previously received an award.

NC Licensed Child Care Association
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