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ADVOCACY SECTION 2. BUDGET INFORMATION The General Assembly adopted its spending plan Aug. 5 for the 2009-11 biennium after six weeks of conference deliberation and compromise, mainly centered on strategies for raising nearly $1 billion in new revenues for 2009-10. The 2009-10 budget of $19 billion eliminates a net of 2,200 state positions and cuts $3.1 billion from the continuation budget. With a normal continuation budget exceeding $22.6 billion, Speaker Joe Hackney noted that the budget ad- dresses the $4.6 billion shortfall by taking 40 percent of it in budget cuts, 30 percent in federal recovery money, 8 per- cent through higher fees and 22 percent through new taxes. All agencies and departments largely saw their automatic continuation increases eliminated. The budget contains a number of cuts and special provisions that are both important to and of concern to counties, although several funding commitments continue unabated. MEDICAID First and foremost, S202 preserves the county Medicaid relief swap enacted in 2007 and contains a special provi- sion (Section 10.68) that eliminates any county responsibility for settlement payments or credit for refunds for any ser- vices on or before June 1, 2009. In other words, counties are officially out of the Medicaid service funding business. EDUCATION The budget preserves the 40 percent of net lottery revenues for school construction, budget- ing $147.2 million for 2009-10. A special provision suspends replenishment of the Education Lottery Reserve. (Statutorily, 5 percent of net lottery rev- enues are automatically transferred to the reserve, up to a total of $50 million. The reserve was drawn down in 2008-09 to offset state revenue deficits). The budget does not change the statutory school construction lottery distribution formula, thereby letting lapse last year's special provision that gave all counties the allotment based on ADM. However, the budget technical corrections bill, H836, does direct any lottery net revenues in excess of appro- priated levels to those counties whose effective tax rates are below the statewide average. S202 does suspend for two years the automatic distribution of a portion of the corporate income tax set aside for school construction [Sec. 2.2 (f)j. Widely known as the ADM Fund, the state is using the anticipated receipts of $125 million over the biennium to backfill school operating expenses. The automatic distribution will resume in 2011-12 unless further legislative action is taken. The biggest change between the House and Senate plans, and the final budget, was the reduction in cuts to public schools. Whereas the House and Senate both proposed classroom size increases, the adopted budget provides flexibility to LEAs to realize $225 million in cuts but forbids any increase in K-3 class sizes. Within 14 days, the State Board of Education must notify each LEA of its amount to be reduced. An earlier proposal to eliminate some teachers' assistants was also turned back. G-4 Page 142 NCACC legislative team members (from left to right) Communications Direc- torTodd McGee, General Counsel Jim Blackburn, Intergovernmental Relations Director Rebecca Troutman, Legislative Coordinator Kevin Leonard, Deputy Director Patrice Roesler, Policy Advocate Anthony Allen, Administrative Assistant Alisa Cobb, and intern Christopher Hansard.