NC House budget could change how child care centers run

NC House budget could change how child care centers run

By Grace Vitaglione and Rose Hoban

The North Carolina House of Representatives released a budget proposal June 17 for the fiscal year that begins July 1 that would raise state employee salaries, put funding toward child care needs, boost some Medicaid provider rates and provide enhanced reimbursements for freestanding psychiatric hospitals. The spending plan also includes a sweeping policy change that alters how the state rates child care facilities — a crucial service for working families and for the health of the economy.

The $31.7 billion proposal is the House’s opening play in the annual tug-of-war between that chamber and the state Senate over whose priorities will be most reflected in the final budget document. 

Most state employees would see an additional one percent raise to their salary for the coming fiscal year beyond what was provided in last year’s biennial budget. The average public school teacher salary increase would be 4.4 percent. The House’s budget proposal also raises the starting salary for teachers to $44,000.

The two chambers don’t necessarily need to reach agreement on a new spending plan for the coming fiscal year, because the state spending plan approved last year allocated funds for this fiscal year and the next. But lawmakers frequently make tweaks in the second year of the biennium after they have a better idea of the state revenue picture and additional legislative priorities.

Senate leader Phil Berger (R-Eden) told reporters he wants the two chambers to have an agreed-upon overall spending number before talking about where the money should go.

“[The House is] just spending too much money, and it’s just not something that we’re interested in,” Berger said.

Rep. Donny Lambeth (R-Winston Salem) said he’s hopeful that the two chambers can reach an agreement in the next week; he says the two chambers aren’t too far apart. He told reporters after the House Appropriations Committee meeting June 18 that the main areas of disagreement include public teacher pay and Medicaid provider rates.

“It’s a matter now of taking the few items that are still … I call them ‘stumbling blocks’ and getting those resolved the best we can,” Lambeth said on Tuesday.

Berger said he disputes the characterization that the two chambers aren’t that far off numbers-wise. Unless something drastic changes, he said, the Senate plans to adjourn June 30.

Deregulating child care centers

The House spending plan would alter how the state rates child care centers across the state, a change that troubles Kody Kinsley, secretary of the state Department of Health and Human Services, as many facilities face the end of an infusion of federal COVID funds.

The state’s five-star rating system dictates the quality of care and the reimbursement for child care centers. It was set up to give parents a better idea of the quality of child care available at certain facilities and the level of education of the providers, while providing an impetus for the centers to improve their child-to-staff ratios and quality.

There has been debate for several years, especially during and immediately after the pandemic, about how to change the system because some providers were having difficulty finding teachers who met education standards and were willing to work for the limited compensation offered by the centers.

“The House budget does two things,” Kinsley told NC Health News. “One it has language that provides an alternative method by which child care centers in North Carolina can achieve their star rating.”

“We’ve actually been working with industry to propose alternative paths forward that if a child care center has a national accreditation that equates to three, four, five stars, then great, they can get those stars and they don’t have to go through a secondary process,” Kinsley added. 

What troubles Kinsley, he said, is how the House budget “really disconnects star ratings from how much these child care centers are paid.”

In North Carolina, child care centers receive more state and federal dollars if they’re five stars than if they’re four or three stars, Kinsley explained. The House budget upends that philosophy by flattening the pay scale no matter the star rating. And by January 2025, centers wouldn’t need a star rating to determine how much they’re paid for participation in the state subsidy program.

“A child care center that is getting five stars — if it’s going to go to what the average pay is — it’s going to get a pay cut,” Kinsley said.

If the budget becomes law, those star ratings would become voluntary instead of mandatory, and subsidy payments would no longer be tied to quality. 

Child care changes could affect families’ costs

Subsidy funds currently help families afford child care programs with three or more stars, along with religiously sponsored programs that meet health and safety standards. Those subsidies become an incentive to place children in programs that will do more to enhance their learning and give low income kids a leg up by the time they hit elementary school.

“High quality programs — which serve the overwhelming majority of children — will receive less money,” a DHHS spokesperson wrote. Programs that want to maintain higher quality will likely have to ask parents for higher fees.

The new rules would also reduce the ratio of lead teachers to students; lead teachers have an educational background in early childhood education. Centers could then fill those spots with teaching assistants, who are only required to have a GED.

Kinsley noted that almost 300 child care centers closed last year in North Carolina. 

“These are small businesses in communities, and we desperately need them to thrive. Now is not the time to cut what our highest-quality child care centers are getting paid to do their work,” Kinsley said. “At a time when our child care system is standing on the brink, we can’t afford to reduce how much child care centers are getting paid, or we’re just going to push this thing that’s on the brink over the edge even faster.”

Child care funding falls short

If the budget bill is enacted, child care advocates could see temporary relief from a funding shortfall expected to take effect in July as federal pandemic relief funds that supported better salaries and rates for child care centers sunset. 

State legislators extended $135 million for child care providers through the coming fiscal year, using $109.5 million in federal pandemic relief dollars that the state lawmakers had placed into a reserve fund. An additional $25.5 million is to come from the federal Child Care and Development Fund, which comes to the state annually as a block grant.

Leaders in the child care space have raised alarms about this looming child care financial “cliff” when federal pandemic aid dries up, and asked state lawmakers to extend federal stabilization grants. 

Without the money, centers could lose teachers, close classrooms and raise tuition and fees. Advocates have pushed for about $180 million in funding, which would meet the needs of child care agencies through the entirety of the upcoming year. 

What the House budget provides would only get the state’s child care centers through nine months before facing yet another funding cliff. 

According to a spokesperson for the N.C. Department of Health and Human Services, the money isn’t enough to keep child care programs open and support NC Pre-K

“While the House Budget provides some funding for stabilization grants, it does not fully fund the need and does not invest at all in subsidy or NC Pre-K,” the spokesperson wrote.

Lambeth said legislators will have to figure out how to resolve child care issues again in the next legislative session.

Lawmakers also directed $1 million to add three sites to the Tri-Share Child Care pilot program, which splits the cost of child care among employers, families and the state. The money would also fund an evaluation of the program, which was first funded in the budget for this fiscal year.

Medicaid and psychiatric hospitals

The House’s spending plan would direct $9 million to increase Medicaid provider reimbursement rates for durable medical equipment and earmark $4 million for speech language and audiology therapy service.

The plan also sweeps freestanding psychiatric hospitals into the Healthcare Access and Stabilization Program, which was rolled out last year as part of Medicaid expansion. The program provides increased Medicaid reimbursements for hospitals, but currently, only acute care hospitals are in the program.

The enhanced payments would not apply to state-operated hospitals, such as Central Regional Hospital in Butner or Cherry Hospital in Goldsboro.

The freestanding psychiatric hospitals across the state, “are in need, just as much as an acute care hospital,” Lambeth said at a House Finance Committee meeting June 18.

NC Health News investigated one such facility, Brynn Marr Hospital in Jacksonville, for allegations of understaffing, violence, abuse and falsifying patient records. Brynn Marr’s parent company, Universal Health Services, runs a total of three psychiatric hospitals in North Carolina: Brynn Marr, Holly Hill and Old Vineyard. 

Universal Health Services was recently called out in a report published by the U.S. Senate excoriating it and other companies running such facilities, which they called “warehouses of neglect.” The Senate Finance Committee document cited multiple reports of understaffing, physical assaults, improper restraints and fraudulent admissions practices at Universal Health Services facilities — findings similar to the allegations made to NC Health News by former patients and staff. 

Other selected line item adjustments in the House budget: 

  • Allocates $1.7 million from state reserves created by federal coronavirus relief to the Human Coalition, a Texas-based anti-abortion group.
  • Sends $24.3 million to 25 mostly rural counties, with few — if any — strings attached. Twenty-two of those counties are represented solely by Republicans. 
  • Provides $340,000 for nasal Narcan spray for schools, $3.66 million for Narcan for rural or underserved county law enforcement agencies and $1 million for naloxone to statewide EMS providers. 

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