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State Of State Speech Focuses On Economy, Education And Efficiency

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In his first State of the State address, Gov. Pat McCrory Monday night pledged to work to lower North Carolina's income tax rates, cut the amount of money the state wastes on Medicaid, and make vocational training a larger part of the state's education system.

Gov. McCrory said his administration will focus on "fixing the economy, transforming education and improving government efficiency." Here's the first step:

"I have concluded that our government must first pay off its debt, which in this state's case is $2.5 billion," he said.

That's how much North Carolina owes the federal government for help paying unemployment insurance since the recession. McCrory said he'll sign legislation Tuesday to pay that back by dramatically cutting unemployment benefits and slightly raising taxes on some businesses.

Republican House Speaker Pro Tempore Paul Stam said that sends a clear signal.

"Governor McCrory is not going to put problems off," Stam said.

'Improving Government Efficiency'

And there's another huge problem – a state audit found North Carolina wasted $1.4 billion on Medicaid over the past few years.

"Georgia is able to deliver Medicaid services at a cost of $4,000 per patient," McCrory said during his speech. "North Carolina's delivery cost is over $6,000 per patient."

He said that's part of the reason the state will not expand Medicaid under the Affordable Care Act – North Carolina needs to "stop the bleeding" first.

McCrory said he wants to make other parts of the government more efficient too, and he hinted that some government employees he calls "seat warmers" may lose jobs.

But Senate Deputy Minority Leader Floyd McKissick said he's not sure if laying off more government employees is such a good idea. 

"Over the last three years since the recession came, there have been an awful lot of reductions in terms of the number of public employees that are out there," McKissick said, "so you just have to be careful about where you cut and how deep you cut."

'Transforming Education'

On education, McCrory said the first bill he signed into law will mean more students will be ready for a job when they graduate from high school. The law tells the State Board of Education to develop a diploma program that shows students are ready for a vocational career, college, or both.

"The disconnect between employers not able to find qualified talent even with our high unemployment rate and the citizens unable to get jobs must be resolved through education," McCrory said.

Also, he said the state's schools need more flexibility to use funding on technology.

House Republican Conference Leader Ruth Samuelson from Mecklenburg County said that drew applause from both sides of the aisle.

"I think there's real strong bipartisan recognition that our education system needs to be modernized," Samuelson said. "Part of modernizing will be including more technology as a teaching tool, but also training the students to use it when they get into the workforce."

'Fixing The Economy'

McCrory said his number one priority as governor is to make North Carolina an engine for economic growth.

He said a key part of that is tax reform, "which should meet the following criteria: lower rates on personal income and businesses to be more competitive at least with our next door neighbors, close loopholes for special interests to make our system more fair and transparent, (and) it must be revenue neutral."

Democratic House Minorty Leader Larry Hall heard that and thought, "Basically, there were no specifics."

Hall said if you cut income taxes, you can't stay revenue neutral just by closing loopholes. 

"And so (McCrory) would have to go to regressive taxes like the sales tax or other taxes," Hall said. Regressive taxes affect poor and middle class families more than wealthy ones.

Catawba College Political Professor Michael Bitzer said the specifics of McCrory's tax plan will likely be revealed in the governor's budget. 

"He identified the fact that there is going to be no new money in the budget, so really those numbers that line up are going to show the details that he's going to have to put behind all these ambitious goals that he's set for state government," Bitzer said.

The governor typically releases the budget in the middle of March.