RALEIGH — The North Carolina Senate, who introduces their spending plan first this biennium, presented their budget on June 21, maintaining the conservative approach General Assembly Republicans have been following since they took over the budget-writing process 10 years ago — focusing on tax cuts, boosting savings, covering fiscal obligations and a more-methodical approach to raises for public employees.
While the House and Senate had already agreed on how much to spend on the 2021-23 budget, some observers thought the announcement of a $6.5 billion windfall in revenue might cause some upward adjustments in that number. But the Senate budget proposal stuck with early targets, spending $25.7 billion in 2021-22 and another $26.6 billion in 2022-23.
“A huge surplus does not mean we’re spending too little. It means we’re taxing too much,” Senate Leader Phil Berger (R-Eden) said when the nonpartisan fiscal staff reported the surplus.
Acting from that perspective, at the budget press conference, Berger and other Republican Senate leaders laid out tax cuts that would reduce personal-income taxes for residents to 3.99%, down from 5.25%, over the next five years. They also proposed increasing the zero-tax bracket to $25,500 for those filing jointly and increasing child-tax deductions by $500 per child. Taken together, Senate budget writers claimed this would be a 37% tax cut for a family of four earning the median household income.
“A decade of responsible budgets and growth-oriented tax policy has North Carolina in the best fiscal shape in a generation,” Berger said. “This surplus came largely out of the pockets of North Carolina citizens and they deserve to see some of it returned to them.”
But Democrats see North Carolina’s strong fiscal position not as an opportunity to return money to citizens and businesses but to increase funding to their priorities, like teacher raises and expanding Medicaid.
A joint release by state House Democratic Leader Robert Reives of Chatham County and Senate Democratic Leader Dan Blue of Wake County said the Senate budget “puts corporations ahead of families and tax cuts ahead of investments.”
“As legislators it is imperative that we make sure we are efficiently utilizing the revenue increases we are blessed with,” Reives said. “We have the chance to fund critically under-resourced programs and the budget should reflect that opportunity.”
In addition to the tax cuts, the budget was noteworthy in that it replenishes the rainy-day fund with an additional $3.8 billion and gives $4.3 billion over the next two years to the State Capital Infrastructure Fund, which pays for much of the state’s infrastructure. While $1.3 billion of those funds will be used to service existing debt, the other $3 billion will go to new infrastructure projects. Over the next 10 years, $12 billion total will be allocated to infrastructure, according to the Senate plan.
Of that infrastructure funding, $1.2 billion would go to resurfacing roads, and $700 million would go to road projects over the biennium.
“Our budget helps North Carolinians by reducing taxes for all citizens and supporting critical infrastructure improvements across the state,” said Sen. Brent Jackson (R-Sampson), a chair of the budget committee.
Public employees, including teachers, received 3% raises over the biennium, with 1.5% in each year. Bonuses of up to $1,800 are also available to teachers. The Senate proposal sets a $13 minimum wage for non-certified workers at K-12 schools and community colleges, such as janitorial staff and lunch-room workers.
“When presented with an added $6.5 billion in unexpected revenue, the N.C. Senate has opted to reward North Carolina educators for working non-stop to support our students through the most difficult school year in history with a pitiful 1.5 percent annual pay raise,” said Tamika Walker Kelly, president of left-wing teacher-advocacy group the North Carolina Association of Educators. “This proposed budget shows that corporate tax cuts take priority over North Carolina students yet again.”
For correctional officers, whom the state has had a particularly difficult time recruiting and retaining, the budget would create a step-pay plan. Rep Allen McNeill (R-Randolph) told NSJ earlier this year that pay raises and experience-based tiered pay was “one of their top priorities” on the House side. The bill also brings back the cabinet-level position for state corrections that had been eliminated in 2012.
Democrats have been pushing for an expansion of Medicaid to more able-bodied adults since the Affordable Care Act opened up federal funds for that purpose, but state Republicans have remained firmly opposed. While this year’s Senate proposal again did not include expansion for adults, it did expand “full Medicaid benefits for eligible postpartum mothers from 60 days to 12 months beginning April 2022.”
Senate Bill 105, “The 2021 Appropriations Act,” as the budget is called, will make its way through the Senate Appropriations and Finance committees before going to the floor for a vote. The House, which has been working on its own version based on the agreed-upon spending targets, will then also release a budget.
Sometimes there are difficulties reaching a consensus and synthesis between the House and Senate versions during negotiations, but crafting a budget that will get beyond Gov. Roy Cooper’s veto pen has been the larger difficulty for legislative Republicans. Cooper has vetoed every budget agreement that has come to his desk since 2017. With a supermajority, Republicans were able to override the veto then, but since 2019 the state has operated without an official budget.