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CORRECTION
A front-page story on Tuesday incorrectly stated the purpose of $328 million in the Senate budget for pay increases. The money is to fund proposed merit increases in the 2012-13 fiscal year.
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The $19.4 billion state budget the Senate will make public today will include a proposal to pay state employees and teachers based on their performance. It also includes more than $320 million for pay raises, effective in the 2012-13 fiscal year.
The call for performance pay is one of the major differences between the Senate and House budgets. The idea drew mixed reactions from state employee and teacher representatives.
Senate leader Phil Berger, an Eden Republican, said he wants teachers' performance evaluations to include reviews from peers, supervisors, parents and students. The idea is to look at proposals being developed and work with others to come up with the best plan, he said.
The Senate budget will include $1 million to study performance pay next year. As for state employee pay, there are corporate designs that the state can consider, Berger said.
Dana Cope, executive director of the State Employees Association of North Carolina, said the association would welcome performance pay, if legislators find a way to eliminate politics and favoritism from the system.
"If you ask rank-and-file state employees, they would tell you the patronage system is very much alive and well in state government right now," Cope said.
Scott Anderson, executive director of the N.C. Association of Educators, said teachers would be skeptical of performance pay because the state abandoned the ABC bonus system when the economic downturn started.
"It's going to be a challenge to get a system that is fair that they will buy in to," Anderson said. Teachers will say, "you're going to make us meet all these goals, but when times get tough, there isn't any money there to fund it."
A Charlotte-Mecklenburg Schools plan to test performance pay has triggered a backlash.
The Senate budget committee is expected to pass the budget this week, with the full Senate voting next week. The House will then consider Senate changes. The Senate budget would spend about $70 million more than the House plan.
GOP leaders outlined major aspects of their plan to editors and reporters at state newspapers Monday.
Education
Senate Republicans are emphasizing their education plan, which will include hiring 1,100 teachers for grades 1 through 3 to get a start on their plan to reduce class sizes in those grades to 1 teacher for 15 students. The budget would pay for teacher assistants for kindergarten classes only.
The Senate included slightly more money for K-12 schools and state universities than the House, but a little less for community colleges. The university cut is 12.5 percent in the Senate budget versus 15.5 percent in the House.
Senate Republican leaders said most school districts have saved money from last year's federal school-jobs stimulus bill that they can use to help compensate for state cuts.
In addition, the Senate budget would add $115 million for district school construction.
Senate leaders are trying to turn the focus from budget cuts to what they say is a plan that will improve student performance.
"We think it's important that you look at how the money's being spent; what we are doing to try to target the dollars without forgetting that we're approaching this in the context of a $2.5 billion shortfall," Berger said.
Democrats criticized the education budget and what Senate Minority Leader Martin Nesbitt said would be the largest education cut in state history.
"The Republican leadership in both those chambers does not seem to value education in the way the rest of North Carolina does," said Chrissy Pearson, spokeswoman for Gov. Bev Perdue.
Taxes
The Senate budget includes the expiration of the temporary sales tax and the income tax surcharge, while adding $670 million in tax cuts over two years.
Perdue proposed keeping a portion of the temporary sales tax increase.
The Senate tax-cut proposal includes cuts in every tax bracket and an exemption for small businesses' first $50,000 of income.
"That is the money being put back in the economy to help individuals and small businesses," said Sen. Bob Rucho, Finance Committee chairman and a Matthews Republican. "The government spending money is not job creation. The government putting it back in the hands of the (taxpayers) is job creation."
The budget does not include the reduced corporate income tax rate Perdue had in her budget.
"Jobs are created in this state by small businesses, by and large, so the emphasis is on small business and individuals," said Sen. Richard Stevens, a Cary Republican and a lead budget writer.
Bob Morgan, president of the Charlotte Chamber, said businesses would have welcomed cuts in either the income tax or corporate taxes.
"North Carolina's corporate and personal income tax rates are higher than any states around us," he said. "Any reduction in the corporate tax rate or the personal tax rate we have long welcomed.
"We find the sales tax to be less of a detriment. We hope the temporary increase will be lifted but we also hope the state will find a way to adequately fund our needed transportation and education investments."
