RALEIGH — This story misstated an economic projection. The governor's budget anticipates 3.6 percent revenue growth.
Gov. Pat McCrory on Wednesday proposed a 1 percent pay hike for state workers, closing five state prisons and the elimination of more than 3,000 teacher assistants as part of a $20.6 billion state budget.
The Republicans first spending plan for the next two years includes money to hire new teachers to handle enrollment growth, to significantly boost the states pre-kindergarten programs, to compensate victims of the states defunct sterilization program and to provide Saturday service at 30 Division of Motor Vehicle offices. It would also provide a 1 percent cost of living adjustment for state retirees.
The total budget cost represents a 2 percent increase in state spending from the current $20.2 billion budget and offers no major, big-dollar policy initiatives. Instead it shuffles money at the edges to pay for priority programs.
McCrory said the biennium budget reflects the states still-tenuous economic picture and his campaign promise to limit government spending.
We have a sound foundation but the foundation now has some cracks in it, the governor said, debuting his first budget in the old House chambers at the Capitol. Our immediate goal is to fill in those cracks ... so we can have a stronger foundation for future generations.
McCrory recommended eliminating the estate tax, a $52 million a year cut in state revenues, but avoided the larger tax overhaul efforts he pitched on the campaign trail.
The budget projects revenue growth at 3.6 percent in the next fiscal year, which starts July 1, giving the governor new money to allocate. But to pay for other priorities, McCrory diverted money from the federal tobacco case settlement and the state lottery, while also cutting major state entities, including nearly $150 million from the University of North Carolina system.
At the same time, it stores away $813 million in a so-called rainy day account to build reserves for unexpected expenses, such as federal budget cuts pending under sequestration.
McCrorys budget also diverges from his Democratic predecessors in clear ways. It ends taxpayer-funded judicial elections and taxpayer checkoffs to send money to political parties.
The governor pledged to introduce bigger changes in future budget years, including a plan to reorganize and consolidate state government, which he plans to put to a legislative vote next session, and completely revamp the state commerce department.
His inch-thick, 324-plus page document starts the state budget negotiations in earnest. Lawmakers will take up the budget document Thursday. But the state Senate began crafting its own plan weeks ago and it remains to be seen how much Republican leaders will incorporate McCrorys recommendations into their work.
Senate leader Phil Berger, an Eden Republican, noted that the budget proposal increased spending from the previous year. My position and the Senates position is less is better than more, Berger said. We will use the suggestions that hes made, the outline that he has (put forward), as a point of reference. Now where we go from there, our members will just have to make decisions about that.
A mixed message
House Speaker Thom Tillis was not available for an interview but his office sent a statement generally supportive of the McCrory budget.
Many aspects of Gov. McCrorys budget are much-needed and long overdue, and I am especially glad to see the inclusion of the Eugenics Compensation Program, Tillis said in the statement. I am confident that together we can continue to put North Carolina back on the path to economic prosperity.
The line-item cuts from the state budget drew the most attention. The plan would cut a net 900 state government positions with the bulk coming from classrooms. McCrory wants to eliminate teaching assistants in second and third grades, limiting them to kindergarten and first grade and adding more for those remaining classrooms. The budget would give local superintendents flexibility with how to apply the cuts.
Rodney Ellis, president of the N.C. Association of Educators, which represents teaching assistants, said the elimination of teaching assistants for those two grades contradicts Republicans efforts to get all children to read by third grade. It certainly sends a mixed message, he said.
Likewise, he said the pay raise for teachers and other state employees would do little to improve the states ranking as 46th in the nation for teacher salaries.
McCrory, who has a teaching degree, said he hopes to do more in the future. I want to increase the pay for teachers right now, he said. But budget constraints are very, very strong right now.
Democratic lawmakers also juxtaposed the elimination of the estate tax, paid by only the 23 wealthiest estates last year, against the closure of state prisons in rural eastern North Carolina and major cuts to the Rural Economic Development Center and Golden LEAF Foundation, two entities that aim to boost the economy in the hard hit areas of the state.
When you see the whole picture, it shows imbalance and it helps the wealthy and hurts the middle class and working people, said state Sen. Martin Nesbitt, a Democratic leader from Asheville.
Rep. Larry Hall, a Durham Democrat, said the governors budget misses the point. It does nothing to create jobs and grow our economy, he said. At the same time, it continues to cut education.