The state House and Senate passed a short-term spending plan Tuesday to keep government running after Sunday, the end of the budget year.
The bill, which Gov. Pat McCrory is expected to sign, allows the state to spend money on “nonessential functions” and pay salaries through July 30. It’s expected that the state will have a permanent budget by then.
The continuing resolution, as it’s called, funds state operations at 95 percent of current levels. It was approved 37-12 in the Senate and 111-0 in the House.
Such continuing resolutions were common when Democrats controlled the legislature as they worked out budget differences between chambers.
But when Republicans took control of the legislature in 2011, they reveled in passing budgets before the June 30 deadline despite vetoes by former Gov. Bev Perdue, a Democrat, in 2011 and 2012.
No veto is threatened this year, but Republicans haven’t even started their heavy budget talks yet.
What’s the holdup? The Senate and House can’t agree on what their new tax code should look like. Without that, they can’t finish a budget.
Budget proposals represent negotiating positions as much as they do real plans. The House and Senate budgets both came in at about $20.6 billion.
Despite the similar bottom lines, there are dozens of differences on policy and spending. Many of those differences are expected to fall away easily once negotiations get going. Slow tax plan negotiations are holding up the budget.
The big obstacles: Once the budget talks begin in earnest, education policy and spending will likely emerge as real sticking points. Here are a half-dozen:
1. Senate leader Phil Berger, a Republican from Eden, wants to end teacher tenure, so the Senate budget phases out tenure over five years. The House voted in a separate bill that’s now sitting in a Senate committee to keep tenure but create a way for a teacher to lose it. The House did not put its tenure plan in its budget bill.
2. There is also a big question over how many teacher assistants the state should pay for. The Senate budget makes big cuts to teacher assistants; the House, not so deep.
3. The House wants to keep limits on class size in the lower grades, while the Senate wants to get rid of them.
4. Not all Republican senators are sold on private school vouchers, while House Speaker Thom Tillis really wants them.
5. There’s been a lot of back and forth over Special Superior Court judges. Senate Republicans are intent on firing a dozen Special Superior Court judges, while the House wants to keep them.
6. Tillis and McCrory want $10 million to compensate victims of the state’s eugenics program. Senate Republicans nixed such payments last year and haven’t shown any signs of changing their minds.
No public hearings featuring emotional victim testimony were held this year, muting the public push for compensation and making it less likely it will survive budget negotiations.
On taxes, House and Senate leaders have been going back and forth in recent days, making compromise offers and counteroffers. At this point, the two sides are inching closer to a resolution. Berger said it’s not “necessarily a surprise” that strong Republican majorities in each chamber aren’t enough to solve all policy differences.
“It’s just part of the process,” he noted.
But if they don’t compromise soon, they aren’t likely to adjourn in early July as anticipated.
Where things stand: Berger said the Senate responded to the House offer Tuesday, but he declined to provide details, saying the talks are ongoing. “I think the take-away is that tax reform is complicated, there are a lot of moving parts to it, and there are a lot of interests out there who like what they have and don’t like a change to what they have,” he said.
Where the two chambers diverge: At last check, the two plans diverged far more often than not – particularly on how much to cut taxes. Here’s a sample of where they need to come together:
1. The Senate wants to cut the personal income tax to a flat 5.25 percent, a good bit more than the House. The House wanted to lower the corporate income tax to 5.4 percent, but the Senate wants to gradually eliminate it.
2. Likewise, the Senate wants to cut franchise taxes paid by businesses and replace them with a new flat tax. The House would rather keep it at the current rate.
3. The Senate would impose a state tax on Social Security checks for those with other income sources, while the House would not.
4. On the bottom line, the Senate plan restricts future spending growth far more than the House.
It’s difficult to tell how the final plan will look. But House and Senate GOP lawmakers, as well as the governor, are vowing to keep their campaign pledge to rewrite the tax code this session.