A month before the legislative session reconvenes, the likelihood that all North Carolina teachers will see a pay raise this year appears to be fading.
Republican leaders are pushing a plan to increase starting salaries for teachers but offering no boost for veteran educators. The latest revenue report forecasts limited growth, so GOP legislative leaders say the state is too cash-strapped for the across-the-board increases demanded by teachers, who rank among the lowest paid in the nation.
The situation is putting renewed scrutiny on a key reason for the state’s financial picture: the tax cutting measure authored by Gov. Pat McCrory and Republican legislative leaders.
The measure cuts personal and corporate income taxes, leaving the state with $2.4 billion less in revenue in the next five fiscal years, according to legislative analysts’ projections.
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“They are sending a message that they don’t value public education in North Carolina,” said Mark Jewell, the vice president of the N.C. Association of Educators. “They could have given us a pay hike last year, but instead they gave vouchers for private school and tax breaks for millionaires.”
The standoff hit a peak Tuesday, as McCrory and lawmakers used Tax Day to laud the new law, which is effective for the 2014 tax year.
“On this day, many of us are looking at every dollar,” the Republican governor said. “Basically what we are doing on this April 15 is we’re leaving a little extra money in everyone’s paycheck.”
The day before, a special legislative panel tasked with developing a plan to improve teacher pay reached a dead end, calling for more study of the issue – a conclusion that left teachers and lawmakers on the committee frustrated.
“It’s all related,” said Rep. Tricia Cotham, a Charlotte Democrat and former high school teacher who served on the panel. “It goes back again to what are your priorities in terms of spending.”
Democrats are hammering the issue of education budget cuts and teacher pay, noting the state’s No. 46 national ranking for average teacher salaries, and the teachers association is launching what it calls the “We (Heart) Public Schools” campaign to bring both issues to the forefront, all ahead of the 2014 elections.
The potential political implications have Republicans on edge, and some GOP lawmakers were critical of the task force’s report.
But Republicans are fighting the suggestion that their tax overhaul – which they call a historic measure – is tied to the fact teachers are looking at another year without a raise. State workers and teachers have seen one salary increase since 2008, years under Democrat and Republican control.
Speaking to reporters after the Tax Day event, McCrory argued that the two are not related.
“The tax bill is not going to be the major factor in our revenues in the future,” he said. “The major issues for our revenue projections are going to be a growing economy on the positive end and Medicaid costs on the negative end.”
The state is estimating that Medicaid overruns will range between $69 million and $140 million in this budget year.
The governor touted a ranking released Tuesday from the conservative, business-backed American Legislative Exchange Council, or ALEC, that showed the state’s economic potential ranking No. 6 in the nation, moving from No. 22 a year ago.
He said the tax overhaul – which cut personal income tax to a flat 5.8 percent in 2014 and the corporate tax to 6 percent – is helping recruit companies and add jobs. In his 2012 campaign and again last year, McCrory pledged to make the tax plan revenue-neutral, meaning it wouldn’t affect state tax collections, but he later changed course.
“I think the tax reform is going to continue to help our growing economy, especially in the long term,” he said.
To address the teacher pay situation, McCrory and GOP legislative leaders propose increasing the base teacher salary to $33,000 this year and $35,000 in 2015. The current starting salary is $30,800, making it tough to recruit and retain new teachers. The plan will cost roughly $200 million.
Republican state Sen. Jerry Tillman, a co-chairman of the teacher task force, said he hopes surplus revenues from an improving economy would give lawmakers more money for education.
But state tax collections remain on target through the end of March, with a slight $12 million additional revenue because sales taxes are running ahead of projections. The picture is murky because personal income tax withholdings, slashed by the tax plan, are behind forecasts by $221 million.
Tillman, a Senate GOP leader from Archdale, said increasing teacher pay across the board is a multiple year process and no broad pay hikes are likely in the legislative session that begins May 14.
“Yes, you can go back and say if we didn’t cut taxes we would have money for education,” he said. “But that money is also going back into the economy and getting people back to work.”
Jewell, the teachers association official, called the connection between tax cuts and teacher pay absolute. “It’s a direct link because we know our public schools are tax-funded primarily,” he said.
He took issue with McCrory’s repeated assertion in recent months that cost overruns for Medicaid, the government health insurance program for low-income residents, is to blame for the state’s financial restraint.
“It’s getting very tiresome to hear,” Jewell said. “They keep blaming poor people for the state the state is in. To pit poor people and public schools against each other is not a healthy solution.”
Staff writer Lynn Bonner contributed to this report.