McCrory budget plan omits tax cuts, offers 3 percent bonus to state workers

Gov. Pat McCrory announced Friday that his $22.8 billion budget proposal won’t include the income tax cuts sought by legislative leaders and would give state employees a one-time bonus averaging 3 percent.

McCrory said the full budget plan will be released Wednesday morning as legislators meet to discuss a spending plan for the fiscal year that begins in July. Overall, his budget will include a 2.8 percent increase in spending – a bit more than the 2 percent target Senate leader Phil Berger suggested this week.

The spending increase was a sticking point last year in negotiations between the House and Senate that prompted the longest legislative session in years. Eventually legislators agreed to increase spending by 3.1 percent from the previous year. House leaders haven’t announced a spending target for this year.

The 2.8 percent growth figure, budget director Andrew Heath said, is “modest when you compare it to last year’s budget. We’re going to maintain fiscal integrity.”

While the plan doesn’t include an across-the-board raise for all state employees, it would provide targeted salary increases for hard-to-fill positions such as correctional officers. All employees would be eligible for a one-time bonus that would equate to an average of 3 percent, with a cap of $3,000. Agency directors would determine how the bonuses would be distributed.

State retirees would not receive a cost-of-living pension increase.

McCrory had announced that teachers would also get more pay boosts than some other state employees, with an average salary increase of 5 percent and a 3.5 percent one-time bonus “that will be more heavily weighted toward our veteran teachers,” Heath said. The salary hikes, meanwhile, would be targeted toward early-career teachers with the goal of increasing the average teacher salary to at least $50,000.

McCrory said the approach is similar to how his administration has handled employee pay in past budgets.

“This continues a trend that we have of adjusting to market forces for employees,” he said. “Especially as the economy rebounds now, we’re seeing industry stealing some of our employees.”

Berger said Wednesday that he’d like to see the standard deduction for personal income taxes increased by up to $2,000. The standard deduction is the base amount of income that isn’t taxed unless a taxpayer chooses itemized deductions.

Under that proposal, a married couple filing jointly wouldn’t owe taxes on their first $17,500 in income – up from $15,500. For a single person, the deduction would increase from $7,750 to $8,750.

Asked why that proposal wasn’t in his budget plan, McCrory said that “with the money that we’ve dedicated at this point in time, this is where our priorities are.” His budget plan does not include any tax or fee increases.

In a news release, Berger said the governor’s plan “sets the right tone.”

“The Senate looks forward to reviewing the governor’s plan in greater detail and building on our shared priorities as we work through the appropriations process,” he said.

The State Employees Association of North Carolina blasted McCrory’s pay plan in a news release.

“By proposing a ‘percent of salary bonus’ rather than a flat rate, McCrory rewards the people at the top with large salaries – like himself – rather than the average state worker who has been hardest hit by the lack of meaningful increases over the last decade,” the group wrote. “Clearly, the governor needs to spend less time worrying about bathrooms and more time worrying about the employees who deliver important public services to North Carolina.”

Rep. Grier Martin, a Raleigh Democrat, also said he was disappointed by the pay plan, noting that the state has a revenue surplus.

“I was hopeful we could do more and actually provide a permanent pay increase and a cost-of-living increase for our retirees,” he said.

But UNC system president Margaret Spellings praised the governor’s proposal, pointing to a $3 million allocation to help keep top faculty members.

“Our top budget priority this session is faculty and staff pay, and we are pleased that the governor is proposing to invest in recruiting and retaining top faculty and to recognize the contributions of university employees,” Spellings said in a news release.

This story was originally published April 22, 2016 at 11:24 AM with the headline "McCrory budget plan omits tax cuts, offers 3 percent bonus to state workers."