It’s June. Where’s North Carolina’s state budget?
The state budget process has been delayed so much this year, the timing of its arrival has turned into fodder for jokes.
House Speaker Tim Moore ended the chamber’s last session for the week — on Wednesday — talking about budget negotiations.
“We were hoping that we would have received the budget from the Senate about two weeks ago, so it’s gotten lost in the mail or something right now. But I’m sure it’s going to show up sooner or later. There may be a special messenger wandering around the building somewhere, still trying to find their way here,” Moore said.
Joking aside, Moore said: “What I can tell you is there are very serious conversations happening to try to negotiate as much as can be right now ... and so I have no doubt that we will get there, it just may take a couple weeks longer than what we would perhaps like,” Moore said.
North Carolina, unlike the federal government, is not on a budget deadline. If the new fiscal year starts July 1 without an agreement, the old state operating budget would roll over until the new budget is passed.
Republicans control both the House and Senate. The two chambers take turns every two years on who puts out its version of the budget first.
This time it’s the Senate’s turn. Senate leader Phil Berger has repeatedly told reporters that he wants the chambers to agree on a spending number before the Senate releases its version.
So what’s the holdup, then?
That spending agreement. The Senate wants to spend less than the House does. And they are still, still, still talking about it. Five rounds of talking about it.
“It’s a little confusing,” Rep. Jason Saine, a Lincolnton Republican and the House’s chief budget writer, told The News & Observer on Thursday. He said the House has given the Senate five different offers.
“They haven’t said no, haven’t said yes, either” about the latest number, Saine said.
So the House is moving ahead to “initialize the process” of the budget in several Appropriations Committee meetings after Memorial Day.
Saine said the Senate has moved a little on their spending number, and the House has moved more.
“We’d love to see some real movement on their end,” he said.
Tax cuts?
What the Senate has done is “telegraph their tax plan,” Saine said.
That came in the form of a bill from Senate Finance Chair Paul Newton on Tuesday. The Senate tax plan includes reducing the income tax rate from 5.25% to 4.99% and increasing the standard deduction and child deduction. It would also continue the Republicans’ goal of phasing out the corporate tax entirely, this time over five years.
“Allowing North Carolinians to keep their own money is the best form of stimulus we can have,” Newton told reporters on Tuesday. The bill moved quickly through Senate Finance and Appropriations committees this week. On Thursday, the Senate’s chief budget writer, Sen. Brent Jackson, added an amendment that would put $1.3 billion from the general fund into the state’s rainy-day fund. That amendment passed. The Senate could vote on it soon after Memorial Day.
Saine said Thursday that the House would look at the Senate’s tax plan. He said because the Senate goes first on the budget this time, it is also tying up the legislature’s fiscal research staff, thus slowing down the House’s work on its own version of the budget.
The delay doesn’t mean the House and Senate aren’t getting along, Saine said.
“No one’s mad or throwing rocks.”
But the Senate is still holding out.
Pat Ryan, spokesperson for Berger and other Senate Republicans, confirmed a report by the conservative news outlet Carolina Journal that the House wanted to spend “$26.1 billion, which is a 5% growth in the state budget. For the past 10 years, the legislature has reined in reckless spending and kept budget growth close to population growth plus inflation, which is referred to as “TABOR.” The TABOR number for next year is 2.5%.”
TABOR stands for Taxpayer Bill of Rights and is used by Colorado, but was rejected by voters in some other states.
“A budget that grows spending by double TABOR is not a conservative or responsible budget, and jeopardizes the last 10 years of responsible spending,” Ryan told The N&O Thursday.
Saine, however, said that the TABOR number can vary, too.
“One problem with an accurate TABOR number is when you’re going two years without a budget,” he said. Lawmakers and the governor couldn’t agree on a full budget for 2019 or 2020.
A budget in July?
In 2019, the House’s first budget proposal was already out in late April. Rolling it out on time doesn’t necessarily mean the state has a budget any sooner. The 2019 budget battle dragged out the entire rest of 2019 and into 2020. Democratic Gov. Roy Cooper vetoed the budget, then the House overrode it but the Senate didn’t. So instead, a series of “mini” budgets were passed to supplement the old budget that had rolled over. This time, each side says, will be different. Cooper, Berger and Moore are on much more friendly terms this round, The News & Observer previously reported. But the budget is still weeks from Cooper’s desk.
Another reason for that final spending agreement delay is the new revenue forecast, which is typically released about three weeks after Tax Day. Because Tax Day this year was May 15, that puts the forecast at early June.
Saine said that’s “absolutely a factor” in elongating the budget process. The last revenue forecast was economically sunny, and this one is likely to be as well. Saine reprised previous comments he’s made calling it “more money, more problems,” in a reference to a song by the late Notorious B.I.G.
Here’s what else we know:
Republicans want to give money to parents to address their students’ learning loss. That could show up in the state budget, but is more likely to be part of the next coronavirus relief package spending as much as $170 million from the American Rescue Plan passed by Congress and signed by President Joe Biden. House Bill 934 would give parents $1,000 per elementary, middle or high school student, with a maximum of $3,000 per household.
There are restrictions on those federal funds, so they will likely be doled out in one or more COVID-19 relief bills.
Saine said the legislature has time to spend the ARP money so that could come after the budget process.
Everyone wants raises, something in itself that is not a controversial budget item. The amount might be, as it was in 2019. Cooper vetoed a mini-budget bill that would have given teachers 3.9% raises, saying it wasn’t enough. Cooper’s other reason for vetoing the 2019 budget was its lack of Medicaid expansion, which is unlikely to be part of budget negotiations this time.
Here are the big things Cooper wants:
▪ $485 million in teacher and administrator pay, with an average pay raise of 10% over two years, as well as restoring master’s degree pay.
▪ 7.5% raises for school districts’ central office staff and noncertified public school employees over two years.
▪ $15 an hour minimum wage for noncertified, public school employees including teaching assistants, cafeteria workers and bus drivers.
▪ $2,000 bonuses for teachers, principals, noncertified public school employees, university employees and community college employees this fiscal year and another $1,000 bonus next year.
▪ 7.5% raise over two years for UNC and state-funded local community college employees. All other employees would see a 5% raise over two years. The proposal also calls for a $1,000 bonus each of the next two years for all state-funded employees. Another $58.3 million is proposed for salary adjustments.
▪ Retired state employees cost-of-living adjustment raises of a recurring 2% and an additional 2% raise each of the next two years.
But before all the nitty gritty budget line items, the Senate and House first need to decide their big-picture spending. And that is still to be determined going into the Memorial Day weekend.
No one on the House side is too antsy, he said. Plus the influx of federal money the past year, and the state already being in good financial shape before and during the pandemic, means that “nobody hit the panic button.”
So, does that mean a July budget?
“The likelihood by June 30 has probably passed us by,” he said.
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This story was originally published May 27, 2021 at 5:10 PM.