The N.C. Senate’s proposed budget includes a major personal and corporate income-tax cut as well as raises for teachers and state employees and a plan to “raise the age” for teens charged with crimes.
The $22.9 billion spending plan for the coming fiscal year represents a 2.5 percent increase from the current year that ends in June – about half the size of the spending increase in Gov. Roy Cooper’s budget proposal.
The senators’ proposal includes the tax-cut plan that the Senate approved last month, which would reduce the personal income-tax rate from 5.499 percent to 5.35 percent while increasing the standard deduction, the base amount of income that isn’t taxed unless a taxpayer chooses itemized deductions. The standard deduction would go from $17,500 to $20,000 for a married couple filing jointly, with similar increases for other tax-status categories. House leaders prefer less sweeping tax cuts.
“This is the same successful approach that has resulted in consecutive years of revenue surplus,” Senate leader Phil Berger said.
Berger and his fellow Senate Republicans announced highlights of the budget in a news conference Tuesday afternoon. The budget document was expected to be posted online late Tuesday night, with committee hearings starting Wednesday.
The budget calls for teachers to get a pay raise averaging 3.7 percent, while other state employees would see smaller raises: $750 or 1.5 percent of their salary, whichever is greater.
Asked whether state retirees would see a cost-of-living adjustment in their pensions, Berger said “that is not in my notes.”
Under the teacher salaries proposed by Senate leaders, starting pay would remain at $35,000 and teachers with 25 years experience or more would not get a raise. The biggest raises – up to 4.8 percent – would go to teachers with nine to 14 years of experience. Teachers with one to three years and 20 to 24 years experience would see the smallest raises of less than 2 percent.
New teachers with a high grade-point average or test scores would be eligible for a higher starting salary. And principals and assistant principals would get raises and performance bonuses through a $28.5 million fund.
The State Employees Association of North Carolina, or SEANC, blasted the size of the state worker raises and the lack of an increase for retirees.
“The N.C. Senate continued its disrespect of the state employees and retirees who make this state great Tuesday by deciding that tax cuts for the rich and socking away funds for a ‘rainy day’ were more important than caring for thousands of working families,” SEANC president Stanley Drewery wrote to the group’s members, calling on them to lobby for more.
The budget does not include controversial changes to the retirement system for state employees, which were part of a Senate bill that would end government pensions for future state hires, Senate leaders said.
The budget also includes $150 million in disaster relief to help victims of Hurricane Matthew, and it adds $363 million to the state’s “rainy-day fund” savings, which Senate Republicans say will put that fund at its highest level ever.
The budget plan also includes a major change proposed for North Carolina’s criminal justice policy: the “raise the age” initiative to send offenders younger than age 18 to juvenile courts – instead of trying them as adults. Senate leaders want to implement that change by December 2020 and said they don’t yet know the cost.
A similar proposal has been filed in the House and has the support of N.C. Supreme Court Chief Justice Mark Martin.
“The fact that it’s in our budget indicates that there’s broad support for addressing that issue,” Berger said. “Something will be done about that.”
North Carolina’s projected revenue surplus grew slightly last week to $580.5 million, which gives budget writers more funding to work with.
The Senate budget is expected to be heard in the Appropriations Committee on Wednesday, with floor votes set for Thursday and Friday.
The Republican-controlled House will then develop and pass its own spending plan, and leaders from the two chambers will work out a compromise budget and send it to Cooper, a Democrat.
Cooper had submitted his own budget proposal, and the governor’s office issued a statement Tuesday that voiced concerns about the Senate budget’s tax cut.
“It’s good that some of the governor’s proposals on teacher pay and other issues are reflected in the Senate budget, but we will reserve judgment until we see the details,” spokesman Ford Porter said in a news release. “Unfortunately, Senate Republicans have prioritized yet another massive tax giveaway for corporations and the wealthiest that would give millionaires a tax cut 60 times larger than middle class families. Their plan blows a $600 million hole in our budget, which wrecks our ability to invest in education, disaster recovery and other priorities.”
Berger defended the tax cuts in the Senate budget. “We feel strongly that when government collects more than it needs, some of that money should be returned to the taxpayers,” he said.
The conservative John Locke Foundation praised the Senate’s plan, noting that the growth in spending is less than the rate of inflation and population growth.
“Restraining state spending growth shows a great deal of prudence, especially when a budget surplus of $580 million means that special interests are placing more pressure on lawmakers to increase spending across state government,” said Becki Gray, senior vice president of the group.