State Politics

Deal on $21.735 billion state budget target could sacrifice worker raises

Sen. Phil Berger (R), President Pro Tempore of the N.C. Senate, left, and Rep. Tim Moore (R), Speaker of the House hold their first joint press conference during the opening of the 2015 session of the N.C. General Assembly in Raleigh, NC Wednesday, January 14, 2015.
Sen. Phil Berger (R), President Pro Tempore of the N.C. Senate, left, and Rep. Tim Moore (R), Speaker of the House hold their first joint press conference during the opening of the 2015 session of the N.C. General Assembly in Raleigh, NC Wednesday, January 14, 2015. NEWS & OBSERVER FILE PHOTO

The $21.735 billion budget target that House and Senate leaders agreed to on Tuesday could mean less money for state employee raises and other spending items.

The target represents a 3.1 percent increase in spending over the previous fiscal year – close to the 2.7 percent increase sought by the Senate and Gov. Pat McCrory. The House wanted a 5 percent increase, which its leaders said was needed to catch up on critical government needs after years of cuts in the recession.

While the House called for all state workers to get a 2 percent raise, House senior budget writer Nelson Dollar said that’s now unlikely with less money to spend.

“It’s $420 million less, so obviously what the House was looking at in terms of raises and in terms of investing in education will not happen,” said Dollar, a Cary Republican.

By settling on $21.735 billion, the House is agreeing to cut about $415 million from its original budget proposal. The Senate is agreeing to spend $265 million more than its original plan. And the figure is $85 million more than the $21.65 billion target that Senate leader Phil Berger suggested several weeks ago, noting that the spending increase would represent population growth and inflation.

“You have to find some common ground in the middle, and that’s what we did with this particular number,” Senate budget writer Harry Brown said.

Asked if the House received any concessions for lowering the spending target, Dollar pointed to the Senate’s willingness to remove a Medicaid overhaul and tax changes from the budget bill. Those are now separate pieces of legislation.

“My understanding is all the policy is supposed to be out of the budget,” he said. “If all the policy is out of the budget, that will hasten moving forward.”

Among the sticking points still to be worked out: state employee raises and teacher assistants.

Instead of the 2 percent pay hike in the House plan, the Senate wanted to instead offer targeted raises for hard-to-fill positions. And the House wants to keep elementary school teacher assistants funded at current levels, but the Senate plan would cut thousands of positions to instead hire more teachers and reduce class sizes.

Spending levels also differ between the two plans. The House, for example, wants to add $48.3 million to public school textbook funding, while the Senate budget includes a smaller increase of $29 million.

Brown said those issues will likely be discussed later this week. Appropriations subcommittee leaders overseeing areas such as education and health could get spending targets and begin meeting as soon as Wednesday, he said.

“I think the biggest difference now would still be in education,” Brown said. “We’re all willing to work through the weekend and try to get there.”

The legislature has a self-imposed deadline of Aug. 31, when the current temporary budget agreement will expire. It’s the second such “continuing resolution” since the last fiscal year ended on June 30, and a third extension is possible if no deal is reached.

Tuesday’s agreement on the $21.735 billion was first announced by McCrory’s office, which said the deal took place at a “breakfast meeting at the Executive Mansion.” Another breakfast meeting took place last week, Brown said.

“This agreement is the result of ongoing dialogue during the last several weeks,” McCrory said in a news release. “We remain committed to working with the House and Senate to find common-sense solutions that create jobs, strengthen education and fund critical infrastructure in North Carolina.”

The meetings represent a more active role for the governor, who Senate Rules Chairman Tom Apodaca recently said didn’t have a role in the budget process or “much of anything.” And while McCrory has found stronger allies for his agenda in the House, he pushed for a significantly lower spending number than the House preferred.

McCrory’s budget director, Lee Roberts, said in a recent interview with WRAL-TV that the governor would only support a spending increase of 2.7 percent or less – the figure representing population growth and inflation.

Brown praised the governor for arranging the breakfast talks between the two chambers’ leaders. “I would say those talks were productive,” he said. “It at least got all of the parties to the table at one time to hash out some differences.”

Agreeing on a spending target will help break the budget logjam that’s resulted in the longest delay in more than a decade. “At least we’ve got a starting point,” Brown said. “Until you can agree on a number, it’s hard to give targets and you can’t move forward.”

By the numbers

Senate budget: $21.47 billion, a 2 percent increase from the previous fiscal year

House budget: $22.155 billion, a 5 percent increase

Last year’s budget adjusted for population growth and inflation: $21.65 billion, a 2.7 percent increase

The compromise: $21.735 billion, a 3.1 percent increase