News: CJ Exclusives

Budget Plan Cuts Taxes, Increases Savings, Boosts Teacher Pay

$22.3 billion General Fund plan would raise state savings to $1.6 billion while expanding "zero tax bracket," or standard deduction while staying within TABOR limits

House Speaker Tim Moore, flanked by Senate leader Phil Berger, at a January 2017 press conference at the General Assembly. (CJ photo by Kari Travis)
House Speaker Tim Moore, flanked by Senate leader Phil Berger, at a January 2017 press conference at the General Assembly. (CJ photo by Kari Travis)

House and Senate leaders on Monday announced a $22.3 billion General Fund budget agreement that boosts teacher pay, increases the “zero tax bracket,” and keeps spending increases below the proportional increase in population and inflation.

“This is a great budget that we arrived at through compromise,” House Speaker Tim Moore, R-Cleveland said at a press conference. “It was a good compromise that allowed us to cut taxes and fund the critical needs of the state.”

“This budget achieves our shared goals with Gov. [Pat] McCrory of prioritizing teacher pay, cutting taxes on the middle class, controlling the growth of government spending, and bolstering our savings,” Senate leader Phil Berger, R-Rockingham, said.

The final budget spends slightly more than the bottom-line spending figure of $22.225 billion budget writers had originally agreed to. Rep. Nelson Dollar, R-Wake, the senior House budget writer, said legislative leaders received word two days ago that the state would receive $62.4 million in additional reversions — spending on programs that was allocated but not used — to put into the new budget.

The budget represents a 2.8 percent increase over the current fiscal year budget. That falls a hair below the Taxpayer Bill of Rights index of 2.9 percent. The TABOR index adds the percentage of population growth in the state to the inflation rate.

“It provides major tax relief for the middle class and small businesses by making the first $17,500 a family earns exempt from income tax over the next two years,” Berger said. “This means a family making the North Carolina median household income of $44,000 annually will see an additional tax cut of $110 next year alone.”

The tax cuts would be phased in over two years, with the standard deduction rising to $16,500 the first year and $17.500 the second year. The cuts come to $145 million for the 2016 tax year and $205 million for 2017, according to Berger’s office.

Berger said the budget would set aside $475 million for the rainy day fund. That money “gets us up close to $1.6 billion” in the state’s emergency reserve fund, said Sen. Harry Brown, R-Onslow, the Senate’s senior budget writer.

The teacher pay plan would increase average teacher salaries to $50,186 for the next school year and to nearly $55,000 within three years, Berger said. Average teacher compensation would rise by 4.7 percent, Berger said, and average pay will have increased $10,000 since 2013, when Republicans took control of the executive and legislative branches of state government.

State employees would see an average 3 percent increase in their pay, Dollar said, adding that half of that would come from a 1.5 percent across-the-board pay raise. State employees would get a one-time bonus of 0.5 percent of their salary. An additional average 1 percent in merit pay increases would be awarded, he said. Retirees would get a 1.6 percent one-time increase.

Other budget provisions include:

  • Appropriating $34.8 million for a reserve fund to reduce the waiting list for the Opportunity Scholarship Program, which provides vouchers of as much as $4,200 for children from lower income families to attend private schools. In addition, the budget includes a provision to increase funding incrementally to pay for more vouchers over the next 10 years.
  • Spending $18 million from the sale of the Dorothea Dix property in Raleigh to expand in-patient mental health care targeting rural areas and $2 million for crisis facilities for children. Those added facilities would be exempt from the state’s certificate-of-need law, said Rep. Ralph Hise, R-Mitchell.
  • Setting tuition at three public universities — Elizabeth City State University, UNC Pembroke, and Western Carolina University — at $1,000 per year for in-state students and $5,000 per year for out-of-state students, beginning in 2018.
  • Guaranteeing no in-state tuition increases for a standard undergraduate college term (usually four years) at the other UNC campuses, beginning in the fall of 2017. The budget also would freeze student fees at current levels in the UNC system, and limits future increases to 3 percent per year.
  • Repealing the $500,000 cap on state funding for light rail projects.
  • Spending $1.3 million to get the Western Crime Lab up and running. It also provides $2.1 million to help close out the State Crime Lab backlog.
  • Increasing funding for the Clean Water Management Trust Fund by $8.6 million

The budget bill could be debated on the Senate floor as early as Tuesday. Initial debate in the House could come Wednesday or Thursday.

Berger and Brown said the Senate would like to conclude its session by the end of the week, though Moore said he expected the House would not wrap up its business until sometime after Independence Day.