Budget differences could lead to long legislative summer
The state's top legislative leaders and Gov. Pat McCrory differ over how much the state should be spending and how to spend it. These are some of the differences, large and small, between different versions of the state budget.
Posted — UpdatedWith North Carolina's new fiscal year set to begin July 1, leaders in the House and the Senate, as well as Gov. Pat McCrory, all Republicans, have all offered different visions of how they would like the state to raise and spend money. They must now reconcile those different visions into a single budget that will run the state for the coming year and lay out the blueprint for a second year of spending.
Speaking just after the Senate had passed its draft Thursday, President Pro Tem Phil Berger acknowledged it was unlikely the House would just accept a version of the budget that looks drastically different from what House lawmakers drafted last month.
"I suspect, if they (the House) don't concur, it will probably take us a while to get to the point where we've got an agreement," Berger, R-Rockingham, said.
When asked if a continuing resolution, a temporary spending bill that runs the government while lawmakers negotiate a final deal, was coming, he said, "That's possibly what we're going to be dealing with."
Berger's counterpart in the House also allowed it could be a longer-than-typical summer for the legislature in Raleigh.
It's not unusual for House and Senate leaders to differ on spending priorities, even when the chambers are controlled by members of the same party. Before Republicans took control of the General Assembly in 2011, Democrats regularly struggled to reach consensus.
This year, the gap is particularly large due to vastly different approaches taken by the two chambers regarding how much money should be available, how much needs to be socked away in reserves and whether to include broad policy changes as part of the spending plan.
While there are differences in how the House and the Senate handle dozens of items, several big ticket questions must be resolved before other pieces can fall into place.
Total state spending
The House spends nearly $700 million more in the first year of the budget than senators would and spends roughly $900 million more in 2016-17. This basic difference is one of the first things the two chambers need to resolve. Lawmakers can't decide what they're going to spend money on until they know how much money they have to work with.
Taxes
The Senate tax package expands the state sales tax to include certain services, such as car repairs and veterinary care. As well, it shifts where sales taxes go once they're collected.
Under current law, 75 percent of the sales tax goes to the county and city where the purchase is made, while 25 percent is distributed across the state based on population. Over the next four years, that formula would change so that, effective July 1, 2019, 20 percent would go to the county where a purchase is made, while 80 percent of sales taxes collected across North Carolina would be distributed based on population. Most counties would be given the option of raising their local sales taxes by a half-cent to offset the shift.
"The sales tax distribution would literally be a new tax on millions of people in North Carolina," McCrory told reporters on Thursday. "It's going to be a hidden tax that's going to be transferred to county and local governments."
Meanwhile, House leaders have spoken forcefully against a piece of the plan that would require large nonprofits to pay more in sales taxes every year.
Without settling on how much they will change taxes and fees, House and Senate leaders will not be able to determine how much money they will have to spend.
Bonds
Moore, R-Cleveland, said the state was unlikely to call for as much borrowing as McCrory has asked for, and both Moore and Berger said they would like to find other ways to pay for transportation needs other than borrowing.
Medicaid
Under current law, most doctors, hospitals and other medical providers who care for Medicaid patients receive a fee for each service that they provide. Both the House and the Senate want to change this so that those who care for patients have more incentive to keep people healthy.
The House Medicaid plan would rely mostly on "provider-led entities," groups of doctors, hospitals and other medical providers that would assume responsibility for a particular group of Medicaid patients. A PLE would get a set amount of money per patient and make money by keeping that patient healthy, and therefore spending less on care. House leaders envision a transition that would take five years.
Senate leaders would rely much more heavily on managed care organizations – large insurance companies – but allow for the type of PLEs envisioned by the House. They demand a much faster two-year transition. The Senate bill also would turn Medicaid over to a new oversight board, taking it out from under the purview of McCrory, who said he objects to such a move.
Lawmakers in the House and the Senate have been debating how to fix the Medicaid system for years. Including reform efforts as part of negotiations could delay a final budget bill, but Senate leaders insist they are committed to arriving at a compromise this year.
"The Senate's position is that it is enough of a priority that we need to take the steps necessary to solve that issue ... this time and not continue that to some other time," Berger said.
Teacher, state employee pay
Teaching assistants
Many educators argue that teachers in lower grades rely on teaching assistants the help manage students who cannot be left alone and often need extra hands-on assistance. However, Senate leaders say they would rather shift money away from teacher assistants and hire more teachers so that overall class sizes would be reduced.
State parks, zoo and aquariums
Economic development
McCrory has been calling for lawmakers to pass an economic development bill since January. It's unclear whether the House and the Senate will include those changes in the budget or a separate bill. In 2014, disagreements over economic development issues prompted the two chambers to let the issue drop entirely.
"The House passed exactly what we wanted," McCrory said, adding that that the Senate budget doesn't renew JDIG for a long enough time period.
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