House budget frustrates conservatives, unlikely to find favor with senators

"Disappointing."

"Fiscally irresponsible."

"Stuffed with pork barrel spending."

Those reviews of the $22.1 billion budget developed by Republican leaders of the state House came not from liberal campaigners or Democratic lawmakers but conservative nonprofits that have traditionally backed policies pursued by GOP lawmakers and helped them get elected.

"We are not happy with what happened last night," Francis De Luca, president of Civitas Institute, said Friday, hours after the House approved the spending plan.

"We think the voters voted for conservative polices, and we don't think the people in the House leadership are embracing conservative policies," De Luca said.

Civitas, along with Americans for Prosperity and the John Locke Foundation, are all stalwarts of North Carolina's conservative movement, and all three blasted the House Republican plan as it made its way through committees and onto the House floor over the past two weeks.

Bob Luddy, a conservative donor who has backed independent spending efforts in North Carolina campaigns, announced this week he was so frustrated with the House budget that he would withhold a $25,000 campaign donation and give it to AFP.

For all of the purported power of money in elections – particularly the rise of 501(c)(4) groups such as those attached to AFP and Civitas – House Republicans don't seem to have listened: 61 of 75 members of the Republican caucus voted for the plan, as did 32 of 45 Democrats.

So what happened?

In part, this was the first budget written by Republicans since they took over the General Assembly in 2011 that has a significant amount of extra money to spend. The recovering economy has boosted tax collections, which in turn allowed House lawmakers to offer 2 percent raises to all state employees and public school teachers, as well as invest in upgrades to equipment used in the courts and by public safety agencies.

Still, Republicans campaigned as budget disciplinarians who pledged to fight the allure of easy money, a message their conservative allies say they abandoned this week.

Depending on how you calculate it, the House proposal would spend between 4.5 percent and 6.5 percent more than the current budget. Donald Bryson, state director for Americans for Prosperity, concedes the budget is larger that his organization would like but says his group racked up some wins along the way.

"They passed a budget, but they did it with a bloody nose," Bryson said.

He points out that House leaders cut a $60 million-per-year grant program for film incentives to $40 million per year, did away with a tax break for research and development and scaled back the extension of a renewable energy tax credit.

It's unclear how much credit AFP and other outside groups can take for those changes, but conservative members of the House caucus did press for changes during the past week. Twice, House leaders sent the budget back to committee for last-minute tweaks that rolled back tax breaks and spending, which apparently won over members who were considering voting against the proposal.

House approves $22.1B state budget plan

"We listened to what people thought was wrong with the budget and put it into practice," House Majority Leader Mike Hager said.

Those tweaks did not slake conservative critics' desire for a tighter budget. Rep. Mitch Setzer, R-Catawba, who said he was not influenced by any of the outside chatter, said he could not vote for a 30 percent increase in Division of Motor Vehicle fees mere weeks after announcing a $400 million budget surplus.

"Those fees are going to hit everybody, every day," Setzer said.

Some of the "no" votes on the final budget bill argued strenuously against the fees. Rep. Dana Bumgardner, R-Gaston, pushed for an amendment to eliminate the fee increases entirely but was rebuffed.

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Nobody expects the final budget to look much like the House plan. Rather, the House document is more of a negotiating position, meant to set up final negotiations with the Senate. Still, Setzer said, that leaves more than 60 GOP members voting for big DMV fee increases.

De Luca described the House budget plan as a "blatantly political document" built more to curry favor than govern.

"What happens when people get elected to office is they forget about the people who elected them and start listening to the people who are around them," De Luca said.

In the case of lawmakers, he said, lobbyists, bureaucrats and career staff members have too much sway when they're in Raleigh.

"That's one of the reasons we're very in support of term limits," he added.

While there are no term limits, members can face re-election campaigns. Generally AFP, Civitas and other conservative groups have backed GOP candidates in elections.

"You've got a lot of guys over there in Republican districts, and the only way you can dislodge them is with a primary," said Carter Wrenn, a longtime conservative strategist.

Most legislative districts are drawn to heavily favor candidates from one party or another, so general elections don't pose much of a threat.

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Still, it has been since the 2006 election that a sitting GOP House member faced a concerted independent spending effort trying to oust him in a primary, which Wrenn said may be one reason lawmakers didn't take saber rattling by Civitas and AFP seriously enough to make sweeping changes to their budget plan.

"I think that they probably didn't see the outside threat as much to worry about," Wrenn said.

That perception could quickly change in 2016, depending on what outside spenders decide to do in the primary.

In the mean time, House Republicans face a much more imminent threat: their GOP colleagues in the Senate.

Now that the budget has cleared the state House, it goes to the Senate, where lawmakers have already let it be known they plan to put forward a much different document.

Senate President Pro Tem Phil Berger said his chamber will plow more money into the state's rainy day account, as well as a fund to pay for reform of the Medicaid system. Senators are also talking about returning more of the projected surplus in the form of a tax break and to make an expensive technical fix that will prevent spending money set aside for highway construction on non-highway projects.

"There's just a different philosophy," Senate Budget Chairman Harry Brown, R-Onslow, said Friday.

Where House leaders spent around 5 to 6 percent more than the current budget, senators plan to spend only 2.75 percent more, a number more in line with preferences expressed by Bryson, De Luca and others.

The two spending plans eventually have to be reconciled, a process that could be difficult if the two chambers try to stick to their philosophical positions.