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@NCCapitol

House OKs $21.7B budget deal

Posted September 17, 2015
Updated September 18, 2015

— House lawmakers voted Thursday night and again early Friday morning to approve the $21.7 billion dollar spending compromise passed by the state Senate earlier this week.

The deal includes full but restricted funding for teaching assistants, a $750 bonus for state workers and teachers and money for raises for State Highway Patrol members and correctional officers, but no overall raise for teachers and state employees and no cost-of-living increase for state retirees.

It also includes a hefty tax cut and other changes to benefit corporations, a small decrease in the personal income tax rate in 2016, from 5.75 to 5.49 percent, and an expansion of the sales tax to include labor for repairs to real property – everything from homes and automobiles to clothing and shoes.

That added sales tax, which would take effect in March 2016, is expected to generate more than $225 million over the next two years – money which will be channeled to the state’s 79 rural counties to use for education or economic development.

The first of two bipartisan votes, 80-35, came around 10 p.m. Thursday, after more than four hours of sometimes testy debate. Nine Democrats, including Rep. Gale Adcock, D-Wake, voted for the bill, as did all House Republicans.

"I've certainly never seen two budgets further apart, and frankly, that was the big challenge we've had over the past weeks and months," said Senior Budget Chairman Rep. Nelson Dollar, joking that the state should consider adopting a unicameral legislature like Nebraska's.

Dollar, R-Wake, highlighted the spending plan's full funding for teacher assistants, funding for driver's education, additional money for courts and mental health in prisons and the new Department of Military and Veterans' Affairs created in the deal.

It also sets aside $600 million for savings, repairs and renovations and increases transportation funding by $440 million. It includes additional funding for film grants, workforce housing, the Clean Water Management Trust Fund and law enforcement body cameras,

"You will see an unprecedented investment in our rural counties and rural parts of our state," Dollar added.

Rep. David Lewis, R-Harnett, said the sales tax expansion will help counties whose residents spend their money in retail hubs in other counties and "is more than offset by the income tax cuts that are also found in other parts of this budget."

Lewis said his county commissioners have assured him they will use the new revenue to increase teacher pay supplements.

"In my county, we lose good and talented teachers to neighboring counties which can afford to invest more in the local portion of teacher pay," he explained.

Democrats, while thanking Republican leaders for items such as the restoration of the medical expense and historic building tax deductions, lined up nonetheless to speak against the overall compromise.

Rep. Tricia Cotham, D-Mecklenburg, criticized the deal for offering teachers a $750 bonus – she called it "a tip" and "an insult" – instead of an actual raise.

"The budget's priorities for education could be labeled as adequate. I've repeatedly heard over the last week that it could have been worse. Is that really where we want North Carolina to be?" asked Cotham. "You could have done more, but you chose not to."

Rep. Kelly Alexander, D-Mecklenburg, praised House leaders for holding fast against the Senate's proposal to redistribute sales taxes, but he said the budget moves the tax burden disproportionately onto the middle-class and poor.

"When you look at the fees that are going to be imposed all over the place, and when you compare that to the reduction in personal income tax, according to my math, we still come out with some kind of tax increase," he said.

Alexander also criticized the deal for capping state investment in light rail projects.

"This budget is one of the greatest 19th-century budgets we could have. The problem is that the state is moving toward a higher level of urbanization," he said. "We open up some livery stables and start selling more hay burners rather than looking to the future."

Rep. Pricey Harrison, D-Guilford, argued that the budget "sends $1.5 million for this boondoggle Solarbee project that's in Jordan Lake" while delaying the implementation of the Jordan Lake Rules designed to limit nutrient runoff into the lake for an additional three years. She also brought up the end of the underground storage tank clean-up fund, the end of the renewable energy tax credit, a $500,000 line item for shale gas exploration and the addition of two terminal groin pilot projects on the coast.

"I think this is the wrong course for the state," Harrison said.

"I've heard from a lot of state retirees who are very concerned that there's no COLA increase and they haven't had one for years," she added.

Rep. Joe Sam Queen, D-Haywood, said Republicans should have expanded Medicaid and increased the minimum wage in the budget. He pointed out that the median household income in North Carolina, adjusted for inflation, is still 10 percent lower than it was before the recession.

"The things that need fixing in North Carolina aren't addressed in this budget. I'm saddened by that," Queen said.

"This budget increases community college tuition. Isn't that where we told folks to go to get training for re-employment?" asked Rep. Susan Fisher, D-Buncombe. "Our retirees – 900,000 of them to be exact – are getting zero. Zero."

Rep. Darren Jackson, D-Wake, chided House leaders for abandoning their earlier bid to give a 2 percent raise to all state employees.

"We had the availability. We started with a healthy surplus. There was no tax increase at all needed," he said.

Jackson also criticized the lack of a cost-of-living increase for retirees, noting that investment returns from the pension fund would have paid for a 1.1 percent increase at no cost to the state budget.

"It's their money, and we refuse to let them have it," he said. "That was a bad move."

Dollar said the House fought for a 1 percent increase, but the Senate wanted too many concessions to even consider it.

"We certainly will be back at it in six or seven months when the short session comes around," Dollar said.

The litany of criticism from more than half of the sitting Democrats wore on the patience of some Republican members, some of whom accused Democrats of "showboating" for the television cameras.

"I want you to go home and tell your teachers you voted against a $750 bonus," retorted Rep. Charles Jeter, R-Mecklenburg. "I want you to go home to your constituents and tell them you voted against cutting their income tax."

Rep. Mickey Michaux, D-Durham, said he would accept Jeter's challenge, arguing the budget spends too much on tax cuts for the wealthy and for corporations instead of using the money to restore years of cuts to classroom funding.

"We used to look down our noses at South Carolina, but now South Carolina spends more per pupil than we do," Michaux said.

"What we have before us is a responsible spending plan which funds the responsibility of our state," Lewis said. "Look at the numbers. This budget is a net tax cut."

Responding to criticism of the tax cuts in the budget, Lewis told Democrats, "You people need to understand it ain't your money."

But House Minority Leader Larry Hall said the tax cuts amount to $2,000 for a millionaire but all of $7 for someone making less than $20,000, while additional fees and sales tax increases will hit lower-income North Carolinians hardest.

"It didn't have to be this way," Hall, D-Durham, said. "We started with a $445 million surplus. Really? This is where we ended up?"

"It's a simple question of our priorities," he said. "The people of North Carolina know this is not satisfactory or acceptable."

Dollar said the surplus revenue has been put into the state's savings reserve to avoid a crisis during the next economic downturn.

"There's no question that this budget in item after item helps the working families and all families in the state of North Carolina," Dollar concluded.

The second vote, 81-33, came shortly after midnight with little further debate. The final vote included two additional Democratic supporters: Alexander and Rep. Howard Hunter, D-Hertford, both of whom spoke against the deal during the initial debate Thursday evening.

House Speaker Tim Moore told the House after the final budget vote that he and Senate President Pro Tem Phil Berger have agreed on a session adjournment date of Sept. 30. That leaves about two weeks for lawmakers to finish work on Medicaid reform, a bond package, a farm bill and a regulatory reform omnibus, as well as changes to the laws governing the state's 2016 presidential primary.

The Senate is scheduled to meet at 8 a.m. Friday to ratify the bill and send it on to Gov Pat McCrory, who's already said he will sign it. A McCrory spokesman told WRAL News late Thursday he doesn't anticipate a public signing ceremony.

7 Comments

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  • Alex Handlovits Sep 29, 2015
    user avatar

    "I want you to go home and tell your teachers you voted against a $750 bonus,"

    I'm sure they'll be suuuper upset their representative fought to get them an actual raise instead of this paltry $750 tip ($62 for each month of the year)

  • Todd Dawson Sep 19, 2015
    user avatar

    I wish they would call the new tax on services exactly what it is: a brand new tax. It's not a sales tax, because there's no transfer of property from one person to another. It's actually a new tax on the labor one person does for another. Crazily enough, it doesn't even apply to all labor, just services that the legislature decided to single out, like auto repairs. Parts were already taxed. So in addition to taxing the income that mechanics (for example) make, they're also taxing the labor that they perform to earn that income.

    So in NC, we now have income tax, property tax, sales tax and a brand new labor tax.

  • Todd Dawson Sep 19, 2015
    user avatar

    View quoted thread



    You're making the assumption that corporations will hire based on a reduced tax burden. It never happens. Corporations hire based on increased demand. They'll pocket the money and say "thanks" to the legislature with extra donations.

  • Joe Cockerham Sep 18, 2015
    user avatar

    It also includes a hefty tax cut and other changes to benefit corporations

    Says WHO? It will benifit the PEOPLE of the corporations, lessening the tax burdon so they can hire

  • Nicolle Leney Sep 18, 2015
    user avatar

    View quoted thread


    I don't consider myself Democrat or Republican (really depend on the person), and I think overall they are on the right track. But I am going to whine about the new sales taxes. (and I know the legislature is Republican based, but McCrory didn't agree with it, so not sure which party is to "blame" for this) So basically next time I have to get something fixed in my house or my car repaired, I am now literally paying extra money that will in no way benefit the county I live in (Durham, one of the counties that this "send money to the small counties" thing hurts the most), to supplement smaller counties, some of which have lower property taxes than Durham does! It would be one thing if they all had really high taxes and needed help, but that's not the case). It is at least an improvement of the original idea to redistribute ALL the sales tax. But it still makes me angry.

  • Roy Hinkley Sep 18, 2015
    user avatar

    View quoted thread



    Why can't the General Assembly be honest and just say they are raising individual's total tax burdens? Small reductions in income taxes are easily offset by the increased sales taxes and eliminated exemptions.

  • Tom Boswell Sep 18, 2015
    user avatar

    At least a 15% raise for the early career teachers where the NEA states is the highest turnover rate. An even lower tax rate again for 2017 for ALL. We went from a 2.5 billion dollar deficit in 2012 created by the 2010 Democratic budget to a 455 million dollar surplus. Yet Democrats are still whining. Tax cuts that will benefit the rich??? Everyone receives the exact same rate. How does someone who makes $100,000 and who pays $5,750 in taxes get a benefit from someone who makes $50,000 and pays only $2,875 in taxes!! Democrats stop your whining and just admit the Republicans have turned the state around. The Tax Foundations web site had NC ranked previously under the Democrats as the 7th highest overall tax burdened state. With McCrory and the Republicans were are now the 34th highest.