State News

N Carolina budget agreement raises salaries, delays tax cuts

Posted 8:10 p.m. Monday
Updated 8:12 p.m. Monday

— Republicans at the North Carolina General Assembly announced Monday a two-year state budget deal that gives raises to teachers, state employees and retirees next year but puts off income tax breaks until 2019.

Senate and House leaders unveiled details of their spending plan Monday and urged Democratic Gov. Roy Cooper to sign the measure when it gets to his desk, probably by the end of the week after votes in each chamber. But Cooper's office signaled quickly that a veto could be on the horizon.

The plan, which would spend about $23 billion in the fiscal year starting July 1, also provides bonuses for public school educators, sets aside another several hundred million dollars for reserves, government building repairs and the Hurricane Matthew recovery.

"What we are trying to do is move in a positive direction on increasing teacher pay, in funding the state's priorities, and we're trying to do it in a responsible way so that we don't end up when we have a recession having to make major reductions in the appropriations," Senate leader Phil Berger of Rockingham County said at a news conference.

Cooper spokesman Ford Porter criticized the plan because it doesn't spend enough on public education and recruiting companies and agrees on a tax plan with more "giveaways" to corporations and the highest wage-earners.

"Those are the wrong priorities," Porter said in a release.

The actual compromise measure hadn't been released by Monday evening as staff members honed the final product. Berger, House Speaker Tim Moore and senior budget-writers described portions of the agreement instead to reporters at the Legislative Building.

GOP leaders said their tax plan, which would cost $530 million over two years, would benefit 99 percent of personal income tax filers by paying either lower or zero taxes. But the tax cuts are weighted toward the budget's second year. Starting in 2019, the individual income tax rate would fall from 5.499 percent to 5.25 percent and the corporate income tax from 3 percent to 2.5 percent. The corporate rate is already the lowest in the country among states with such a tax. The Senate budget had wanted rate cuts phased in over two years. Standard deductions — income in which individual filers pay no tax — also would increase, Republicans said.

Budget-writers said teacher pay on average would grow by 3.3 percent next fall and 9.6 percent for the two years combined, not including several bonus options. Assistant principals pay would rise even higher, while principals would benefit from new performance bonuses. Rank-and-file state employees would get $1,000 raises, while retirees would get a 1 percent cost-of-living pension increase — something neither the House nor Senate budgets approved in the spring included.

The agreement includes a policy decision that would prevent North Carolina from becoming the last remaining state that automatically prosecutes 16- and 17-year-olds as adults for crimes. The budget would shift teens accused of misdemeanors and some lower-grade felonies to the juvenile court system beginning in late 2019. Legislators in New York agreed in April to a two-year phase out of the practice.

According to legislative leaders, the budget agreement also would:

— spend nearly $700 million more on public education.

— fund more than 3,500 slots for the state prekindergarten program, reducing the state's waiting list by 75 percent.

— locate $10 million for opioid addiction treatment statewide.

— earmark more than $100 million in lottery profits over two years to help economically struggling counties build schools through a matching program.

— reduce spending for the University of North Carolina law school by $500,000, not by $4 million as in the Senate budget.

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