McCrory rolls out first spending plan

The 324-page document does not lay out a much anticipated plan for tax reform, but it does anticipate ending the estate tax, which is paid when someone dies.

However, McCrory expects to spend about $400 million more during the next fiscal year, which starts July 1, than the state spent this year. Some of that increase is fueled by a bump in tax revenue.

The governor does pick up some addition revenue for state spending from a number of places, including capturing $65 million that had been slated to go from master settlement agreement with tobacco companies to the Golden LEAF fund, which gives grants for economic development.

He also makes some big cuts to state programs, including cutting more than $135 million from the University of North Carolina system over the next year. Community colleges would see a much smaller cut.

McCrory does not propose any new debt and would have a $139 million surplus at the end of the year.

"We've had to make some tough decisions on this budget," he during a news conference in the Capitol Building.

Referring to the repairs needed in any aging structure, he said the state has "a strong foundation, but the foundation has some cracks in it." He said his priority in the budget was to fill in and fix the cracks so that the state can thrive in the future.

"Right now, we're focusing on fixing a broken government, building an economy in North Carolina and transforming education," he said.

Lawmakers will begin reviewing the document Thursday morning, but McCrory said his budget advisers have already gathered input from top House and Senate budget-writers, as well as members of the Council of State, while drafting the spending plan.

"This budget hasn't been put together in a vacuum in the Governor's Office," he said.

Senate President Pro Tem Phil Berger and House Speaker Thom Tillis were quick to compliment McCrory's proposal.

"Gov. McCrory’s refreshing new leadership and hard work has produced a balanced budget proposal that exercises fiscal discipline and keeps state government spending within its means," Berger, R-Rockingham, said in a statement. "His emphasis on paying off our debts and repairing our critical infrastructure reflects a vision and commitment to the long-term fiscal health of our state."

"Many aspects of Gov. McCrory’s budget are much-needed and long overdue, and I am especially glad to see the inclusion of the Eugenics Compensation Program," said Tillis, R-Mecklenburg.

The House included money for victims of the state's former forced sterilization program in last year's budget, but it was eliminated in negotiations with the Senate on a final spending package. McCrory calls for $10 million for eugenics compensation.

Democrats weren't as receptive to the budget, however, saying it would adversely affect rural communities and working-class residents.

In addition to the loss of Golden LEAF funds, the budget calls for closing prisons in Wayne, Duplin, Bladen, Robeson and Burke counties, costing hundreds of jobs while saving the state $54 million.

"The cuts are just much deeper than they appear on the surface," Senate Minority Leader Martin Nesbitt said.

Education accounts for the majority of McCrory's spending plan, and he called it the "building block" for North Carolina's future. Some of the major points include the following:

McCrory also said he would like to freeze tuition for in-state students at UNC campuses. Tuition will go up on out-of-state students by as much as 12.6 percent, which state budget director Art Pope said would help offset the cut in appropriations for the university system.

"We do not want to put addition debt on these (in-state) students," McCrory said. "They have a very difficult time getting out of that debt once, and even if, they get a job."

Teachers and other state employees would receive a 1 percent raise in the budget, and retirees would be in line for a 1 percent cost-of-living increase.

Aside from education, McCrory said North Carolina needs to invest in its operations and buildings, so he wants $77 million set aside for information technology repairs and upgrades.

"We have some serious concerns about our information systems throughout North Carolina government," he said. "They're not efficient, they're too costly, they don't talk to each other and we're concerned some of the new programs flat out won't work. This impacts our efficiency and customer service."

Another $300 million would go to overall maintenance and repairs over two years, including $50 million a year for the UNC system.

The budget proposal assumes a 3.6 percent increase in state tax revenue next year and 4.1 percent in 2014-15, but the governor said he doesn't include any tax increases, saying "we have many, many challenges" with the economy.

"We want (families) to have as much disposable income in their hands to help build the economy and pay for their child's education and pay for their mortgages, rents and groceries," he said.

McCrory also included an extra $600 million in the budget reserve to prepare for the impact of federal spending cuts and another economic downturn.

"We need to start replenishing our rainy day fund and also make sure we pay down our unfunded liabilities," he said.

The latter category includes Medicaid cost overruns, so he wants an extra $575 million over two years to fund the system. That amount is roughly equivalent to what the administration of former Gov. Beverly Perdue said Medicaid was under-funded by during the past two years.

"We are no longer going to play budget tricks, which have been played in the past," McCrory said. "We're going to do honest accounting of exactly how much some of these services are costing."

His budget does make small cuts throughout the rest of the Department of Health and Human Services to help offset the Medicaid increases, trimming funding for items such as the AIDS drug assistance program.

Other budget highlights include the following: