'So many demands' on state spending, as GOP-led NC House pushes record spending plan

A new budget plan is speeding through the North Carolina House of Representatives, proposing that the state spend a record-high $31.8 billion in the fiscal year that starts July 1.

The proposal was made public Monday night and went through a series of committee hearings Tuesday, with a vote planned Wednesday afternoon.

The budget is all-but-certain to pass the House, whose top leaders have spent weeks writing it behind the scenes. What happens next is the bigger question. The proposal would need to be approved by the state Senate, too. Senate leader Phil Berger, R-Rockingham, has said that’s unlikely since he thinks his fellow Republicans in the House want to spend too much money.

Even though North Carolina has an additional $1 billion surplus on top of what the state has already tentatively approved for this coming fiscal year, Berger has said he’s not convinced by pitches to use that surplus on recurring funding, such as additional state employee raises or child care subsidies. Nor does he favor dipping into the state’s savings to pay for anything. The House's proposed budget utilizes each of those strategies.

The state has many issue-specific savings accounts, and the House budget proposal would put more than $3 billion into savings. But it would also take a combined $500 million from two accounts — a Medicaid reserve and an economic development reserve — to pay for cost overruns in those areas.

“Quite frankly, we struggled with so many demands on needs and just not enough funds this time,” Winston-Salem Republican Rep. Donny Lambeth, a top House budget writer, said Tuesday.

Democrats say Republicans have cut taxes too aggressively, as Republicans have also ramped up spending on non-required projects like private school tuition vouchers — potentially leaving the state in a tough spot financially in the future, critics say.

Rep. Wesley Harris, a Charlotte Democrat who's running for State Treasurer, said he's concerned that even though the budget is higher than last year's, it's not keeping pace with the state's population growth even as lawmakers are pushing ahead with further tax cuts.

"This isn't particularly sustainable," Harris said Tuesday. "We're going to have to be making some tough decisions in the next couple years, as we're trying to figure out how we fund the government that we need."

Even with a series of tax cuts since Republicans took flipped the legislature in 2011, however, the state budget has grown substantially.

The new House budget proposal is 50% larger than the state budget that lawmakers approved a decade ago: In 2014 North Carolina spent $21 billion operating the state government. This newest plan would spend nearly $32 billion. The state has added about 1 million new residents in that same period of time, now close to 11 million people.

GOP disagreements

Berger and the other top lawmaker, House Speaker Tim Moore, R-Cleveland, agree they want to spend close to half of the state's $1 billion budget surplus on private school tuition vouchers.

Disputes abound about how, or whether, to spend the rest of the money.

It’s unlikely that any final budget agreement would include everything the House is preparing to approve in its proposal this week, but some priorities could survive — unless budget negotiations break down entirely. And the clock is ticking. The current fiscal year ends June 30, and Berger recently told reporters he hopes to adjourn the legislative session then — whether a budget deal is in place or not.

Some highlights of the House plan include:

• $487 million for private school vouchers, over two years.
• $350 million to cover cost overruns in Medicaid.
• $225 million on raises for teachers and other state employees.
• $180 million for renovations to N.C. State University’s Poe Hall.
• $150 million on road construction for a massive Toyota factory being built in Randolph County.
• $135 million on child care subsidies, to partially replace expiring federal aid.
• Nothing extra for the State Health Plan, which State Treasurer Dale Folwell has said is underfunded by $240 million.

Under the tentative budget plan for this coming year that lawmakers have already approved, teachers and other state workers would receive 3% raises.

The House plan would bump that up to 4% for most state workers — except probation and parole officers and corrections officers, who would see a 9% raise. The average teacher would see a 4.4% raise, rather than 3%.

There would also be a 1% bonus to retired state workers’ pensions, and smaller bumps to pension plans for retired firefighters and North Carolina National Guard members.

Democrats’ counter-proposal

Democratic Gov. Roy Cooper has said the raises for state workers could be much higher if Republican leaders weren’t intent on further reducing taxes and spending hundreds of millions of dollars on private schools.

His budget plan calls for raises between 5% and 8.5% for state workers and teachers, plus $745 million on child care and early education, with money left over to pay for economic development and environmental projects, such as a $100 million fund for cleaning up pollution of so-called forever chemicals.

Cooper’s budget would pay for that extra spending by not funding vouchers, and by not implementing the further tax cuts that Republican lawmakers are planning to phase in. He would keep the state's tax rates where they currently are: Personal income taxes at 4.5% and corporate taxes at 2.5%.

Under already-approved GOP budget plans, the corporate tax rate is set to go to 0% by 2030, and the personal income tax rate will drop to 3.99% by 2026.

“Sustaining our growth, preparing an educated workforce of people who can fill new jobs, and securing a strong future cannot be done with tax giveaways to the richest among us,” Cooper wrote in his budget message. “Instead, we must wisely invest in our future – in our early childhood education and child care, our public schools, our teachers, and in our people.”