Democratic Gov. Josh Stein, Democratic state lawmakers and Republicans in the state House of Representatives are all pushing for swift action on a new budget when lawmakers return to Raleigh next month.
But it remains to be seen whether the surprise electoral defeat of state Senate leader Phil Berger, in this month’s Republican Party primary, will make his Senate Republican caucus more or less willing to make compromises in the budget negotiations.
Other WRAL Top Stories
The Senate budget is laser-focused on income tax cuts. It proposes small raises for state employees this year, and cuts to many state agencies, in order to help pay for ramped-up tax cuts. The House budget, on the other hand, would freeze the state’s income tax rate at its current level and instead fund higher raises for state workers, in addition to funding other state government goals and projects.
On Wednesday Sen. Sydney Batch, the Wake County Democrat who serves as the Senate minority leader, called on her Republican colleagues to sit down and hammer out a deal. GOP leaders routinely freeze Democrats out of the budget process, leaving them largely powerless to influence the budget process.
Batch bemoaned the lack of bipartisan negotiations, which she said could’ve helped reach a deal sooner. And she questioned why Republicans aren’t more eager to finally get a deal done and fund crucial state services.
“Republicans have refused to do their actual job,” she said. “And so we now have, in this state, nine months that have gone by without necessary funding. And it's not just about the salaries and the teachers raises and the state employees raises. … We have Helene recovery that we have not spent nearly enough money on.”
New budget numbers
Stein plans to unveil a new Helene recovery spending proposal Thursday during a stop in western North Carolina. And he has already released a separate $1.4 billion spending plan to address Medicaid, state employee pay raises and other pieces of the budget he views as needing immediate attention.
Batch offered a proposal in case Berger and House Speaker Destin Hall can’t reach a deal of their own. She thinks the House budget is the better plan, she said, and will deliver all 20 Senate Democrats’ votes for the House budget — if she can find enough Senate Republicans to tip the scales. If everyone votes, that would mean convincing six of the 30 Senate Republicans to cross Berger and side with the House budget plan, to pass it into law.
“While I want to work with all 30 of my Republican colleagues on passing the budget, I only need six brave and courageous souls to cross the aisle,” Batch said, making her pitch Wednesday. “Work with us — in a really genuine and meaningful way — for North Carolinians and for their respective constituents.”
The state released a new economic forecast Tuesday showing higher-than-expected revenues — perhaps $370 million more than previously forecast, or about 1% of the state’s total budget. The forecast for the next fiscal year, which starts in July, also projects falling revenues.
The legislature’s own economists have predicted similar losses, concluding that for the first time in years, planned tax cuts will outpace wage and population growth, leading to losses for the state.
After Tuesday’s report was released, House Speaker Destin Hall indicated that it underscores his chamber’s plan. “We must protect North Carolina’s hard-earned reputation for fiscal strength by passing a responsible budget sooner rather than later,” Hall said in a written statement.
GOP’s fight over taxes
The main sticking point between the two chambers is tax policy.
The House budget would freeze tax rates at their current levels to avoid the drop in revenue that the state’s budget analysts are predicting next year. Yet there’s little guarantee that Berger would agree to halt those tax cuts — especially if the budget could be his last major act in office.
Berger spokeswoman Lauren Horsch rejected a claim Batch made Wednesday, that budget talks have been put on hold for Berger to focus on his primary election. She said Senate Republicans have been willing to negotiate with House Republicans, to no avail.
Hall spokeswoman Demi Dowdy said Republicans in the House want a budget with meaningful pay raises for state employees and “fiscally responsible” policies, and that “House Republicans stand ready to have a productive budget negotiation that accomplishes those goals.”
Berger’s nearly 30-year political career has been defined, in large part, by tax cuts. When Republicans took control of the legislature in 2011 and made him their leader, his first goal was to rewrite the state’s tax code. Year after year, in the 15 years since then, Republicans have lowered tax rates.
And despite warnings from Democrats, the state’s revenues have kept growing — due to North Carolina’s population boom and growth in wages — until now, when state economists say the cuts are finally about to become too aggressive and could necessitate spending cuts. Unlike the federal government, North Carolina can’t legally engage in deficit spending.
“We will soon fall into a budget gap of at least $2.8 billion, causing the state to have to make painful cuts to critical services like public safety, education, and health care,” Stein said in a statement on Tuesday. “... As our population rapidly grows and the federal government becomes a less reliable partner, I urge this General Assembly to study these new realities, hit pause on outdated, irresponsible tax triggers, and invest in our most important resource: our people.”
Batch, meanwhile, suggested an off-ramp for Berger: Tap into the state’s multibillion-dollar savings reserve, which is above the minimum required levels, and use some of that money to fund immediate needs.
“We have a rainy day fund,” Batch said Wednesday. “What's the point of a rainy day fund, if you just sit on the money when it's torrential downpouring in North Carolina? People are suffering.”