Raises, bonuses for teachers, state workers part of long overdue budget proposal

Votes are scheduled for this week, formally sending the two-year spending plan to Gov. Roy Cooper, who can let it become law or further extend a fight that submarined the past two full budget plans, delaying projects and raises across state government.

The Republican majority's decision to send him a budget, after weeks of secret negotiations failed to produce a compromise, puts pressure on the Democratic governor to sign off on the budget or veto a bill laden with spending increases for a wide range of constituents.

The budget doesn’t expand Medicaid as Cooper had hoped, but it does extend Medicaid benefits for low-income mothers for up to a year after a child is born. General Assembly leaders said their plan includes a number of things Cooper and legislative Democrats requested, which they hope will be enough to either win the governor’s signature or pull enough Democratic votes to overturn a veto.

Jordan Monaghan, Cooper's press secretary, said Monday that the governor and his staff were reviewing the proposal Monday.

The bill includes 2.5 percent average annual salary increases for state employees and teachers, plus multi-tiered bonuses giving most employees another $1,500 and teachers up to another $2,800.

The raises come in January, but employees and teachers can also expect a lump sum check then to make the raises retroactive to the July 1, 2021, start of the state's fiscal year.

"Although we have many differences, we each had the common goal of coming together to create a spending plan for the state," House Speaker Tim Moore said in a statement. "In the end, I am confident that we have come together to design a budget that truly meets the most critical needs of all North Carolinians."

Much of the funding in the bill comes from federal pandemic relief aid handed down from Congress, but the increased spending was also made possible by the state’s multibillion-dollar reserves, which were bolstered in part by Cooper’s vetoes of previous budget plans, which has kept spending near 2018 levels.

The budget’s general fund totals $25.9 billion in the first fiscal year, which began July 1, an increase of 4.3 percent over last year. The second year of the budget – which will likely get a rewrite next year but serves as a starting point – totals $27 billion.

The budget would still allow for a $4.25 billion savings reserve at the end of the biennium.

Here are some of the highlights from the proposal:

The budget has 2.5 percent raises in each year for state employees, but every state employee would also get a one-time $1,000 bonus. State employees making less than $75,000 a year, or working in law enforcement, prisons or state hospitals, would get an additional $500.

The minimum wage boost would affect employee categories not boosted by a 2018 minimum wage measure. In addition to this increase, direct care workers would get bonuses up to $2,000.

Retirees would get a cost-of-living bonus of 2 percent in the first year and 3 percent in the second.

The state health plan is fully funded, including up to $215 million in COVID-19 cost reimbursements.

Teachers would get a 1.3 percent salary increase across the board in each year. Annual step increases are also funded, so the average salary increase would be 2.5 percent each year, according to budget documents.

There's a new $100 million fund to help nearly all school districts supplement teacher salaries. Most districts use property taxes to supplement what the state pays for teacher salaries, so wealthier counties typically pay more. With this new program, the state will add thousands of dollars to teacher salaries in most counties. Moore’s office said that, when this is factored in, average raises hit 6.7 percent for teachers.

There are also bonuses: Teachers get the $1,000 bonus that goes to every state employee, plus the $500 for those who make less than $75,000 a year, plus another $1,000 specifically for teachers, plus another $300 that would have been spent on test score bonuses that were instead scrapped this year in favor of the across-the-board bonus.

There’s also another $1,000 bonus to help recruit new teachers to low-wealth counties.

The budget has a $3,500 supplement for school psychologists, and it adds another 115 of these positions statewide. It has a $1,000 bonus for school counselors.

Principals would get 2.5 percent salary increases in each year. Non-certified employees, including bus drivers and janitors, would get the $1,500 bonus for regular state employees. They would also be subject to the new $13 minimum wage for this year and the $15 minimum after that.

The North Carolina Association of Educators, which has backed Cooper's past budget vetoes as a way to press for more education funding, said it was reviewing the budget Monday night but that state lawmakers "chose new tax cuts over our children’s education."

"The budget includes more than $2 billion in new tax cuts," NCAE President Tamika Walker Kelly said in a statement. "That’s a choice to prioritize tax cuts over complying with the court-mandated constitutional requirement to fund public education. Our advocacy work is not yet finished."

That corrections salary schedule would cost $32 million in the first year, plus another $5.2 million to address salary compression issues. The probation/parole salary schedule is listed at a cost of $18.1 million.

The budget also has $30 million to add air conditioning to every prison facility without it now in the state, including the North Carolina Correctional Institution for Women in Raleigh.

Republican lawmakers built previously discussed tax cuts into the budget, but they delayed plans to cut corporate taxes.

This plan would take the current 5.25 percent individual income tax rate down to 3.99 percent over the next six years, starting with a drop to 4.99 percent in the first year. This, along with changes in the state’s deduction rules, will cut taxes $650 million in the first year and another $1.7 billion in the second.

The standard deduction for married couples would increase under this plan from $21,500 to $25,500 for married couples and from $10,750 to $12,750 for a single filer, increasing the number of people who pay zero taxes. Child deductions would increase as well, by $500 with the total deduction varying by a family's income.

A planned corporate tax phaseout is in the bill, but it wouldn’t start until 2025 – two years after this budget document covers. The move would still be law, though, taking the current 2.5 percent tax down to zero by the end of the decade.

Republican lawmakers balked at full Medicaid expansion, which would have provided taxpayer-funded health insurance to hundreds of thousands of people in North Carolina, most of them the working poor.

This has been a top priority for Cooper since he took office in 2017, and it's one of the reasons he vetoed past budgets.

This budget does, however, extend Medicaid coverage for mothers who are at or below 196 percent of the federal poverty level, providing them coverage for up to 12 months after they give birth. The current coverage ends after two months.

Legislative Republicans also committed to a study committee on health care, which will report back to a 2022 legislative session on health care access and Medicaid expansion.

A coalition of 128 groups, including the AARP, hospitals and health practitioner groups, called on Cooper to veto the budget over the lack of expansion, saying it was "gravely disappointed."

"Gov. Cooper, please continue to fight for our citizens and refuse this budget until it keeps faith with hardworking North Carolinians by closing the coverage gap," Erica Palmer Smith, executive director of the Care4Carolina coalition, said in a statement. "We know you want what is best for the people of North Carolina, and closing the coverage gap is the best thing we can do for all our people."

The budget has $1 billion in it to expand broadband in the state.

It has more than $1.6 billion for water and sewer upgrades, with much of that money earmarked for aging and struggling systems that can’t afford improvements.

There’s $150 million for lead and asbestos abatement in schools and child care facilities.

There’s also a 60-page list of local projects – courthouse repairs, airport grants, park upgrades, football and soccer fields, boat ramps – satisfying years of denied wish lists that fell by the wayside when Cooper vetoed previous budgets.

The budget expands the NC Promise program, which guarantees in-state students $500-per-semester tuition at several universities.

Fayetteville State University would be added to the program, costing the state $66 million in the first year to cover the gap left by the lower tuition. Elizabeth City State University, the University of North Carolina at Pembroke and Western Carolina University are already in the program.

The budget includes a new $500 million grant program for small businesses affected by the pandemic.

The awards are limited to $500,000, or 20 percent of the businesses losses – if that business hasn’t already gotten pandemic grant funding – whichever is less. For businesses that have already gotten help, the cap is 10 percent of losses.

As always, there are several items in this budget that don’t have much to do with spending money.

One would rein in the governor’s emergency powers, requiring sign-off from the Council of State to keep emergency closure orders and other statewide emergency declarations in place longer than 30 days and agreement from the legislature to do so for more than 60 days.