@NCCapitol

@NCCapitol

State budget cuts income taxes, raises teacher and state worker salaries

Posted June 27, 2016 7:13 p.m. EDT
Updated July 7, 2016 6:05 p.m. EDT

— House and Senate budget negotiators say they have crafted a $22.34 billion state budget that cuts personal income taxes and raises salaries for both teachers and state employees.

"It continues the commitment made by Republican state leaders to dramatically raise teacher pay," Senate President Pro Tem Phil Berger said Monday night.

Although documents laying out the budget deal aren't expected to be available until close to midnight, Berger, House Speaker Tim Moore and other legislative leaders provided an overview during a 7 p.m. news conference. Overall, the budget represents a 2.8 percent increase in spending over the current fiscal year.

The final budget, they said, adopts a Senate plan to expand the personal exemption, income on which North Carolinians pay no taxes. For a couple who are married filing jointly, that personal exemption expands from $15,500 to $16,500 for the current tax year and then to $17,500 for the next tax year.

Meanwhile, the final budget looks more like the House proposal, granting salary increases to both teachers and state workers.

Average teacher salaries will rise about 4.7 percent, lawmakers said. Counting local supplements, the average teacher salary in North Carolina will rise to more than $50,000 this year and top $54,000 over the next three years. According to a salary schedule provided by budget writers, every teacher in the state would get a raise under the bill.

All state workers would get a 1.5 percent pay increase under the plan, plus a 0.5 percent bonus. The budget also sets aside a merit pay fund equivalent to 1 percent of state worker salaries that will be distributed based on performance.

"Some individuals will receive more than 1 percent; some will receive less than 1 percent," House Budget Chairman Nelson Dollar, R-Wake, said. "Those rules will be finalized and revised by the state Human Resources Commission."

State retirees will not get a cost of living increase, but instead will see a 1.6 percent one-time bonus. This is a compromise between House members, who wanted a cost of living increase, and Senators who said a permanent rise in pension benefits would be too costly.

Berger said he expected senators would take the first of two votes on the budget Tuesday. Moore said the House tentatively planned to vote on Thursday and Friday, but that schedule could move up to Wednesday and Thursday votes if Democrats agree to the change.

Presuming both chambers approve the budget, it would next go to Gov. Pat McCrory for his signature or veto. The new budget year starts Friday.

Here are other items included or otherwise settled by the state budget:

YEAR ROUND SCHOOLS: A provision that would have forced dozens of single-track year-round schools throughout the state, including several in Durham and Wake counties, to change their calendars has been deleted from the final version of the budget. "It's out," Berger confirmed Monday.

EDUCATION: The budget does include a bonus program for third-grade teachers whose students excel on state-mandated reading tests. A third-grade teacher who has students with the top marks for the state and their district can earn up to a $6,800 bonus under the plan, according to Senate Budget Chairman Harry Brown.

UNIVERSITIES: The budget keeps language that freezes tuition for undergraduates during their four years in the University of North Carolina system. It also moves forward with a plan to create a $500 per semester in-state tuition plan at three schools: UNC-Pembroke, Western Carolina University and Elizabeth City State University. Tuition for out-of-state students would be $5,000 per year.

While the initial plan for a lower tuition rate had proved controversial, lawmakers said that several schools came to them asking to be part of the plan. The lower tuition, proponents say, will help shore up enrollment at less attended schools.

"I think the decision was that Elizabeth City State was the one that could benefit the most," Berger said.

FERRIES: A provision in the state budget will specify that ferries that are currently tolled will remain tolled, but routes that are not tolled will remain free, according to Rep. John Torbett, R-Gaston. The House version of the budget would have eliminated ferry tolls, while senators have pushed to expand tolling.

Torbett said the budget includes money to repair ferries and to buy a new passenger ferry that will operate between Hatteras Island and Ocracoke Island.

WRIGHT SCHOOL: The budget does not include a cut to the funding for the Wright School in Durham, which works with students who have emotional and behavioral disorders.

"It's fine," Dollar said of the school's funding.

ZIKA: The budget puts $500,000 into a Zika virus prevention program.

JORDAN LAKE: Berger and Moore said that a compromise had been reached on the cleanup of Jordan Lake. Senators had wanted to roll back rules that would curb pollution washing into the lake from communities in the Triad.

Rep. Chuck McGrady, R-Henderson, one of the House budget chairmen, said plans that would have relied on freshwater mussels or delayed cleanup dates have been taken out of the bill.

MENTAL HEALTH: The budget provides funding for an additional 250 "innovation waiver" slots for people with developmental disabilities. That funding helps those individuals live outside of institutional settings.

Dollar and Brown said the budget provides $20 million of the $30 million boost McCrory sought for mental health and substance abuse funding.

According to a news release, the budget also will use proceeds from the sale of the Dorothea Dix property in downtown Raleigh to pay for "services for the mentally ill, including $2 million to establish child facility-based crisis centers and $18 million to expand inpatient behavioral health beds targeting rural areas."

SAVINGS: The budget creates a $10 million disaster relief fund and boosts the state's rainy day fund by nearly $475 million, which will give the state a savings reserve equal to about 7.5 percent of its annual budget.

NOT IN: Budget writers said they did not include provisions regarding hot-button topics such as House Bill 2, certificate of need programs or other major policy items that weren't in either version of the budget.