Stein budget proposal calls for teacher raises, sales tax holiday

North Carolina families need help entering the job market and caring for their children, Gov. Josh Stein says. That’s why Stein released a two-year spending proposal Wednesday that calls for funding new apprenticeship programs, free breakfast for public school students, and tax credits for North Carolinians who have children and need help with childcare, among other initiatives.

Stein laid out $33.6 billion wish list in a press conference in downtown Raleigh, spelling out his spending preferences for the two fiscal years ending in June 2027.

Despite the state’s successes — a growing population and a top-rated business climate — many North Carolinians are struggling to make ends meet, Stein said.

“We have to invest in strengthening our families and lowering costs,” Stein said. “Too many families can't afford the bare necessities, like groceries, housing, health care, so we have to lower costs whenever we can.”

Stein’s proposal is unlikely to become law, but it articulates his legislative priorities. The Democratic governor's proposal may or may not influence legislators who write the state budget. Both chambers of the North Carolina General Assembly are controlled by Republicans, so the GOP calls the shots on state spending.

Legislators are expected to review his proposal during a joint committee meeting Thursday.

House Speaker Destin Hall, R-Caldwell, said Wednesday that there are parts of Stein's proposal that the legislature won't consider, such as his call to slash private school voucher funding. But Republican lawmakers and the Democratic governor could reach an agreement on other priorities, Hall said, particularly regarding raises for teachers and other state employees.

Stein's proposal calls for:

• A 10.6% average raise for teachers over two years.
• A 6.5% raise for correctional officers and youth counselors.
• A 2% average raise and $1,000 bonus for state employees.
• A child tax credit of up to $300 for a family of four.
• Reinstating a sales tax holiday for school supplies that lawmakers repealed in 2014.

Stein also proposed $60 million to incentivize local governments to update their zoning plans to encourage more housing construction. And he reiterated his support for a $4 billion bond for school construction that he proposed last week in his State of the State address.

Stein’s 250-page proposal doesn't include a spending plan for victims of Hurricane Helene, which caused an estimated $60 billion in damage in the state. Stein has made Helene relief a top priority for his administration since entering office. He was part of a bipartisan group of North Carolina officials that successfully lobbied the Federal Emergency Management Agency to extend its temporary housing program for eligible participants during the winter. And last month, Stein announced that his office is partnering with Dogwood Health Trust to launch a $30-million grant program for small businesses hurt by Helene.

Stein kept Helene funding out of his proposed state budget because he's been working on that separately with state legislators, his office said. On Wednesday, state legislators were expected to take a final vote on a $500 million relief package that Stein plans to sign.

School vouchers

Stein proposed cutting the state’s Opportunity Scholarship program to fund raises for teachers — a law popular with Republican legislators. Under the program, the state writes a check to a participating private school to cover some or all of a student’s tuition. The total amount is based on a family's income and the average state per-student public school expense.

Starting this school year, any family of any income can apply to the program and receive at least more than $3,000, and any current private school student is now eligible. Those changes have ballooned the state's planned spending on the program to more than $500 million next year.

Critics of the program say taxpayer dollars shouldn’t go toward private schools. Supporters say state education dollars should follow children wherever they receive their instruction.

Stein wants to phase the program out by 2027. Stein’s plan would boost the average salary for new teachers from $42,800 to $53,000, which he said would be the highest in the Southeast.

"We don’t have enough money to meet the needs of the public. And public dollars should go to public schools," Stein said.

Hall said Republican leaders also want to raise teacher salaries, but not at the cost of school vouchers. Stein's proposal to end the program "is a non starter with us," Hall said.

Freezing tax rates

At the very least, Stein said, legislators need to freeze tax rates in order to continue funding the state government at current levels.

The 2.25% corporate income tax rate is scheduled to drop to 0% by 2030. The 4.25% personal income tax rate — which accounts for nearly 50% of state revenue — could decrease by a quarter of a percentage point each year before 2030 if certain tax collection goals are met.

If those tax rates decrease, and the state doesn’t find new ways to add revenue, the fast-growing state won’t be able to fund the government at its current levels, Stein said.

“I'm simply calling on the General Assembly to freeze them, not to raise them," Stein said. "Just freeze them, just maintaining the current level of individual and corporate tax rate, rather than recklessly walking to the edge of the fiscal cliff and then stepping off it.”

Hall said the economic forecasts could be wrong. But he acknowledged that inflation has been higher than they predicted when they passed the tax cuts.

"We always do periodically look at the tax picture to see if we need to dial the knobs some way," Hall said. "We know we’ve seen a lot of inflation under the Biden administration. That sort of throws off our numbers."

Senate Leader Phil Berger, R-Rockingham, said Stein's proposed freeze amounts to a tax increase.

“His budget proposal raises taxes for our citizens and rips educational freedom and parental choice from hardworking families," Lauren Horsch, Berger's communications director, said in a statement to WRAL News.

"Instead of finding ways to make government more efficient, Gov. Stein doubles down on the Democrats’ failed tax-and-spend playbook," she said.