House proposes budget $3B less than the governor

(The Center Square) – North Carolina House Republicans’ proposed budget will offer large raises to teachers and state employees, and implement several policy changes, while spending about $3 billion less than the governor’s plan.

Leaders are proposing a 10.5% increase from current spending for a cost of $29.7 billion in the first year of the biennial budget, or about 7.5% less than the nearly $33 billion in spending proposed by Gov. Roy Cooper earlier this month. The House bill would spend $30.9 billion in fiscal year 2024-25.

The Senate is expected to release its version of the budget later this spring, before negotiations to settle on a final compromise bill to send to Cooper. He signed a Medicaid expansion bill on Monday that’s contingent upon a signed budget, giving considerable leverage on the budget to Republican majorities in the General Assembly.

While the state has a projected revenue surplus of $3 billion, Speaker Tim Moore, R-Cleveland, said Wednesday the proposed House budget will continue a conservative approach to hedge against the threat of a recession he blamed on bad policy in Washington.

“We recognize that we are facing some uncertain headwinds,” Moore said. “We would be irresponsible to spend every bit of money and not prepare for the future given these uncertain times.”

The House proposal would increase state employee pay by at least 7.5% over the next two years, or slightly less than the 8% across-the-board pay increase proposed by the governor. Teachers, meanwhile, would receive a 10% increase over the same time under the House proposal, about 8% less than what Cooper proposed. Cooper’s budget also included bonuses of at least $1,000 for teachers and state employees that are not included in the House bill.

Other winners in the House budget include state troopers with an 11% raise, and enforcement and corrections officers, who would get a 10% pay bump.

The House budget also allocates a 1% increase in all state agencies’ salary budgets to address hard-to-fill positions. It would give state government retirees a 1% pension cost-of-living increase each of the next two years.

Other spending in the House budget includes about $3.6 billion for infrastructure, including $1 billion for roads and transportation, and $1 billion for water and sewers. Another $700 million would go to develop sites for business growth, including megasites.

Many policy measures in the bill also run counter to Cooper’s plan, such as a measure to block participation in a regional greenhouse gas initiative, a prohibition on state funds for abortions, and a prohibition on state or regional emissions standards for vehicles.

“It prevents our state from going down a failed energy policy that raises rates and reduces reliability,” said Rep. Dean Arp, R-Union, who helped craft the proposal.

Other aspects of the House budget would enact legislation currently pending in the lower chamber, including preventing discrimination based on vaccination status, authorizing remote charter schools, expanding eligibility for Opportunity Scholarships, and moving the State Bureau of Investigation from the Department of Public Safety to its own department.

Notably absent is any major abortion legislation, the SAVE Act, and the Parent’s Bill of Rights.

The House budget also conflicts with Cooper’s proposal regarding taxes.

While Cooper proposed cutting taxes on those earning under $200,000 per year to 3.99% by 2027, House Republicans did not include an income threshold to achieve the same. The House proposal also includes higher standard deductions for taxpayers and those with children. Cooper wants to keep the corporate tax at 2.5%, while the House proposal would reduce the business franchise tax by a third by 2029.

Both Cooper’s proposal and the House budget would set aside more than $1 billion in federal funding from Medicaid expansion to use for mental health services, which Rep. Donny Lambeth, R-Forsyth, said would be detailed in separate legislation.

Legislation to expand Medicaid to about 600,000 North Carolinians rests on the lame-duck governor approving the biennial budget, leaving Cooper little leeway in negotiations to secure a policy win he’s pursued since taking office in 2017. The Medicaid expansion bill will expire on Dec. 31 if that doesn’t happen.

Cooper regularly vetoed lawmakers’ budgets until signing one in November 2021. He signed a second last year. Republicans have since expanded a supermajority necessary to override a veto in the Senate, and came one vote shy of the same in the House.