North Carolina House approves budget proposal with $2B in tax cuts

(The Center Square) – The North Carolina House passed its proposed budget for the biennium Thursday, spending $25.7 billion in the already underway fiscal year and $26.6 billion in fiscal year 2023.

The proposal includes $2 billion in tax cuts for North Carolinians, a historic amount in capital project and disaster relief spending, raises and bonuses for state employees and billions of dollars in federal aid.

The more than 600-page budget packet included eight pages of policy changes, lawmakers said. After several hours of debate over the budget Wednesday and Thursday, the House gave the plan a final nod, 72-41, Thursday.

Lawmakers who opposed the proposal said it does not do enough to fund education and shortchanges state employees. They also slammed budget writers for including the nonmonetary provisions. Democrats and Republicans accused each other of political games and pushing rhetoric.

“This is truly a wonderful financial package,” House Majority Leader John Bell IV, R-Wayne, said. “Of course, I wish we could do more, but it’s a responsible step for sustainability for our state and supporting our state employees and retirees.”

The state must spend more than $5.6 billion more on education to meet constitutional requirements through 2028, according to a court-mandated order.

The order is part of a 1997 case, Leandro v. the State of North Carolina, where the plaintiffs claimed students in poor school districts were not receiving the same educational resources as students in wealthy school districts.

Rep. Julie von Haefen, D-Wake, said the budget only funds about 48% of the plan in fiscal year 2022 and 30% in fiscal year 2023. The current version of the proposal earmarks $14.5 billion for education this fiscal year and $15.6 billion the next fiscal year, reflecting a little over a billion increase.

She said funding the first two years of the Leandro plan would cost $1.5 billion. The state has around $6 billion in unappropriated funds.

“The education spending package we are voting on today is disappointingly inadequate,” von Haefen said during the initial vote Wednesday. “I cannot pretend that we’re serving North Carolina families to the best of our ability when this budget barely gets us halfway toward funding the basic education that our students deserve.”

Some of the nonmonetary provisions included in the proposal already were struck down through the legislative process. They include provisions that reduce the governor’s executive powers, prevent the attorney general from settling lawsuits and changes election law. The proposal dictates education curriculum for public school teachers and penalizes superintendents for not teaching cursive in schools.

“There are pages and pages and pages devoted to policy,” Rep. Susan Fisher, D-Buncombe, said. “It is as if you lifted, took a bill and just put it right into appropriations – into the budget.”

Rep. Brandon Lofton, D-Mecklenburg, filed an amendment Thursday that would have removed pages and portions of the policy. It failed, 60-51.

Lawmakers said the House proposal would invest $9 billion over the next two years on capital improvements while reducing state debt. It includes nearly $1 billion for disaster relief and flood mitigation. Lawmakers said taxpayers would save on the “back end.” For every dollar spent on predisaster mitigation in the proposal, taxpayers save $4 to $7 in disaster recovery funding.

Front-line state employees could see bonuses from $500 to $2,000 depending on their salary. Most state employees would be given a 2.5% increase in pay each year of the biennium. Community college professors would get a 3.5% salary increase and other community college staff would receive 2% raises.

Correction officers would receive up to 7% raises under the plan because of low retention. The proposal also sets up a base salary schedule for judiciary employees and increases step raises for senior teachers.

The plan reduces the personal income tax rate from 5.25% to 4.99% and the corporate tax rate from 2.5% to 2.25% in 2024 and 1.99% going forward. It eliminates the North Carolina property bases from franchise tax calculation and makes expenses paid with federal Paycheck Protection Program loans tax-deductible.

Some of the tax provisions and salary boosts differ from the Senate proposal. Both chambers of the General Assembly must meet and negotiate a final version of the proposal. Once they vote on and pass a final plan, it must be sent to the governor.

Senior Appropriations Chair Rep. Dean Arp appealed to his colleagues to compromise Thursday.

“I ask you to sit back and think. There’s a lot of good things here,” Arp, R-Union, said.

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