State Senate leaders on Monday unveiled a $21.47 billion budget, which represents a 2 percent increase over last year’s.
The Senate plan comes in at about $700 million less than the House proposal passed last month. The House put forth a $22.2 billion budget package that would represent about a 5 percent increase over the current fiscal year.
The Senate plan includes increased starting salaries for teachers, targeted raises for state employees and tax cuts for citizens and corporations.
The Senate budget comes within spitting distance of Gov. Pat McCrory’s proposed $21.52 billion budget, put out earlier this year.
Senate President Pro Tem Sen. Phil Berger (R-Rockingham) said that the budget is in line with the expectations of the voters who sent the legislators up to Raleigh.
“Voters expect us to keep our promises and maintain the budgeting and spending discipline and commitment to pro-growth tax reforms that helped give us a $400 million surplus this year,” he said. “I’m grateful to members of the Senate for crafting a structurally sound, sustainable budget that does just that, by setting priorities, living within our means and taking steps to let North Carolinians keep more of their own money.”
Major tax reforms and tax cuts are credited with freeing up more revenue in the state, leading to the surplus Berger mentioned.
The House used the $400 million surplus to allot more spending while the Senate proposal maintains what Senate leaders call a more prudent increase.
“With a prudent overall increase of about 2 percent, our plan keeps state government spending in line with population growth and inflation and comes within less than a quarter-percent of the governor’s budget,” the lead budget writer, Senate Majority Leader Sen. Harry Brown (R-Jones), said
Education fully funded
Brown said that the budget fully funds education in the state and makes good on a promise to raise starting teacher salaries to $35,000, making the state a regional leader.
“Our also takes significant steps to ensure that highly qualified teachers are at the head of every classroom in the state,” Brown said.
Brown said the increase will make the teaching profession look more attractive in North Carolina.
The budget also reduces class sizes in kindergarten to one teacher per 17 students, and in first grade one teacher per 15 students.
Public school funding is increased under the Senate budget with K-12 schools getting an additional $453 million, community colleges getting $5 million more and the University of North Carolina system getting an additional $160 million over two years
More in the state savings account
Brown said that the Senate proposal reallocates the surplus to shore up the state’s savings.
The Senate budget funnels $800 million into the state’s coffers in contributions to the rainy day fund and the repair and renovation fund.
Of the $800 million, $500 million will go to the rainy day fund and the remaining $300 million will go to the repair and renovation fund.
The additional savings will put the state’s savings reserves at over $1 billion, in preparation for the next economic downturn.
Tax cuts included in state budget
Under the Senate plan, tax-cutting provisions of its version of the NC Competes economic development plan would be included in the budget, including standard deduction increases, personal income tax cuts as well as corporate and franchise tax cuts.
To pay for some of the cuts, the budget expands the sales tax base, leading to a more consumption-based system, GOP leaders said.
Under the proposed budget, in the next tax year the standard deductions for taxpayers for taxpayers will increase across the board to a $17,750 deduction for married people filing jointly, an $8,875 deduction for single filers, and a $14,2000 deduction for heads of households.
Over the next four fiscal years, those numbers would increase to $18,500, $9,250 and $14,800 respectively.
Currently the standard deduction is $14,000 for married couples filing jointly, $7,000 for single filers and $12,000 for heads of household filers.
If the bill is passed, the state personal income tax rate will also drop in 2016, from 5.75 percent to 5.5 percent.
Senate plans to pass budget this week
Berger said, during a press conference announcing the budget, that he expects the budget proposal to hit the Senate floor on Wednesday, and he hopes for a second reading vote and a third vote on the budget on Thursday.
Currently the budget rests in Appropriations; from there it will move to Finance and the Pensions and Retirement and then finally onto the Senate floor.
After the approval of its budget proposal, the Senate will move into conference committee with the House to hammer out a final deal.