Senate Spending Plan Would Fund Priorities, Boost Reserves
The North Carolina Senate has passed a budget that would bolster funding for key priorities, especially education and teacher pay raises, while also building the state’s rainy day fund, slowing spending growth, and saving taxpayers $1 billion in taxes over its first two years of implementation.
Under the Senate’s proposal, Total General Fund spending would reach $22.9 billion, compared with Gov. Roy Cooper’s $23.5 billion budget released in early March. The Senate plan would mark an increase of 2.5 percent over the current year’s budget, compared to Cooper’s plan to grow spending by 5.1 percent. The Senate’s more restrained growth rate would result in roughly $600 million less in state General Fund spending.
“Anyone who has seen our Senate budgets over the last six years will not be surprised that this budget continues our philosophy of improving outcomes in public education, providing generous tax cuts for the middle class and job creators, controlling spending growth and saving for the future,” Senate President Pro Tem Phil Berger (R-Rockingham) said at a press conference announcing the budget.
“This is the same successful approach that has resulted in consecutive years of revenue surpluses, including this year’s $580 million budget surplus. Overall this balanced budget spends $22.9 billion, [and] it increases spending by 2.5 percent over last year’s adopted budget and 3.75 percent over last year’s actual spending. It focuses those increases on key areas, like providing $600 million more for public education. It continues implementing a plan announced last year to dramatically increase teacher pay, providing teachers an average 3.7 percent raise this year and 9.5 percent over the two years of the biennium while also ensuring that they earn far more over the course of a career.”
As always in the Long Session, the state House will present its own spending plan, and a major portion of the legislature’s work will be reconciling the various proposals into a final General Fund budget.
Yet the Senate budget has set the tone by keeping spending under control while strongly supporting key functions, especially education.
In the budget, spending for public education, K-12, community colleges and the UNC System make up the largest area of spending. Here’s a quick overview on what the Senate is recommending to strengthen education in North Carolina.
The Senate budget adds $778 million in new education spending over the next two years. The majority of that increase ($617 million) is for K-12 public education, including an average 3.7 percent pay raise for teachers in the coming fiscal year, and a total 9.5 pay raise over the biennium.
Total K-12 education spending now exceeds $9 billion.
The Senate budget also adds $100 million in new funding to the UNC System, an increase of 3.5 percent over two years, and an additional $62 million in new spending to the Community College System budget, a 5.8 percent increase over two years.
Major education line items include:
K-12 public schools
- Teacher pay: $130 million in raises for 2017-18 (for an average raise of 3.7 percent); $360 million in the 2018-19 Budget.
- Bonuses: $14.9 million in 2018-19 for third-grade reading teachers.
- LEA pay raises: $48 million each of next two years.
- Administrator pay raises: $28 million in 2017-18 and $33 million in 2018-19 budget.
- Enrollment growth: $32 million to cover enrollment growth.
- Textbooks: $10 million in both years of the biennium for textbooks and digital materials.
- Department of Public Instruction: Reduces DPI budget by $13.1 million (25 percent) in each of the next two years.
- Governor’s School: Eliminates $800,000 in general funding for the controversial Governor’s School.
- State Board of Education: Reduces $513,000 in funding for the board.
- Teaching Fellows: Allocates $4.5 million in funding from NC Education Endowment to reinstate the abolished program.
- Salary increases: $17.5 million in each of the next two years for 1.5 percent salary increase.
- Enrollment growth: $4.9 million to fund enrollment growth.
- Salary increases: $43.4 million in each of next two years for raises.
- UNC Centers and Institutes: Reduces funding $8 million.
- Medical School: $8 million for UNC Western School of Medicine in Asheville.
- Budget stabilization: $2.8 million for Elizabeth City State University to grow enrollment
- ESA Accounts: $1.4 million over two years for scholarships for students with special needs.
- Opportunity Scholarships: Increases funding reserve by $20 million in 2017-18 and $30 million in 2018-19.
Other key provisions in the Senate budget include:
“Billion Dollar Tax Cut”: The budget includes a tax cut package (as outlined in Senate Bill 325) projected to save taxpayers a billion dollars in its first two years of implementation. Republican leaders in the Senate say 99 percent of taxpayers will be either paying less in personal state income taxes or none at all.
The tax cut plan includes the following:
- Reduction in the personal income tax rate from 5.499 percent to 5.35
- Increase of the standard deduction for married filers from $17,500 to $20,000 and single filers from $8,750 to $10,000
- Lowering of the corporate income tax rate from 3 percent to 2.75 percent in 2018 and to 2.5 percent in 2019
- Simplification and reduction of the franchise tax on businesses, creating a new flat $200 tax on the first $1 million of a business’s net worth
Reserves: The budget adds $363 million to the state’s rainy day fund, which would bring the fund’s balance to more than $1.8 billion – the highest in the state’s history. By comparison, Gov. Cooper’s spending package set aside just over $300 million into the savings reserve
Disaster relief: The Senate plan sets aside $150 million in disaster relief assistance for continued Hurricane Matthew support. This will help replenish the $201 million already spent from the Disaster Recovery fund this year. Cooper’s budget plan allotted $100 million for disaster relief.
State employees: Most state employees would get a $750 or 1.5 percent salary increase – whichever is greater. Also, taxpayer contributions for the state employee pension fund will increase next year to $1.7 billion.
Though the budget slows the rate at which spending is increasing, it is nevertheless increasing. The budget includes $727 million in debt service payments on the state’s debt.
That only underscores the presence of questionable spending. The proposed budget:
- Agrees with Cooper’s budget in granting more handouts to Hollywood. The Senate budget makes a permanent expenditure of $15 million annually to the film grant program, the same amount Cooper included in his budget for the coming fiscal year
- Creates yet another corporate welfare program, called the “Site and Building Development Fund.” This fund would offer interest-free and very low interest loans to local governments for the development of “qualified business facilities.” The Senate budget appropriates $2.5 million to the fund in the coming fiscal year
- Allots roughly $30 million for museums, $10 million for “historic” sites (including Tryon Palace), $7 million for the Arts Council, $2.4 million for the North Carolina Symphony, and $40 million for the state zoo and aquariums.
- Doles out $400,000 in additional funding for a “strategic plan” and operating support for the Global Transpark money pit, bringing total appropriation to $1.15 million.
- Spends $2.8 million for “downtown revitalization” and another $1 million for “Main St. Solutions.”
- Gives $1.8 million to the High Point Market Authority (a $200,000 increase).
- Spends $750,000 increase in “marketing funds” for NC products.
- Authorizes $3 million increase in “advertising” funds for tourism and international advertising.
- Sets aside $112,000 for the “Outdoor Heritage Advisory Council Director.”
As usual, the budget includes a wide range of other initiatives. Among them are:
- In the area of Health and Human Services, the budget plan makes allocations for improving the state child welfare program and accountability in the program, as well as allocating $150 million to the Medicaid Transformation Reserve over two years to prepare for Medicaid reform.
- The budget plan would also seek to improve oversight over prescription opiates to help combat drug addiction.
- The budget plan also includes a proposal that would have the state charge 16- and 17-year-olds as juveniles in the penal system instead of charging them as adults.
- Berger said that including this proposal in the budget shows the Senate’s commitment to that measure. The change would be phased in by Dec. 1, 2020.
- The budget would also seek to strengthen enforcement and awareness of human trafficking in the state.