More tax cuts, small teacher raises, major infrastructure spending in the NC Republican Senate budget

The Senate Republicans’ state budget proposal features tax cuts deeper than those they’ve already approved, smaller than usual teacher raises, and billions for infrastructure.

The Senate has already approved a bill that cuts personal income taxes and phases out corporate income taxes. Senate leader Phil Berger on Monday said the budget will include a cut in the personal income tax rate to 3.99% over five years. The rate is now 5.25%.

The budget “reflects our commitment to tax relief,” Berger said at a news conference Monday.

The budget proposes teacher and state employee raises of 3% over two years and bonuses paid with federal money. Employees who make less than $75,000 a year would receive $1,500 bonuses, and employees who make more than $75,000 would receive $1,000.

Under the Senate budget proposal, non-certified school employees would make a minimum of $13 an hour.

Cooper included raises for teachers of 10% over two years in his proposed budget. Teachers were caught in a budget impasse between the Republican-run legislature and Democratic Gov. Roy Cooper in the last two years and did not receive raises. They did receive step increases and bonuses, however.

Republican senators held their budget news conference Monday afternoon, before they released the complete document and ahead of committee discussions that will start Tuesday. The pre-release news conferences allowed Republican senators to discuss budget highlights while limiting public scrutiny of details.

North Carolina is flush. The state has a surplus of more than $5 billion, largely because of the failure to adopt a comprehensive budget in the last two years. It’s getting billions in COVID-19 federal relief money. And last week, economists with the state budget office and the legislature projected the North Carolina will to take in $6.5 billion more in tax revenues than expected over the next two years.

House and Senate Republicans have agreed to spend $25.7 billion this year.

Given the state’s healthy economic outlook, the proposed raises are disappointing, NC Association of Educators President Tamika Walker Kelly said in a statement.

“When presented with $6.5 billion in unexpected revenue, the NC Senate has opted to reward North Carolina educators for working nonstop to support our students through the most difficult school year in history with a pitiful 1.5% annual pay raise. This proposed budget shows that corporate tax cuts take priority over North Carolina students yet again.”

During the news conference, Berger, an Eden Republican, seemed to indicate that the proposed raise was as negotiating position, but would not say what raises Senate Republicans would accept.

“This is not going to be the final budget,” Berger said. “Let’s see what the House does.”

State government retirees would not get the 2% cost-of-living increase they are seeking under the Senate plan.

Richard Rogers, executive director of the NC Retired Governmental Employee Association, said in an interview that retirees have received cost of living adjustments in only three of the last 12 years, and they are “struggling more and more to make ends meet.”

Rogers said the association wants to continue to work with legislative leaders on a cost-of-living increase.

“It’s disappointing that the leadership in the Senate did not see with the budget surplus we have, see it as an opportunity to support public service retirees in North Carolina.”

He is hopeful that a COLA will be in the final budget, after the House and Senate negotiate a final deal.

“This is the first step in the budget process,” Rogers said. “We know that.”

A House committee has already approved a 2% COLA for retirees, he said.

The Senate will hold committee meetings and vote on a budget, then sent its proposal to the House. The House will write its own version. Then, typically, representatives from the House and Senate will get together to agree on a compromise version to send to the governor.

Cooper proposed asking voters to approve a $4.7 billion bond for K-12 school construction, community colleges and universities, Department of Health and Human Services buildings, and state attractions.

Senate Republicans prefer pay-as-you-go infrastructure improvements. Their budget includes $3 billion for infrastructure over the next two years.

Sen. Ralph Hise, a Spruce Pine Republican, said budget includes $1 billion in federal grant money for water and sewer projects and $100 million for to help local governments with water and sewer infrastructure.

State Treasurer Dale Folwell, a Republican, thanked the Senate for its budget, which includes money for a fund meant to pay down unfunded pension liabilities.

Folwell said in a statement that this is the first proposed budget to include money for the reserve fund.

“Additionally, it provides unparalleled resources for water and sewer infrastructure needs at a time when communities are struggling to maintain fiscal stability while meeting public health and environmental responsibilities,” Folwell said.