(The Center Square) – The North Carolina General Assembly approved a "historic" budget Wednesday that would increase spending by more than 4% over each of the next two fiscal years.
North Carolina will spend $25.9 billion in the current fiscal year, representing a 4.3% increase over the previous fiscal year, and $27 billion in 2023, representing a 4.1% increase over the proposed 2022 budget, if the proposed state budget becomes law.
The budget also cuts $3.2 billion in taxes over the biennium and billions more years after. It allocates more money to education and increases teacher pay, with a record amount for infrastructure and savings.
"This is a once-in-a-generation budget," Rep. Donny Lambeth, R-Forsyth, said. "The state of North Carolina has never, never invested more money in education. The state has never invested more in health and human services. This state has never invested more in infrastructure and our communities, and this state has never saved more for the future and returned more money to hardworking taxpayers and families. Everyone, everyone in the state benefits."
The bill includes a record $8 billion infrastructure plan, including adding $6 billion to the State Capital and Infrastructure Fund. The proposal directs $4.25 billion to North Carolina's rainy day fund and another $800 million for disaster relief. It also increases base K-12 education spending by $1.5 billion, pushing the budget line close to $11 billion. The state also invests in broadband expansion, domestic violence shelters and other social services.
Under the measure, the state would cut $3.5 billion in taxes for the next two years and $13 billion for the next five. The proposal would increase the state's zero-tax bracket from $21,500 to $25,500. It cuts the personal income tax rate from 5.25% to 3.99% by 2027, starting with 4.99% in 2022. It increases child tax deduction by $500 per child and eliminates state income tax on military pensions.
The bill also reduces the franchise tax base for corporations and phases out the corporate income tax over six years, beginning in 2025. It makes expenses paid with Paycheck Protection Program loans tax-deductible.
The budget plan also makes use of federal American Rescue Plan Act funding. Lawmakers would use $545 million for 5% bonuses for teachers and state employees. Teachers will receive an average 6.7% pay increase over the biennium and up to $2,800 in bonuses. The proposal also secures $15 an hour for noncertified school and community college personnel.
The state budget proposal cleared the House, 104-10, on Wednesday afternoon. The Senate approved the bill, 40-8, on Tuesday and gave its final approval Wednesday morning. The conference committee proposal came more than four months after the start of the fiscal year July 1. If the bill becomes law, North Carolina will be the last state to enact a budget. It would be the first budget Gov. Roy Cooper has signed since he took office.
The budget bill also includes nonmonetary provisions, including reducing the governor and attorney general's authority.
The proposal includes a provision to limit the governor's ability to shut down the economy because of an emergency. Republican legislators have made three attempts to pass duplicate bills that mirror the provision. All of the attempts have failed, with Cooper vetoing two. The third bill did not make it to a full vote.
Legislative leaders also inserted a provision that would require legislative leaders to sign off on lawsuit settlements involving the General Assembly. Cooper vetoed a bill that mirrors the provision in September, calling it "unconstitutional and unwise."
Cooper stood by his view of the provisions Tuesday, but he said he is still committed to signing the budget bill.
Rep. Marcia Morey, D-Durham, said the provisions taint the budget and slammed Republicans for not including Medicaid expansion in the bill. Increasing enrollment in the publicly funded health care program has also been an issue of contention between Republican leaders and Cooper.
Legislative leaders said they would consider expanding Medicaid in recent negotiations but could not get enough votes from other Republican members. The General Assembly, however, will study ways to address health care access and consider Medicaid expansion.
"We are voting on policy, policy that has nothing to do with money. It is pure politics to curtail the duties and authorities of the governor during a state emergency and limits the attorney general from doing his job to settle lawsuits," said Morey, who also opposed ending the corporate tax. "These bills have already been vetoed, and yet we see them again in this budget."
The House must give the budget final approval Thursday before sending it to Cooper.