(The Center Square) – The North Carolina Senate has approved a multibillion dollar budget proposal with a billion-dollar tax cut for North Carolinians.
The spending plan for the next two fiscal years establishes a 10-year, $12 billion cash infrastructure and capital plan, issues bonuses and raises for state employees and funds education and other public services and state agencies.
Under the proposal, the state would spend $25.7 billion from the general fund in fiscal 2022 and $26.6 billion in 2023. North Carolina would also use $5.1 billion in federal State Fiscal Recovery funds, while state economists predict the state will have a $6.5 billion surplus.
"Because of the state's strong financial position after a decade of responsible governance, Senate budget writers could pair historic tax cuts with a massive infrastructure package," Senate Leader Phil Berger, R-Rockingham, said. "Responsible spending, tax cuts whenever possible, and saving for a rainy day have defined Republican budgets for 10 years, and the formula works."
After nearly 2½ hours of debate, the Senate gave Senate Bill 105 its initial approval with a 32-18 vote, Thursday. Senators must approve the bill once more before they send it to the House of Representatives for consideration.
Democrats who voted against the measure said it prioritizes corporate taxes and does not set aside enough funding for schools, state workers and needy North Carolinians. They filed eight amendments that were tabled Thursday, many of which pushed for higher teacher pay.
Most state employees, including educators, would see a 3% pay increase under the proposal. State correctional officers could see an average pay increase of 7%. The proposal would also secure a $13 minimum wage for noncertified employees in local public schools and community colleges. Democrats pushed for $15.
State employees who make less than $75,000, law enforcement, correctional officers and some residential facility staff would get $1,500 bonuses. State employees who make more than $75,000 will receive $1,000 bonuses. Teachers would see an extra $300, and principals would receive $1,800 bonuses.
Sen. Michael Garrett, D-Guilford, said a 3% raise would not survive inflation forecasts. So he proposed an amendment Thursday that would have given state employees a 10% raise.
"If this budget goes into effect, as written, untold thousands of our state's civil servants, many that we heap praise on day after day, will literally be taking home a salary that buys less in 2023 than it does today, in 2021," Garrett said. "And all this at a time when our state is sitting on unprecedented billions of dollars of revenue unallocated, which we could invest in our people."
The plan also directs $100 million of federal funds for $1,500 bonuses for direct care workers and $17.5 million to give them pay raises. It fully funds the state retirement and health plan and gives $300 million to the state treasurer to pay down unfunded retiree benefits.
The proposal increases the zero-tax bracket to $25,500 and cuts the personal income tax rate from 5.25% to 3.99% over five years. It increases the child tax deduction by $500 per child. It also includes several provisions in House Bill 334, including the elimination of state corporate tax.
The proposal allocates $4.3 billion over the next two years to the State Capital Infrastructure Fund. About $3 billion would cover previous debt. It adds a total of $1.4 billion over the biennium to the General Maintenance Reserve for storms and general maintenance.
The proposal fully funds the University of North Carolina (UNC) System's repairs and renovations requests over the next four years and supports a handful of construction projections across the system. The state would also use $430 million in cash to pay down state construction debt, eliminating future interest payments under the plan.
The proposal sets aside $10.4 billion in fiscal 2022 and $10.5 billion in fiscal 2023 for K-12 schools, reflecting a half-billion dollars more in state spending. Schools would also receive $338 million in federal relief funds under the proposal.
The Senate plan also uses $76.8 million to increase enrollment in the state's Opportunity Scholarship Program, which provides tuition assistance for low-income students to attend private schools. It would also fund the newly formed North Carolina Personal Education Student Account for Children with Disabilities Program, costing the state $15.6 million a year.
SB 105 creates new public safety departments and divisions. It adds two dozen new positions for the Department of Environmental Quality and funds 150 victim services positions that could be eliminated because of a cut in federal funding.
The plan earmarks more than $1 billion of federal American Rescue Plan funds for water and sewer utility grants for local governments. It would also set aside $100 million in federal funding to create a new program to assist local governments with stormwater infrastructure and management. Local rural communities would get $100 million in federal aid for stormwater infrastructure and management.
About $1.5 billion in federal funding is included for business recovery grants. The proposal also contains federal aid for food banks, the state fair and other state attractions, rural downtown renovations, broadband access, long-term care facilities, a Medicaid fee-for-service system transformation, developmental disabilities grants, charitable clinics and rural health. It extends full Medicaid benefits to postpartum mothers from 60 days to 12 months beginning April 2022.