NC budget agreement raises salaries, delays tax cuts

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State House and Senate leaders rolled out a joint budget agreement on Monday.

Republicans at the North Carolina General Assembly announced Monday a two-year state budget deal that gives raises to teachers, state employees and retirees next year but puts off income tax breaks until 2019.

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Senate and House leaders unveiled details of their spending plan Monday and urged Democratic Gov. Roy Cooper to sign the measure when it gets to his desk, probably by the end of the week after votes in each chamber. But Cooper's office signaled quickly that a veto could be on the horizon.

The plan, which would spend about $23 billion in the fiscal year starting July 1, also provides bonuses for public school educators, sets aside another several hundred million dollars for reserves, government building repairs and the Hurricane Matthew recovery.

"What we are trying to do is move in a positive direction on increasing teacher pay, in funding the state's priorities, and we're trying to do it in a responsible way so that we don't end up when we have a recession having to make major reductions in the appropriations," Senate leader Phil Berger of Rockingham County said at a news conference.



Cooper spokesman Ford Porter criticized the plan because it doesn't spend enough on public education and recruiting companies and agrees on a tax plan with more "giveaways" to corporations and the highest wage-earners.

"Those are the wrong priorities," Porter said in a release.

The actual compromise measure hadn't been released by Monday evening as staff members honed the final product. Berger, House Speaker Tim Moore and senior budget-writers described portions of the agreement instead to reporters at the Legislative Building.

GOP leaders said their tax plan, which would cost $530 million over two years, would benefit 99 percent of personal income tax filers by paying either lower or zero taxes. But the tax cuts are weighted toward the budget's second year. Starting in 2019, the individual income tax rate would fall from 5.499 percent to 5.25 percent and the corporate income tax from 3 percent to 2.5 percent.

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NC legislative leaders unveiled a joint House-Senate budget agreement Monday.



The corporate rate is already the lowest in the country among states with such a tax. The Senate budget had wanted rate cuts phased in over two years. Standard deductions - income in which individual filers pay no tax - also would increase, Republicans said.

"Gov. Cooper will sign this budget if he cares about increasing the zero-tax bracket for low-income North Carolinians, keeping a long-term commitment to increasing teacher pay, providing disaster relief to hurricane-hit regions and protecting the state from future emergencies through smart savings and responsible spending," Moore said.



Budget-writers said teacher pay on average would grow by 3.3 percent next fall and 9.6 percent for the two years combined, not including several bonus options. Assistant principals pay would rise even higher, while principals would benefit from new performance bonuses. Rank-and-file state employees would get $1,000 raises, while retirees would get a 1 percent cost-of-living pension increase - something neither the House nor Senate budgets approved in the spring included.

The agreement includes a policy decision that would prevent North Carolina from becoming the last remaining state that automatically prosecutes 16- and 17-year-olds as adults for crimes. The budget would shift teens accused of misdemeanors and some lower-grade felonies to the juvenile court system beginning in late 2019. Legislators in New York agreed in April to a two-year phase out of the practice.

"At first glance, it's clear the General Assembly has chosen yet again to help those who need it least at the expense of our public services," said NC Democratic Party Chairman Wayne Goodwin. "Our state should prioritize substantive raises for our teachers, meaningful economic development, and tangible investments in the middle class, not even more tax giveaways that disproportionately help the wealthy and corporations."

However, Senior House Finance Committee Co-Chairman Bill Brawley, R-Mecklenburg, said, "After this plan is fully implemented, 95,000 more hardworking, lower income North Carolinians will not be paying any state income taxes.

"This plan continues along the path of reductions to personal income taxes for North Carolinians along with investing in our state by repealing taxes that make us less competitive, like the mill machinery tax," Brawley added.

According to legislative leaders, the budget agreement also would:

- spend nearly $700 million more on public education.

- fund more than 3,500 slots for the state prekindergarten program, reducing the state's waiting list by 75 percent.

- locate $10 million for opioid addiction treatment statewide.

- earmark more than $100 million in lottery profits over two years to help economically struggling counties build schools through a matching program.

- reduce spending for the University of North Carolina law school by $500,000, not by $4 million as in the Senate budget.

Many Democrats bristled at the budget proposal. Left to watch the plan's details unveiled on television - some seemed frustrated they weren't provided details beforehand. They wanted more money for education - things like replacing old textbooks. They call the tax cuts a giveaway for the wealthy and big business.

"It looked like a lot of missed opportunities," said House Minority Leader Darren Jackson. "So you do what looks good and what gets the most media attention and makes you look like you're doing something; and maybe you're not addressing the long-term problem."

On the senate side, Wake County Democrat, Senator Jay Chaudhuri, said he had not had a chance to see the budget bill either; but the details he'd seen so far concerned him.

"Based on what I've heard from Republican leadership, my sense is that I will vote no," Chaudhuri said. "I'm not going to speak on behalf of (Governor Cooper), I know he's already conveyed his concerns about the budget; my sense is that he probably will veto it."

The Associated Press contributed to this report.

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