NC GOP unveils state budget; House backs Medicaid expansion path

RALEIGH, N.C. -- North Carolina Republican legislative leaders on Tuesday unveiled state budget adjustments for the coming year, proposing to spend or set aside billions in expected extra tax collections to raise worker pay, recruit companies, build more infrastructure and combat inflation.

The legislation, which will be voted on later this week before heading to Democratic Gov. Roy Cooper's desk, spends $27.9 billion in the second year of a two-year budget that was already enacted last November. The changes reflect expectations that state coffers will take in $6.2 billion more than anticipated earlier in the current fiscal year and the new year, which begins Friday.

Absent from the legislative agreement are additional tax cuts beyond the income tax reduction already set in motion when the two-year budget was signed by Democratic Gov. Roy Cooper last November. Republicans from both chambers had talked for weeks about giving more tax breaks to citizens struggling with inflation and other economic pressures. But they ultimately decided against it.

"This is the budget that we have ... It is the right budget for North Carolina at this time," Senate leader Phil Berger said at a Legislative Building news conference. "Some things made the cut and some things didn't."

READ THE FULL BUDGET HERE (.pdf)

Instead, Berger and House Speaker Tim Moore portrayed the plan as a bulwark against what they consider a coming recession and inflation that has ratcheted up prices for government projects and eroded buying power. The bill sets aside an additional $1 billion for a new "Stabilization and Inflation Reserve" and builds the state's rainy-day reserve to a record $4.75 billion.

"We're going to run a government as much like a business as possible," Moore added. "We're going to live within our means. We're not going to overspend. We're not going to overtax."

The proposal doesn't spend as much as the $29.3 billion that Cooper wanted to spend in his budget that he released in May, but it still places $7.7 billion in various reserves. And the pay raises aren't as high as Cooper wanted.

"This is a responsible budget that responds to our current needs and plans for an uncertain economic future. This budget takes into account the strain of runaway spending from our federal government that is stretching North Carolinians' budgets thin, and the burden of skyrocketing fuel prices and inflation," Berger and Moore said in a joint statement. "It's imperative that we stay on track and continue the good work we've done in North Carolina to strengthen our economy, meet the needs of our citizens, and secure a bright future for our state."

The legislative plan would increase next year's 2.5% raise for rank-and-file state employees already in place to 3.5%, while average pay raises for teachers for the upcoming school year would grow from roughly 2.5% to 4.2%, with first-year teachers seeing base salaries of $37,000.

Unlike other measures, the adjustments are contained in a bill that can't be amended before the up-or-down floor votes later this week. Republican leaders negotiated them privately but did speak with Cooper before their release.

A Cooper spokesperson said the governor would review the full proposal. Berger said GOP leaders have received no commitment from Cooper, but "it is our hope, and really, expectation that he will either sign it or let it become law."

The budget stakes aren't as high this year because Cooper signed the two-year budget, which can still be used to operate state government when the next fiscal year begins if the governor should veto the measure and Republicans lack the votes for an override.

The budget agreement doesn't contain provisions to expand Medicaid to hundreds of thousands of additional low-income residents through the 2010 Affordable Care Act. But the issue isn't off the table in the final days of this year's session.

The House overwhelmingly passed legislation Tuesday evening that would direct Cooper's administration to develop an expansion plan by mid-December - after which legislators would take an up or down vote on all or parts of it. The measure says the expansion plan must meet at least eight designated fiscal and health care benchmarks.

"The beauty of this plan is that we've given the guardrails and the parameters ... and when they bring that plan back to us, we'll act on it," Moore said before the legislation passed by a vote of 101-6.

The Senate approved separate legislation earlier this month that would accept expansion immediately but also include several other changes to nursing licensure and hospital construction.

Berger wouldn't comment on the House expansion proposal at the budget news conference, saying it hadn't yet come to his chamber.

Cooper told ABC11 that he was "encouraged that both the House and Senate agree that North Carolina needs to expand Medicaid. It is imperative that an agreement is reached to get this done now. I will review the full budget when it is released."

The GOP budget agreement also includes $883 million for water and wastewater infrastructure projects; $876 million for economic development; an additional $47 million in school safety and resource officer grants; and $300 million to renovate or create new state government buildings in downtown Raleigh, including one for the governor's offices.