N Carolina lawmakers expect $357M surplus, uptick next year

RALEIGH, N.C. -- North Carolina lawmakers have several hundred million dollars more at their disposal as they adjust the two-year state budget because state government has a slight surplus this year.

The legislature's fiscal agency and Gov. Roy Cooper's budget office adjusted revenue figures upward for the fiscal year that ends June 30 and for the following year. The projections come after all the money received at the mid-April tax deadline was counted.

The state expects to collect $357 million more than anticipated this current year, according to state economists, marking the fourth consecutive year in which the state will record a surplus.

These extra collections also led state economists to predict there will also be an additional $277 million at the state's disposal for the next fiscal year starting July 1, according to a memo sent to legislators and its content agreed to by the Cooper administration.

This year's projected surplus equates to about 1.5 percent of the current $23 billion spending plan within the two-year budget approved by the General Assembly last summer.

But the anticipated extra funds from this year and next year should help further ease fiscal pressures as the Republican-controlled legislature reconvenes next week. Adjusting the second year of the budget is the primary job of legislators during the annual session.

House and Senate Republican budget-writers already have been meeting behind closed doors in hopes of fashioning a spending deal quickly. In fact, the two chambers already have agreed on a spending target of $23.9 billion, House Speaker Tim Moore and Senate leader Phil Berger announced late Monday. That's about $270 million above what legislators already approved for next year in last year's bill.

Berger and Moore said the budget adjustment will retain decisions made in 2017 to raise teacher pay again by an additional 6 percent on average this fall and bring taxes lower. The two-year budget directs the individual income tax rate to fall from 5.499 percent to 5.25 percent and corporate income tax rate to fall from 3 percent to 2.5 percent, both in 2019.

"We will maintain our proven approach to successfully keeping North Carolina on solid financial footing for the long-term benefit of our citizens and businesses," Moore said in a release.

The additional funds, both one-time windfalls and recurring increases, also could help pay for school safety improvements being discussed by legislators. Moore said some funds would be set aside in the adjusted budget to address them, although he didn't give an amount.

Cooper, a Democrat, will offer his own budget proposal, which he's said would include $130 million in school safety recommendations, including the hiring of hundreds of additional school counselors, nurses, psychologists and campus-based police officers.

Berger said he anticipated a budget agreement will be reached by the General Assembly well before the new fiscal year begins. He predicted the Senate, which by tradition acts on the budget first during this two-year cycle, would have a budget bill to vote on by early June.

"We fully expect that when Gov. Cooper releases his proposed budget, he will propose a return to the Democrats' failed economic policies of high taxes and irresponsible spending that left our state totally unprepared for the Great Recession," said Berger. "But legislative Republicans, unlike Gov. Cooper, have learned from the failure of Democrats' liberal tax-and-spend economic schemes. Last year our members passed a responsible plan that promised a generous teacher pay raise and lower taxes for working families - and this year we'll work quickly and efficiently to build on those promises."

Cooper would be asked to sign any budget. He vetoed the two-year budget last summer, saying it didn't help public education enough while giving tax breaks disproportionately to the wealthiest wage earners and corporations. But Republicans used their veto-proof majorities to override Cooper's veto. Berger said he wouldn't rule out a further tax cut in response to the surplus.

The economists' memo attributed the revenue uptick mostly to higher-than-expected collections for individual income, business franchise and insurance company taxes, although the individual income tax jump was driven in part due to federal income tax changes. Sales tax collections actually are falling short of forecasts by about $117 million, the memo says.