North Carolina Senate passes budget plan, moves to House
RALEIGH, N.C. (WTVD) -- North Carolina Senate Republicans have advanced a two-year budget for the ninth-largest state that spends less than what Democratic Gov. Josh Stein requested and goes heavy on lowering taxes for state residents.
The GOP-controlled Senate gave initial approval by a 31-16 margin Wednesday evening to a proposal to spend $32.6 billion for the fiscal year starting July 1 and $33.3 billion for the following year. The bill passed fully on Thursday morning with a vote of 30-15. It now heads to the house.
Stein, in his first budget pitch last month, wanted legislators to spend roughly $1 billion more each year than what the Senate decided, in part by finding money through pausing planned tax cuts.
Republican senators countered with their version, balancing spending, taxes, and cost-cutting. They've earmarked more than $1.3 billion more for Hurricane Helene aid and seek to eliminate hundreds of vacant state government positions.
"For more than a decade, Republicans have worked tirelessly to ensure North Carolinians can keep more of their hard-earned money in their pockets," Senate Appropriations Chairman Sen. Brent Jackson said. "This budget continues those efforts, enhancing our state's appeal to businesses, families, and individuals who want to call our great state home."
Bill approval marks the next step toward enacting a final budget.
Taxes would keep falling
Stein's budget asked the legislature to freeze the current individual income tax rate at 4.25% and the corporate rate at 2.25%, rather than let them fall even further. Previous laws are set to lower rates further in 2026 and later.
Stein said times are fiscally tight, and a consensus forecast from his budget office and General Assembly economists predicting state revenues would drop in the 2026-27 fiscal year from the lower rates shows GOP policies are "threatening a self-inflicted fiscal pain."
The Senate budget would not only let the individual income tax rate continue down to 3.99% next year but also fall to 3.49% in 2027 and 2.99% in 2028.
Senate Republicans rejected arguments that lowering rates even more would hurt the state. On the contrary, they noted that tax cuts this past decade have helped raise revenues.
"Notwithstanding those cries of gloom and doom, what we have seen is the state's economy continue to grow and flourish," Senate leader Phil Berger told reporters this week. "It is our belief that these tax reductions will continue to grow North Carolina."
Eliminating vacancies, raising pay
Following the cost-cutting trend in Washington, Senate Republicans also seek to eliminate unfilled state government positions, consolidate programs, and root out waste and fraud.
The Senate budget directs that 850 vacant government positions be eliminated, according to Berger's office, citing the legislature's Fiscal Research Division. About half are state Department of Health and Human Services positions vacant for more than 12 months. About 14,000 vacant positions in the state government would remain.
The state community college system was also told to cut $57 million in spending by consolidating certain administrative functions. And the University of North Carolina system must reduce spending by targeting campus centers or institutes that, in part, are "low-performing, redundant" or in conflict with federal or state law.
Employee raises
The Senate budget gives workers raises that are generally lower than what has been enacted in recent years.
Public school teachers, on average, would receive 3.3% raises over two years, while rank-and-file state employees could count on a 1.25% raise in the first year. But in addition, teachers and employees would also receive bonuses totaling $3,000, and adjustments could be made next year. State law enforcement officers would see higher permanent raises.
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In contrast, Stein proposed average teacher pay raises of 10.7% over two years, and offered a 2% raise for rank-and-file workers, along with a $1,000 bonus.
Closing agencies
The Senate budget eliminates some state agencies. They include the North Carolina Innocence Inquiry Commission, which began operating in 2007 to examine and evaluate claims of wrongful convictions.
The commission's work has resulted in 15 people being exonerated, according to its website. A budget document explaining the elimination says, "Other non-state entities provide similar opportunities for individuals to seek legal guidance and case review."
The budget also would eliminate money for a community college initiative designed to help minority male students complete their degrees, and abolish a program that works to help minority- and female-owned businesses land state contracts.
Democrats react to plan
Democrats, who hold 20 of the Senate's 50 seats, predictably blasted the budget proposal for the pay raises, accelerating tax cuts they say benefit the wealthy, and for keeping billions of dollars in reserve, rather than using them for critical needs or potential federal spending cuts.
The Republican plan would include funding to replenish the Rainy Day Fund to $4.75 billion, putting it back to what it was before Hurricane Helene.
"So hopefully, we can continue our work with disaster recovery and wherever else we might need it to move forward," said Republican Sen. Brent Jackson.
Democrats were not on board.
"This is a cheapskate budget, and we are not a cheapskate state," Democratic Sen. Graig Meyer said. "Democrats continue to be disappointed at the ways that Republicans are making choices that they're bragging about, but are leaving North Carolinians behind."
Another Democrat, Sen. Kandie Smith, said the state budget was about more than numbers.
She called it "a moral document that shows us who and what our government values."
"The budget before us today very clearly shows that my colleagues in the Senate don't value the black and minority community in North Carolina. This budget strips us of resources," Smith added.
Republicans used parliamentary maneuvers to block votes on more than 20 Democratic floor amendments, several of which tried to spend money otherwise going for private-school vouchers or to corporate tax filers.
"North Carolina's economy is stronger than ever before," Berger said. "We have an incredible opportunity to build on the last 14 years of successes with this budget by providing additional tax relief, supporting teachers and state employees, and continuing our hurricane recovery efforts. And we can do all of that while taking on unnecessary bureaucratic bloat."
What's next?
The Senate must give the plan another affirmative vote Thursday before it goes to the House. After the House approves its competing proposal later this spring, the two chambers will attempt to work out differences in hopes of getting a final budget enacted by July 1.
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House Republicans have signaled a desire for higher teacher pay increases or expressed concerns that tax rates could fall too quickly.
Stein said Wednesday the "Senate budget falls short" and that he wants to work with lawmakers to improve the spending plan: "We need to do much more to compensate teachers, support community colleges, and protect public safety."
The threat of a Stein veto also could wield more influence over a final budget because Republicans are one seat short of a veto-proof majority. However, Republicans have gotten some Democratic support for past final budget bills.
ABC11's Michael Perchick and The Associated Press contributed.
