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NC House budget spends more on construction, pay than Senate

August 9, 2021 GMT

RALEIGH, N.C. (AP) — North Carolina House Republicans would put more money now toward infrastructure projects and pay teachers and state employees more in their two-year budget proposal compared to what the Senate voted for earlier this summer.

The House spending plan, the subject of a Monday news conference by GOP leaders, would not go as far on cutting income tax rates as Republican senators advanced in their competing budget bill. Instead, the House would give COVID-19 tax breaks to those who got a federal Paycheck Protection Program loan or received unemployment benefits last year.

And while the House would park $2.2 billion less in the state’s rainy-day emergency fund than the Senate wants, the $2.8 billion total proposed by the House would still be a record. It’s the result of a massive revenue surplus during the past year thanks to the resurgent post-pandemic economy.

House Republican leaders said their budget, with more than $9 billion in state and federal dollars for state buildings, schools, water and sewer improvements, broadband and other capital projects, would bring transformational change to the state if approved.

“It’s a pretty amazing opportunity for this state, when you look at what we’re investing in,” Rep. Jason Saine, a Lincoln County Republican and senior budget writer told reporters. “This budget shows a very forward-looking future for North Carolina, for our citizens and particularly for our children.”

House Republicans expect the full chamber to approve the measure by Thursday after some committee meetings. That will set up negotiations on a final spending plan between and House and Senate leaders. How much they listen to Democratic Gov. Roy Cooper and his priorities will have a lot to do with whether he will sign the ultimate package or veto it.

The House proposes average 5.5 % raises for public school teachers over two years — starting with a 4% average increase this fall and with an emphasis on pay for veteran teachers. That compares to the Senate’s proposal of 1.5% average raises each year. Cooper wants even more — reaching 10% over the two years. All budget authors also would provide teacher bonuses of some kind.

State employees would get 5% raises over two years in the House plan, bringing it in line with Cooper’s plan. The Senate offered less. The House budget would provide up to $2,000 in one-time bonuses, with the largest going to the lowest-paid workers.

And while the Senate proposed doing away with the corporate income tax by 2028, the House would only reduce the current 2.5% rate to 1.99% by 2025. Cooper has railed repeatedly against corporate tax breaks when he says needs for public schools are great.

Cooper and the same GOP leaders never enacted a traditional two-year budget in 2019, as the governor’s demand to consider expanding Medicaid to hundreds of thousands of residents through the Affordable Care Act became a nonstarter with Republicans. House Speaker Tim Moore and Senate leader Phil Berger said in June that Medicaid expansion would not be in their budgets this year either.

The state revealed last week that already-soaring tax collections grew another $190 million more than anticipated in the fiscal year’s final weeks. The revenue surge also meant budget writers learned in June it should have $4.6 billion in additional funds through mid-2023. But Berger and Moore had already agreed on spending caps for state funds each year.

The House Finance Committee on Monday reviewed the tax package, which would reduce the state’s individual income tax rate from 5.25% to 4.99% next year. The Senate wants to take it down to 3.99% over five years. Standard deductions would rise in each plan. The House also would exempt more military retirees from state income taxes. The Senate would help businesses and nonprofits that struggled during the pandemic with $1.5 billion in grants.

Democratic Rep. Wesley Harris of Mecklenburg County said the House GOP plan strips away too many revenues — $8.6 billion over five years — when a recession could be around the corner: “It worries me that we’re not focusing first on investing in our people and getting that shored up before we even talk about tax cuts.”

Moore’s office said the House plan would commit $5.8 billion in state spending toward capital construction for the next two years, compared to $4.3 billion by the Senate. Moore’s office said the House also spends more than the Senate on broadband and water and sewer projects.