RALEIGH — The $23 billion House and Senate budget compromise will include a 3.1 percent increase in spending in the 2017-18 budget year, which is higher than the two chambers agreed to several months ago when budget writing began.
Senate leader Phil Berger Sr., R-Rockingham, said the plan does many of the things Democratic Gov. Roy Cooper has asked for while allow North Carolinians to keep more of what they make.
To help achieve the higher spending the budget pushes the effective date of personal and corporate income tax cuts to 2019 instead of next year. The individual income tax rate would be 5.25 percent, with the standard deduction for married couples filing jointly set at $20,000. The amount of tax-free income a head of household could claim would be $15,000.
Rep. Nelson Dollar, R-Wake, the House’s senior budget writer, said raising the standard deduction would remove 90,000 North Carolinians from the income tax rolls.
Corporate income tax rates would be reduced from 3 percent to 2.5 percent beginning in 2019.
The budget includes a number of other franchise and sales tax reductions. It also carves $979,205 out of the governor’s administrative budget, which represents about a 16.5 percent reduction from the $5.8 million base budget.
The plan adds $263 million to the Savings Reserve Account, bringing the total in that fund to $1.84 billion, the largest since its inception, said House Speaker Tim Moore, R-Cleveland.
“It’s still relatively responsible on the spending side. It’s $100 million more than either side had previously recommended,” said Joe Coletti, senior fellow at the John Locke Foundation. “Compared to what the governor is recommending, it’s a really good budget.” Gov. Roy Cooper recommended a 5.1 percent increase.
“They’re still taking care of teachers, they’re still taking care of employees. They’re still doing good things” with salary increases, Coletti said.
The budget includes funding to raise the age of juvenile offenders to 16 and 17 in December 2019 for all but the most serious felony crimes. North Carolina is the only state that had not set the age of adult offenders at 18.
Sen. Harry Brown, R-Onslow, the chief Senate budget writer, noted that when Republicans took control of the General Assembly in 2011, starting teachers were paid $30,000 annually. New teachers now start at $35,000.
“One of our goals,” said Moore, “is to raise average teacher pay.”
A major policy shift in the budget proposal would eliminate retiree health benefits for new state workers hired in 2021 and later. The move would not immediately reduce the $30 billion in unfunded State Health Plan liabilities, but should drive down those liabilities within the next decade because not as many new retirees will be coming into the system.
The budget has a 1 percent recurring cost-of-living increase for retirees. The House budget had a one-time increase, and the governor’s budget a had 1 percent recurring increase. The Senate did not include an increase in its budget.
Coletti said there are still too many corporate giveaways in the budget, including a film industry grant.
A new retroactive subsidy would allow biomass resource-related projects to claim what had been an expired renewable tax credit of 35 percent. To qualify, a renewable energy project would have to had a certain minimum level of completion prior to Jan. 1, 2016, and be placed in service prior to May 5 of this year.
Berger said he hoped the budget — a bill requiring votes on two separate days — would be posted late Monday night or early Tuesday morning. The Senate could vote on the plan Tuesday and Wednesday. By House rules, the budget must be posted 48 hours before that body votes, leaving a final vote likely Friday.
Cooper quickly responded through spokesman Ford Porter.
“While we wait for details, the budget outlined by legislative leaders continues to shortchange education, economic development, and middle class families in favor of more tax giveaways that help the wealthy and large corporations. Those are the wrong priorities,” Porter said.
Dan Way is a staff writer with Carolina Journal.