State Senate Republicans plan to release their budget bill on Monday. Leaders in the House and Senate have already agreed on how much to spend, and it's expected to be a tight budget year.
Republicans plan to increase state spending by just 2.75%, well below the roughly 5% amount Senate leaders proposed last year 鈥� and well below what Gov. Josh Stein has proposed. That amounts to an increase of about $800 million in the fiscal year that begins July 1, and an additional $700 million (2.25%) the following year.
鈥淲e've looked at the population growth, the inflation factor, we've looked at where we are as far as western North Carolina, and the things that we continue to need to do there 鈥� and I would say it's a budget that will meet the needs of North Carolina,鈥� Senate leader Phil Berger told reporters when asked if an austere budget year is likely.
Details haven't been released yet, but Democrats like Sen. Julie Mayfield, D-Buncombe, are concerned about state programs on the chopping block. Past budget cycles have featured big revenue surpluses, which meant the partisan divides were often centered on how big the increases in things like education funding and state employee raises should be.
鈥淭his time, we'll be plowing through, seeing what the cuts are going to be, and what programs or staff or whatever is getting cut,鈥� she said.
A key point of contention will likely be scheduled corporate and personal income tax cuts. Gov. Josh Stein says the cuts will cause a rare projected revenue deficit starting in 2026, which his team considers a 鈥渇iscal cliff.鈥�
Stein鈥檚 budget proposal features a significantly larger spending increase than what House and Senate Republicans have agreed to.
But that鈥檚 because the Democrat wants to pause the tax cuts, which his budget estimates would generate about $455 million in additional revenue in the coming fiscal year, and nearly $2 billion the following year.
The recent consensus revenue forecast 鈥� developed by nonpartisan economists working for Stein and for the legislature 鈥� estimates that with the tax cuts in place, state revenue would increase by just 0.5% in the coming year ($181 million) and then drop by 2.4% ($823 million) the following year.
The fact that legislative budget writers are proposing spending increases that exceed those totals could signal that Republicans might revisit the tax cuts, or the revenue "triggers" in state law that determine when they'll take effect.
Asked about that prospect on Thursday, Berger told reporters that 鈥渨e're certainly not raising income taxes. I'm not really prepared to talk about exactly what we're doing, but I remain optimistic that North Carolina's economy is growing, will continue to grow, and I think we've got capacity to further reduce the tax burden on everyday North Carolinians.鈥�
Regardless, a spending increase of $800 million will likely pose some tough trade-offs for budget writers. For comparison, here鈥檚 how much some of the proposals in Stein鈥檚 budget would cost the state:
- Teacher raises averaging 10.6%: $365 million in the first year and $682 million in the second year.
- Funding growth in the state鈥檚 Medicaid healthcare program: $700 million
- A 2% cost-of-living raise for all state workers: $227 million per year
- A $1,000 one-time bonus to all state employees: $170 million
- Funding enrollment growth in the state鈥檚 K-12 public schools: $100 million
Asked about whether the budget will include cuts in existing state spending, Berger told reporters 鈥渨e have asked all of our budget subcommittees to look at their areas, and if there are programs that could be curtailed, if there are situations where we're spending more money than we need, to take appropriate steps.鈥�
Once the budget bill is released to the public 鈥� Berger says that will happen Monday evening 鈥� it will get its first hearing in the Senate Appropriations Committee the following morning, followed by floor votes Wednesday and Thursday.
Senate Democrats are already criticizing the timeline as rushed.
鈥淲e would welcome a more open and transparent process, but we will be up all night reviewing the budget and having a debate,鈥� said Sen. Natalie Murdock, D-Durham.
Murdock says her party plans to propose amendments to the budget bill that will show 鈥渉ow we think we can still keep more money in the pockets of working families, be fiscally responsible, but also providing the services that North Carolinians need.鈥�
The upcoming Senate budget vote won鈥檛 be the final step in developing a spending plan. The House will develop its own proposal in the coming weeks, and then leaders from both chambers will meet privately to hash out a compromise between the two budget bills.
Then it鈥檚 up to Stein to decide if he鈥檒l sign it or veto it. And if he picks the latter approach, House Republicans are one vote short of a veto-proof majority this year.
It鈥檚 also possible a budget bill might never make it to the governor鈥檚 desk. That鈥檚 what happened last year when the House and Senate couldn鈥檛 reach an agreement on the details, which meant spending levels remained unchanged from the previous fiscal year.
