Legislative Budget Agreement Maintains Tax Cuts, Spends $500 Million Less than Cooper’s Plan | Eastern North Carolina Now

    Publisher's note: This post, by Brian Balfour, was originally published in Civitas's online edition.

    North Carolina legislative leaders released their agreed-upon budget proposal Monday, with votes expected to take place this week.

    The spending total of $23.9 billion marks an increase of less than four percent over current year expenditures, and about half a billion less spending compared to Gov. Cooper's spending plan.

    The proposed legislative budget would allow previously-scheduled tax cuts to go into place in 2019. Specifically, the state's personal income tax rate will fall from 5.499 percent to 5.25 percent, while the corporate income tax rate would drop from 3 percent to 2.5 percent. The tax relief will result in 99 percent of North Carolinians either paying less or paying no state personal income taxes.

    The budget also includes the fifth straight pay raise for teachers, along with raises for other state employees. Budget writers also add $161 million to the state's rainy day fund, boosting the balance to $2 billion to better prepare the state for the next natural disaster or recession.

    Disappointingly, the budget includes corporate welfare expansion - with the intention of luring an Apple operations facility to the state - along with several appropriations earmarked for local pet projects.

    Some of the highlights include:

    Tax Cuts Continue as Scheduled

• The personal income tax rate would fall to 5.25 percent in 2019 from the current 5.499 percent as provided for in a previous budget. Cooper's plan would have preserved the higher rate for filers earning $200,000 or more.
• The corporate income tax would fall from 3 percent to 2.5 percent beginning in 2019, giving North Carolina the lowest such rate of any state imposing this tax. Cooper's plan would have frozen the rate at 3 percent.
• Allowing these two rates to drop is estimated to save taxpayers $110 million in the first half of calendar year 2019 alone.
• An increase in the standard deduction for the personal income tax included in last year's budget and scheduled to take effect in 2019 are also not stopped in the budget proposal.
• Deduction for married filers will increase from $17,500 to $20,000, and $8,750 to $10,000 for single filers.

    Pay Raises for Teachers, Other State Employees

• Teachers would receive an average 6.5 percent pay increase, bringing the average increase to teachers' base pay to nearly 20 percent since the 2013-14 school year.
• Includes nearly $12 million to provide a permanent salary increase for veteran teachers with 25 years of experience.
• Appropriates $22 million toward performance-based pay initiatives for 4th and 5th grade reading teachers and 4th thru 8th grade math teachers.
• Provides performance bonuses for principles whose students achieve the most academic growth. Eligible principles could earn up to $20,000 in bonus money.
• Most other state employees would receive a 2 percent salary increase, with the minimum salary for all permanent, full-time workers brought up to $31,200.

    Education Funding

• Provides an overall increase in public education funding of $700 million, compared to current year.
• Allocates $35 million for public school safety initiatives, including safety training, safety equipment and youth mental health personnel.
• Increases funding by $11.9 million for textbooks and digital resources, raising total textbook funding to $73.9 million.
• Includes a $3 million funding increase for the Children with Disabilities Scholarship Grant program to reduce the waitlist.
• Includes a provision enabling cities to use their tax revenue to fund public schools, including charter schools. Currently, cities are not allowed to provide funding for schools.
• Adds $18 million in funding to the Pre-K program (formerly More at Four) to add more than 3,500 additional slots. Includes a plan to eliminate the waitlist for this program by 2021. (Note: Pre-K funding technically is in the HHS department)

    Corporate Welfare and Local Earmarks

• Makes it easier to qualify for status as a "transformative project" in the JDIG program (Job Development Investment Grant). Investment threshold is lowered from $4 billion to $1 billion, and promised jobs lowered from 5,000 to 3,000. "Transformative" projects are eligible for larger incentives than normal projects. This move is presumably geared at luring a major Apple investment to the Triangle area.
• Establishes the Growing Rural Economies with Access to Technology (GREAT) program. GREAT would grant state taxpayer dollars to broadband providers to set up broadband service infrastructure in unserved areas.
• Millions of dollars are earmarked for dozens of strictly local projects, such as walking trails, local libraries, parks and playgrounds.
• $500,000 is earmarked for Cleveland County youth baseball fields, in anticipation of the American Legion World Series this year in Shelby - which happens to be in House Speaker Tim Moore's district.