The N.C. House voted 93-20 鈥� with support from some Democrats 鈥� on Wednesday to approve a budget that delays income tax cuts while providing modest raises for state workers and increasing starting teacher pay.
A final vote set for Thursday will be followed by negotiations between the House and Senate. The Senate鈥檚 budget features smaller raises and would keep scheduled tax cuts in place.
鈥淲e've taken and made an overt effort at listening to people and incorporating in this budget things that we think and know that the people want in North Carolina,鈥� said Rep. Donny Lambeth, R-Forsyth and a House budget writer.
Gov. Josh Stein, who will ultimately sign or veto the final budget legislation, issued a statement Wednesday saying he strongly prefers House Republicans鈥� budget over the spending plan that passed the Senate in April.
鈥淭he House鈥檚 proposed budget isn鈥檛 perfect,鈥� he said in a news release. 鈥淏ut I am pleased that the House raises teacher pay to make North Carolina鈥檚 starting teacher salaries the second-highest in the Southeast and rewards our state employees with a raise. The House budget also makes important investments in public safety, childcare and workforce training. Importantly, the House budget cuts taxes for working families while recognizing that North Carolina is a growing state and reduces personal income tax rates after this year only when the economy is growing.鈥�
Here are some of the key elements of the House budget plan:
Scheduled tax cuts: Amid predictions of a looming 鈥渇iscal cliff,鈥� the House budget would delay scheduled personal income tax cuts set to take effect in the coming years. The revenue 鈥渢rigger鈥� amount to launch those cuts would rise from $33 billion to $36.3 billion. But the delay wouldn鈥檛 apply to scheduled corporate income tax cuts, which would remain unchanged.
鈥淭hat is just fundamentally unfair,鈥� said Rep. Deb Butler, D-New Hanover, who unsuccessfully sought to expand the delay to corporate rate cuts by amending the budget.
Some conservative groups, including the influential Club For Growth, are strongly opposed to delaying the personal income tax cuts, arguing that the change is effectively a tax increase, and that Republicans who support it should be voted out.
Anyone who votes for the S.B. 257 tax increase in North Carolina should expect to be held accountable on election day, and kiss their political future goodbye. Club for Growth PAC will not endorse anyone who votes for it.
— Club for Growth (@club4growth)
New tax breaks: The House wants to increase the standard deduction for personal income taxes, meaning the level of income that鈥檚 untaxed would rise from $25,500 to $26,500 for married couples filing jointly, with smaller increases for individual filers.
Another provision would reinstate the August 鈥渂ack-to-school鈥� sales tax holiday, when some items like school supplies would be untaxed. The legislature dropped that holiday a decade ago.
A scaled-back version of a 鈥渘o tax on tips鈥� proposal is also included, allowing tipped workers to deduct up to $5,000 in tips from their taxable income.
Teacher raises: Starting teacher salaries would increase from $41,000 to $50,000 over two years, but raises would be smaller for more experienced teachers. Those with more than 25 years in the classroom would get a 3.3% raise to $57,820 over two years.
Other state employees: They鈥檇 get a 2.5% raise starting in July and no raise the following year. State agency leaders would be required to cut some vacant positions and use the money for targeted additional raises in hard-to-fill jobs.
Some questioned the wisdom of cutting vacant jobs to increase pay. 鈥淚f the positions aren't there, if the people aren't there, we just have to double up on shifts,鈥� said Charles Owens, a healthcare technician at Cherry Hospital in Goldsboro. 鈥淭hat's all we can do. It's a safety issue. We're understaffed.鈥�
State retirees: They wouldn鈥檛 get a permanent cost-of-living pension increase, but they would get a 1% one-time bonus in the coming fiscal year and 2% in the following year.
DMV fixes: $2.6 million would add about 60 positions to DMV offices to address long wait lines, as well as open several new offices. The budget also calls for a pilot program in several counties to test out the privatization of DMV offices and the potential to move the license renewal process online.
NC Children鈥檚 Hospital: While the Senate would add additional money for a proposed new children鈥檚 hospital, the House wants to cut some funding already approved for the project.
NC Innovation: The House also wants to claw back $500 million from NC Innovation, a public-private partnership designed to bring research from state universities to the market through start-ups. The budget would redirect the money to Helene recovery funding.
