House Budget Includes More Modest Tax Cuts, Same Spending Amount as Senate Plan

The state House approved early Friday morning its proposed budget, which totals $22.9 billion in General Fund spending, the same amount included in the Senate’s proposal. Recall that this amount would be roughly $600 million less than Gov. Roy Cooper’s $23.5 billion budget plan released in early March.

Moreover, the House and Senate plans would mark an increase of 2.5 percent over the current year’s budget, compared to the 5.1 percent growth of spending in Cooper’s budget.

Highlights from the House budget proposal include tax cuts and raises for teachers and other state employees and retirees, but no funding for Education Savings Accounts.

The House budget:

Tax Reform

• Includes reforms estimated to save taxpayers about $380 million in the first two budget years of its implementation. The Senate plan would save more than $930 million in that time.
• Increases standard deduction from $17,500 to $18,500 for married couple filing jointly, and from $8,750 to $9,250 for single filers. The Senate plan would increase the deduction to $20,000 and $10,000, respectively.
• Increases the cap on mortgage expense and property tax deductions from $20,000 to $22,000. The Senate plan also increases the cap on these deductions, but the amount varies according to filing status.
• Lowers the franchise tax on businesses from $1.50 to $1.40 per $1,000.
• Exempts major manufacturing machinery from sales taxes, estimated to save business $51 million per year.
• Exempts distribution equipment purchased by “large customer fulfillment” centers.
• Includes a new sales tax refund for small and rural research and development businesses.

Teacher and State Employee Pay

• Provides pay increases for teachers varying according to their years of service, with an overall average boost of 3.3 percent. Largest raises would go to those with 17 to 19 years of experience, with raises as high as 6.7 percent. First-year teacher pay would increase from $35,000 to $35,300, while those with 25 years of experience would receive a 0.6 percent pay increase. The House plan would also offer retention bonuses up to $5,000 for teachers with 27 or more years of experience, if they agree to teach two more years. The Senate plan included an average 3.7 percent pay increase for teachers.
• Includes a $1,000 salary increase for “most state employees,” compared to 1.5 percent or $750 (whichever is greater) included in the Senate’s plan.
• Provides a 1.6 percent, one-time bonus in state retiree pension payments. The Senate included no pension increase.

Savings

• Includes $363 million set aside into the state’s Rainy Day fund, like the Senate budget.
• Allocates $150 million for disaster relief funds, same as the Senate’s plan.

Other Education

• Eliminates the waiting list for the NC Pre-K program (formerly More at Four) by increasing funding by $18 million over two years to fund an additional 4,700 slots by 2018-19.
• Makes no changes to the scheduled annual $10 million increase in funding for the Opportunity Scholarship program. The Senate plan includes the same provision; however, the House budget includes a requirement for recipients to take the Iowa Test of Basic Skills to measure academic progress, and also allocates funding to finance an independent research organization to measure academic progress of recipients.
• Does not include funding for Education Savings Accounts, a program that sends funds to families for educational expenses of their choice. The Senate did include funds to launch an ESA program.

Corporate Welfare and Cronyism

• Provides $12.7 million in nonrecurring funds for the new Site and Building Development Fund (includes $7.0 million in receipts transferred from the Industrial Development Fund Utility Account), which would offer interest-free and very low interest loans to local governments for the development of “qualified business facilities.” The Senate budget appropriates a total of $12.5 million to the fund in the coming fiscal year.
• Coincides with the Senate budget in appropriating $15 million for the state’s film grant program.
• Appropriates $1.8 million to the High Point Furniture Market Authority.
• Includes a $77 million increase in transportation funding for capital improvements of commercial airports.
• Allots $400,000 in additional funding for a “strategic plan” and operating support for the Global TransPark money pit, bringing the total appropriation to $1.15 million, same as in the Senate budget.

Various miscellaneous items in the budget include:

• Funding to implement the “Raise the Age” initiative, which allows certain 16- and 17-year-old nonviolent offenders to be tried in the juvenile justice system rather than as adults
• $500,000 increase in “International Marketing” funds
• $250,000 spent on a “Food Marketing” program
• $300,000 allocated to the “Association of Agricultural Fairs”
• $250,000 appropriated to a program to subsidize the selling of healthy foods in small retailers located in “food deserts”
• $112,000 to establish a “Director for the Outdoor Heritage Advisory Council”
• $2.2 million increase in tourism and marketing advertising
• $2 million in marketing funds to promote economic development
• $2.5 million increase in funding for the Museum of Art
• $35,000 appropriated to the Museum of the Albermarle
• $675,000 increase in grassroots art grant program funding
• $300,000 increase in taxpayer funds for the NC Symphony
• $7 million allocation to the Parks & Recreation Trust Fund
• $500,000 increase for state historical sites
• $100,000 increase for the Transportation Museum near Salisbury