Senate Budget Plan Includes Major Tax Cut, Spending Growth Rate Half of Cooper’s Plan

The North Carolina Senate’s budget plan would increase state spending at half the rate proposed by Gov. Roy Cooper and include a tax cut package projected to save taxpayers $1 billion over its first two years of implementation.

Total General Fund spending for the coming fiscal year would reach $22.9 billion under the Senate’s proposal, compared to Gov. Cooper’s $23.5 billion budget plan released in early March. The Senate plan would mark an increase of 2.5 percent over the current year’s budget, compared to Cooper’s budget that would grow spending by 5.1 percent. The Senate’s more restrained growth rate would result in roughly $600 million less in state General Fund spending.

Headlining the budget proposal are major tax cuts, teacher pay raises, more rainy day savings, and – unfortunately – more corporate welfare.

Following is a list of highlights from the Senate budget proposal (and a closer look at education spending can be found here):

• “Billion Dollar Tax Cut”: budget includes the Senate’s tax cut plan projected to save taxpayers a billion dollars in its first two years of implementation. It is projected that under this cut, 99 percent of taxpayers will be either paying less or no personal state income taxes. The tax cut plan includes the following:
  • Reduction in the personal income tax rate from 5.499 percent to 5.35
  • Increase of the standard deduction for married filers from $17,500 to $20,000 and single filers from $8,750 to $10,000
  • Lowering of the corporate income tax rate from 3 percent to 2.75 percent in 2018 and to 2.5 percent in 2019
  • Simplification and reduction of the franchise tax on businesses, creating a new flat $200 tax on the first $1 million of a business’s net worth
• Teacher Pay: provides an average 3.7 percent pay raise for NC teachers in the coming fiscal year, and a total 9.5 pay raise over the biennium
• Increases state funding for K-12 education by $600 million over two years
• Education Savings Account: appropriates $450,000 in the first year to help establish an ESA program for special needs students, with $1 million allocated in the second year to go towards eligible students
• Adds $363 million to the state’s rainy day fund, which would bring the fund’s balance to more than $1.8 billion – the highest in the state’s history. By comparison, Gov. Cooper’s spending package set aside just over $300 million into the savings reserve
• Provides $150 million in disaster relief assistance for continued Hurricane Matthew support. This will help replenish the $201 million already spent from the Disaster Recovery fund this year. Cooper’s budget plan allotted $100 million for disaster relief
• Includes a $750 or 1.5 percent salary increase for most state employees – whichever is greater
• State Pension contributions: taxpayer contributions for the state employee pension fund will increase next year to $1.7 billion
• Increases funding to the NC Pre-K program (formerly More at Four) by $18 million over two years to add another 2,350 slots
• Appropriates $75 million in grant money to rural counties to assist with public school building expenses
• Agrees with Cooper’s budget in granting more handouts to Hollywood. The Senate budget makes a permanent expenditure of $15 million annually to the film grant program, the same amount Cooper included in his budget for the coming fiscal year
• Creates yet another corporate welfare program, called the “Site and Building Development Fund.” This fund would offer interest-free and very low interest loans to local governments for the development of “qualified business facilities.” The Senate budget appropriates $2.5 million to the fund in the coming fiscal year
• $727 million in debt service payments
• And lastly, many pork and highly questionable budget items remain, including:
  • Roughly $30 million for museums, $10 million for “historic” sites (including Tryon Palace), $7 million for the Arts Council, $2.4 million for the Symphony, and $40 million for the state zoo and aquariums.
  • $400,000 in additional funding for a “strategic plan” and operating support for the Global Transpark money pit, bringing total appropriation to $1.15 million
  • $2.8 million for “downtown revitalization” and another $1 million for “Main St. Solutions”
  • $1.8 million to the High Point Market Authority (a $200,000 increase)
  • $750,000 increase in “marketing funds” for NC products
  • $3 million increase in “advertising” funds for tourism and international advertising
  • $112,000 for something called the “Outdoor Heritage Advisory Council Director”