RALEIGH — It was just a matter of time. Once the new revenue numbers, including and expected surplus for the current fiscal year came into view for the North Carolina legislature, the House’s version of the what will become the state’s biennial budget wasn’t far behind.
Last week, House budget subcommittees — and the public — got their first look at the House plan, which includes both an array of new spending, some cuts and shifts in spending and dozens of new special policy provisions.
Right now, the state budget is in eight parts and still lacks a few key details, including the full salary schedule for teachers and state employees and the amount, if any, of any retirement cost-of-living increases or changes to the state health plan.
You can view the various parts of the plan here.
The proposal also doesn’t not fully flesh out changes to taxes and fee schedules, although it does contain another set of changes to the state’s motor fuels tax and restores the Historic Preservation Tax Credit, a goal sought by Gov. Pat McCrory and many Western North Carolina cities and towns.
Cautioning that budget timelines are tricky, House Speaker Tim Moore said last week that he expects a vote on the budget Thursday. To get to a final vote by week’s end will require sticking to an aggressive schedule.
The House Finance Committee is schedule to meet today (Monday) to hammer out any changes to fees and taxes. On Tuesday, the full House Appropriation Committee plans to spend the day working through amendments to advance the bill.
In a lengthy blog post outlining the process for budget Rep. Chuck McGrady, R-Henderson, one of the House’s four “Big Chairs” of the full Appropriation Committee, said that despite the good news of a predicted $400 million surplus, budget writers remained conservative.
“We haven’t gone on a spending spree — even though our revenues exceeded expectations,” he wrote. “When the complete budget is released and sewn together over the next few days, my expectation is that folks will see that we’ve made some targeted investments — but that we’ve also made sure that we’ve prudently put monies towards long-needed repairs/renovations and savings.”
McGrady said he also expects some positive news on the final numbers on teacher salaries and state employee pay.
Looking ahead
The passage of the House version of the budget is the first formal move in a long process that results in either a new budget or a temporary fix by midnight on June 30, the end of the state’s fiscal year.
After passage in the House, the Senate typically votes the House version down and eventually produces its own version. The two chambers then enter into an often protracted negotiation. The governor’s role in the process differs from administration to administration. The House has already signaled some disagreements with the governor’s priorities, including the transfer of the state parks and other attractions to from the N.C. Department of Environment and Natural Resources to the N.C. Department of Cultural Resources.
And legislative leaders in both chambers have thrown cold water on the governor’s proposed bond program, which he wants to see go before the voters this fall.
Senate leader Phil Berger, R-Rockingham, has said the $3 billion price tag is too large. In the House, Speaker Tim Moore said recently that he would prefer the bonds vote be held in 2016.
The state rarely holds a statewide election in an odd number year, in part because of the cost, but mainly because turnout tends to be extremely low. In some counties, including Wake, one of the state’s largest counties, it would be the only item on the fall ballot.
The House also did not include a move of the state parks system, science museums and other attractions now under the N.C. Department of Environment and Natural Resources to the N.C. Department of Cultural Resources.
DENR does see a considerable reduction in force in the budget proposal, however, with 70 mostly vacant positions eliminated. More than half of those are in the state parks system.
The main undecided budget driver is how the Senate and House will settle on a plan to reduce taxes given the budget surplus.
This year’s spending total is likely to be high enough that it will trigger another reduction in corporate income tax. The tax reduction plan was passed in 2013, but contingent on certain budget thresholds. Without any modification, the corporate rate drops from 5 percent 4 percent and is scheduled to drop to 3 percent next year. The plan will lead to estimated reduction of $349 million in revenue in fiscal year 2016 and $555 million by 2019.
Berger said last week that, in light of the surplus, it’s time to study a reduction in the personal income tax as well.
WNC in the budget
Although there are some specific WNC items in the budget plan, much of the impact could come in increases in statewide programs targeted at shoring up rural counties.
The transportation portion of the budget includes an additional $2 million for capital grants to bolster public transportation in rural counties.
Additional spending on rural water and wastewater infrastructure projects is also in the plan with an additional $10 million in 2015 and 2016 to go to “rural, economically distressed areas.”
WNC related budget items and special provisions in the House proposal include:
• $1.6 million to advance planning for a Western School of Science and Math;
• Bond authorization for up to $70,782,000 to construct the Appalachian State University Health Sciences Building;
• $1 million for the Western North Carolina Stream Initiative for Avery, Buncombe, Burke, Cherokee, Clay, Graham, Haywood, Henderson, Jackson, Macon, Madison, McDowell, Mitchell, Swain, Transylvania, Watauga and Yancey counties;
• A special provision that puts UNC Asheville among the state universities exempt from reductions under budget flexibility granted the UNC system;
• Allocates $858,380 in both 2015 and 2016 to the NC Arboretum for the Bent Creek Institute and Germplasm Repository; and
• $250,000 for Linville River restoration projects.
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