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As North Carolina’s Democratic governor and Republican legislators prepare their differing budgetary agendas, the sides are expressing optimism that they can achieve some consensus this year, despite acknowledgement of the disagreements that have repeatedly derailed the state budget process in recent years.
Gov. Roy Cooper released his spending plan, and legislators wrapped up preliminary hearings last week, moving North Carolina’s two-year budget cycle into the drafting stage.
North Carolina failed to adopt a biennial budget in 2019 after talks between the governor and legislative leaders broke down. Cooper vetoed the legislature’s plan shortly after its passage that June, mainly over the failure to include Medicaid expansion under the Affordable Care Act.
Since then, a series of consensus mini-budgets, supplemental bills and an automatic budget backstop that maintains funding at prior-year levels have funded the state agencies.
At his $27.3 billion budget announcement last week in Raleigh, Cooper was cautiously optimistic that this year’s debate wouldn’t dissolve into disagreement, saying the dialogue, which dwindled to nil in 2019, was much better this year.
The pandemic and the urgency to move forward on infrastructure and reopening schools has changed the dynamics, he said, even as he acknowledged that last year’s election left all the key players in place.
“Unlike the last budget cycle we had, I’ve had numerous conversations with both Republican and Democratic leadership,” Cooper said.
“And one thing we agreed on is that first, the people of North Carolina elected us again. So, we’re back in the same situation that we were, and we owe it to them to do the best that we can to find a path forward.”
House Speaker Tim Moore said while Cooper’s plan had some shared priorities, the General Assembly would stick to its own budget strategies.
“I look forward to reaching consensus on a state budget that works for all North Carolinians to avoid further vetoes by the governor of valuable funds that taxpayers earned and communities deserve,” Moore said in a statement.
Money left unspent
One consequence of the prior years’ stalemate may have made reaching a deal this year a little easier.
The budget standoff boosted the state’s bottom line by delaying expansions, raises and major spending initiatives. That, along with a stronger-than-anticipated economic recovery and substantial federal relief has resulted in a large, although temporary, fund balance.
Going into this year, budget writers will start with roughly $4 billion in unspent funds.
Cooper’s budget plan includes a pay raise for teachers averaging 10%, a roughly 7.5% raise and bonuses for all school personnel, and a 5% raise for state employees. State retirees would receive a 2% cost-of-living adjustment.
Cooper also wants a $4.7 billion bond referendum to go to the voters in November. It includes funds for K-12, university and community college construction and repair; water and sewer infrastructure; and parks, museums and aquariums.
Other major initiatives in Cooper’s proposed budget include restoration of the earned income tax credit, a new child and dependent care tax credit, and a major boost for the state’s parks, land conservation and water quality trust funds.
Meanwhile on Jones Street
House and Senate leaders are moving ahead with their own initiatives after two months of joint appropriations hearings that set the stage for this year’s plan.
Senate budget committees will start putting together their plans next month. The rollout for some items in the plan has already started.
On Monday, Senate Leader Phil Berger, R-Rockingham, and Sens. Deanna Ballard, R-Watauga, and Michael Lee, R-New Hanover, announced a major effort to retool the state’s literacy and elementary reading programs.
A group of senators from Eastern North Carolina also recently announced that they’ll seek additional help with flood mitigation for inland counties hit by repeated flooding. Cooper has similar initiatives in his plan.
No matter what happens with the budget, it won’t be the only major spending plan this year. Cooper said he will also announce a proposal for how to spend a wave of federal funds coming to North Carolina from the American Rescue Plan.
In addition to relief for individuals and businesses, state government is expected to receive roughly $5.3 billion along with $277 million for capital projects. County, tribal and municipal governments will get another $3.3 billion.
Also on the horizon is North Carolina’s share of a federal infrastructure plan, which is expected to be the Biden administration’s next major legislative push.