Governor Pat McCrory released his budget plan, his proposal for how the state should spend money for the next two years. It distributes more than $45 billion from the state’s general fund, or more than $100 billion when including all the other fees, federal dollars, and various revenue streams the state uses to fund services. The final budget may look quite a bit different once state lawmakers are through, but this proposal is where the debate begins.
Taxes
State Budget Director Lee Roberts says the budget does not raise taxes. However, it includes an increase to the state’s gas tax to fund transportation projects, along lines the state Senate has proposed. That would increase state gas tax collections by $475 million over the next two years.
Revenues are expected to increase about $1.4 billion—that’s $271 million less than projected when lawmakers passed tax cuts in 2013, according to the legislature’s non-partisan Fiscal Research Division.
Teacher Raises
Governor McCrory and Roberts called raising the base salary for beginning teachers “the largest discretionary item in the budget.” Under the plan, those salaries would increase to $35,000 a year, up from $33,000. The governor had promised to do this last year.
One-third of teachers will receive some form of pay raise. For many years that scale was frozen, meaning teacher pay remained stagnant. The governor also wants to set aside $15 million over the next two years to reward high-performing teachers. Lawmakers also increased teacher salaries last year by 5.5 percent on average. The largest raises went to beginning teachers.
College Cuts
It cuts $50 million a year of state money from the UNC system, or about two percent. The campuses lose an additional $18 million for fundraising.
UNC System president Tom Ross said he was “disappointed” to see the cuts.
“To continue to improve North Carolina’s economic position, attract new industry, and create needed new jobs, North Carolina must continue to maintain and invest in our strong public university system,” Ross said in a statement.
Community college students would pay about 5 percent more in tuition costs.
But the budget includes money for technology -- $5 million a year to upgrade community college software and $7.5 million for a two-year grant program to move UNC technologies to the marketplace.
Incentives and Tax Credits
McCrory wants more money for the state’s economic development fund. The fund gives businesses tax breaks in return for creating jobs and investing in North Carolina. The budget assumes another $21 million this year — similar to the amount the state House of Representatives included in its economic development package. It could be used to lure a carmaker.
The budget also calls for extending several expiring tax credits:
- The Historic Preservation Tax Credit, which gives developers a tax break for converting old mills and warehouses to new businesses. The credit expired at the end of 2014. The resurrected version would have an unspecified limit on the amount any one development could receive from the credit. Local governments have supported restoration of the credit.
- The Research and Development Tax Credit.
- A cap on airline jet fuel taxes.
The film incentive program would remain in its new format. The state can pay out $10 million in grants each year to film productions, about a quarter of the 2012 payout. Film production in the state has fallen since lawmakers adopted the change last year.
There’s no mention of reimbursing local governments for a business tax state lawmakers ended last year, a top priority for municipalities. Charlotte will lose about $18 million in the next budget without the tax.
Bonds
As expected, the governor says he’ll introduce two bonds of at least $1.2 billion each. One will fund transportation infrastructure — repairs and upgrades to roads and bridges. The other will focus on government buildings that have fallen into disrepair.
Veterans
The governor wants to create a new Department of Military and Veterans Affairs. It would consolidate several divisions currently housed in the Department of Administration and the Governor’s Office. The secretary of the new department would join Governor McCrory’s Cabinet.
Public Safety and Courts
Courts would see $16 million in increased funding over two years for essential services, including jurors, witnesses, interpreters, and software. North Carolina Supreme Court Chief Justice Mark Martin had asked for about double that amount.
The amount does not include money to pay for any new courthouse positions like magistrates, assistant district attorneys, and trial court positions.
Seven hundred state troopers and 10,000 corrections officers would receive pay raises, and prisons would gain new mental health units, including a total of more than 330 new employees.
Medicaid
The state’s largest single expenditure, Medicaid, does not see major changes. The budget does add another $175 million to a risk reserve fund in the event of a shortfall.
Energy
The state could participate, along with private companies, in exploratory drilling. The budget sets aside $500,000 to look for natural gas in Lee and Chatham counties that could lure fracking companies. Fracking becomes legal in North Carolina, and companies can begin applying for permits, later this month.
The state’s renewable energy tax credit, which has helped North Carolina become a national leader in solar energy, will expire at the end of 2015. Last year, solar companies received $78 million from the tax credit, according to the North Carolina Sustainable Energy Association. The governor’s budget calls for extending the credit, but not for solar.
Roberts says it can continue to encourage other renewable technologies the way it did for solar, but at a cost of $7 million. Solar companies have lobbied for the credit’s extension, while Duke Energy has opposed it.
Zoo Swap
Several agencies would swap departments, including the state environment agency, which currently oversees state parks, the zoo, aquariums, and the state science museum. Those sites, along with their funds and staffs, will transfer to the Department of Cultural Resources. The budget then calls for a $10 million cut to the expanded department (about 7 percent), some of which it expects to make up through increased ticket revenue.
