State workers to get 7% raises, tax cuts to be sped up under new NC budget

Most state employees would get a combined 7% raise over the next two years, residents would pay lower taxes, and hundreds of thousands would gain health insurance under North Carolina’s new state budget, which was made public Wednesday.

The $30 billion spending plan, released less than 24 hours before lawmakers expect to vote on it, is the result of a secret, months-long negotiation between Republican leaders in the House and Senate.

The chambers, which were at odds over a plan to expand casinos in the state, ultimately opted to nix that plan this week, breaking the impasse. Medicaid expansion had briefly been tied to the casino deal, but after that fell apart it went back to being part of the budget.

If the budget becomes law, as is widely expected to happen, Medicaid expansion will give federally funded health care coverage to over 500,000 North Carolinians who work jobs that don’t offer health insurance, and who also don’t make enough money to afford insurance on the private market.

The budget would also give most state employees a 4% raise this year and a 3% raise next year. That means the average state worker, with a $57,377 annual salary, is looking at a raise to just under $60,000 this fiscal year, and about $61,400 next year.

For teachers, the raises are more complex. The budget rearranges the salary schedule used to pay teachers based on years of experience. Beginner teacher pay would jump from $37,000 to $39,000, and again up to $41,000 next year, an increase of 10.8% over both years combined. More experienced teachers would see smaller pay bumps of between $1,000 and $1,800 per year, with the bigger step increases going to younger teachers.

The salary schedule increases range from roughly 5% to 9% for early- and mid-career teachers, over both years of the budget combined, and drop to 3.6% for teachers with 15 or more years of experience.

Senate leader Phil Berger said the raises are focused more heavily on younger teachers because that’s where North Carolina lags behind the rest of the country in particular.

“That’s where we were something of an outlier,” he said, adding: “We’ve tried to address that.”

As of this year North Carolina ranks 34th in the nation for average teacher pay, but 46th for beginner teacher pay, according to the National Education Association.

Berger said there’s also money in the budget for rural school districts to pay extra supplements to their teachers. And another program in the budget, he said, will give extra pay to advanced teachers chosen by their local districts. It’s intended to keep skilled teachers from leaving the profession, he said, by offering higher pay and opportunities to mentor others. He indicated the program could get more funding in the future, if it appears successful.

“We want to see how it works,” Berger said. “It seems to be something that actually provides a pathway for career teachers to earn more money, and really not be faced with a choice of, ‘If I want to make more money, do I go into administration?’ And so, hopefully, we keep some our best teachers in the classroom.”

Democratic Gov. Roy Cooper hasn’t said whether he will veto the budget. Even if he does, Republicans control veto-proof supermajorities in both chambers. At least some Democrats are also expected to vote for the budget in part because it contains Medicaid expansion, which has long a priority for the Democratic party.

However, not everyone is happy with the new spending plan.

‘Employees will keep leaving’

A lobbying group for state workers, the State Employees Association of North Carolina, slammed the budget for not doing more for raises — as well as including no bonuses, after they had asked for $5,000 bonuses in addition to raises. Ardis Watkins, the group’s executive director, noted the large number of vacancies within state government.

“As for the 7% [raises] over two years, this is a very dangerous gamble with public health and safety,” she told WRAL. “Employees will keep leaving if this is what they get when there is plenty of money for a better raise and more than 20% of state jobs are vacant. And the public, unfortunately, will pay the price for the lack of services these vacancies cause.”

Corrections officer vacancies in state prisons have been an issue for years, and earlier this year Labor Commission Josh Dobson, a Republican and former state lawmaker, came back to the legislature to urge GOP leaders for higher raises based on his own experience running a state agency. He said he had a large amount of vacancies in important jobs like elevator inspectors; WRAL reported this week that more than 5,000 elevators, escalators and lifts are overdue for inspections statewide.

Unlike other state workers, most teachers don’t make only the state-funded base salary. Nearly all local school boards pay additional supplements, many of which are calculated as a percentage of the state’s base pay. Those local supplements also vary drastically from county to county.

So depending on the local rules for those supplements, many teachers could expect to see their pay rise beyond the raises in the state budget, once it becomes law.

How to spend extra money

In addition to many policy provisions unrelated to state spending but favored by GOP leaders, the budget also contains a large amount of spending — $30 billion budget this year, following unexpected surpluses.

The state has been named No. 1 in the country for business two years in a row by CNBC, and the booming economy has brought with it higher tax collections than state budget writers had planned for.

The question of what to do with the surplus that dominated this year’s budget talks. Fiscal conservatives pushed for increasing the state’s reserves, which did get a boost in the budget but didn’t use up all the extra funding.

Democrats had suggested significantly larger raises for state employees, including 18% average raises for teachers. House Republicans had also originally pushed for raises that were less than what Democrats wanted, but still smaller than what ended up in the final budget. Their proposal was shot down by Senate Republicans, who preferred instead to speed up the implementation of a series of income tax cuts over the next several years.

The budget also would implement Medicaid expansion — something that Republicans warmed up to this year after the Biden administration’s offer of $1.8 billion as essentially a signing bonus, if North Carolina went along with the plan to extend health care coverage to hundreds of thousands of the working poor. The budget will put some of that federal money toward strengthening the state’s often-criticized mental health care system, which lacks both the funding and the physical space to deal with increased demand for services.

“Prioritizing mental healthcare in this state offers significant benefits to North Carolina’s citizens of all ages and has positive impacts on a multitude of factors impacting those citizens, including overall health and well-being, education, business, workforce development, and the justice system,” the budget document states.

That had been a top priority of Rep. Donny Lambeth, a Forsyth County Republican, retired hospital executive and top state budget writer. He has previously said North Carolina’s suicide rate tripled in the last five years, and that the state’s biggest mental health providers are no longer health care providers, but rather jails and prisons.

“We need more access points,” Lambeth told WRAL earlier this year, advocating for increased state funding. “We need more crisis centers. We need to address how to take care of these people.”

Tax cuts sped up

The budget would also speed up already-planned cuts to the individual income tax, which is currently at 4.99%. It would decrease to 4.6% next year and 4.25% by 2025 — slightly ahead of already-approved cuts passed in the 2021 budget.

Several more years into the future, the personal income tax rate could potentially reach as low as 2.49%, but only if the state continues hitting certain revenue benchmarks.

The budget wouldn’t speed up already-approved plans to cut the corporate income tax rate to 0% by 2030.

The personal income tax changes in the budget will mean large savings for wealthy families, but they won’t be as notable to blue collar and middle-class families. A married couple making a combined $100,000 per year, and using the standard deduction, would take home an extra $46 per month by 2025, if the new changes become law.

Other budget highlights

State lawmakers published more than 1,400 pages of budget documents late Wednesday afternoon, in advance of votes planned for Thursday morning.

The documents are similar, but not identical, to non-public budget drafts that WRAL obtained and published earlier this week. As reporters and members of the public dig through the budget, it’s possible that issues will continue coming to light in the coming days and weeks — after the votes are finished.

But some of the interesting parts of the budget already identified deal with changes to DMV rules, public records laws and a legislative oversight commission with newly aggressive powers.

• Drivers license changes: Most people would only have to renew their driver’s license every 16 years, instead of every eight years. The rule change will apply to everyone between 18 and 65 years old.
• Many drivers would pay less for their annual vehicle inspections: The budget exempts every county in the state, except for Mecklenburg County, from needing to conduct emissions tests along with the standard annual vehicle inspections. Many counties had already been exempted in recent years, but the new changes in this budget will now also exempt drivers in Wake, Durham, Franklin and Cumberland counties, as well as a handful of other counties in other parts of the state.
• Legislators would be even more shielded from public records laws: State lawmakers have already exempted themselves from some parts of North Carolina’s public records laws. The new budget goes significantly further, allowing lawmakers in the future to refuse any records requests they don’t want to comply with.
• The legislature’s governmental operations committee, whose members are heavily skewed toward the party in power, would get immense new authority. The changes are coming two years after the legislature eliminated its nonpartisan oversight division. The committee would now have subpoena power over people and documents in any state or local government agency, as well as any private company or charity that receives government funding, either directly or indirectly. The committee would also be allowed to have people involved in an investigation charged with a crime, if the committee felt they were not fully forthcoming or cooperative.

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