- Both the House and Senate have now released their budget plans
- There are many similarities, and both plans have strengths and weaknesses
- A potential Cooper veto could make this a drawn out process
Budget season is in full swing in North Carolina. The House of Representatives passed their version of the biennial budget in early May, and the Senate released their budget highlights over Memorial Day Weekend. The two chambers agreed to a General Fund appropriation of $23.9 billion. Upon passage of the Senate budget, the two editions of the budget will then be reconciled into one final budget, and presented to Gov. Roy Cooper for his signature or veto.
The John Locke Foundation recently published a comprehensive overview of the House budget. Some highlights from the House budget include:
- Spending growth of 3.1 percent in the first year and 4 percent in the second year.
- Moves $104 million to the state’s savings reserve fund in the first year and $154 million in the second year, bringing the balance to just over $1.5 billion.
Just released this week, Senate budget highlights include:
- Moves $1.1 billion to the state’s Rainy Day fund over the biennium.
- Salary increases of 3.5 percent (average) for teachers and 5 percent (average) for other state employees over the biennium.
- Plans $4.8 billion over 10 years for pay-as-you-go school construction.
Both budgets have their strengths as well as areas where improvements could be made through the conference budget process.
Tax cuts for North Carolina businesses. Both the House and Senate proposals promote the state’s business friendly climate by including language to phase out the state’s franchise tax over the next several years. Such measures are a great way to encourage investment in North Carolina’s economy. However, the next step should be to eliminate the state’s corporate income taxes. Repealing the relatively small tax will send the message that North Carolina is open for business.
Expansion of the Opportunity Scholarship Program. Unlike the Governor’s proposed budget, the House and Senate budgets maintain scheduled funding increases to the state’s opportunity scholarship programs. This is a clearly needed change, since the program denied scholarships to 520 eligible students last year due to lack of funding.
Further progress in this area would entail expanding eligibility to include more low- and middle-income North Carolina families. The Senate passed an eligibility expansion as a stand-alone bill this session. If that language makes it into the final conference committee budget proposal, it would be a significant win for North Carolina families.
Limiting the growth of government in the healthcare sector. The House and Senate budgets did not contain an expansion of eligibility for the state’s Medicaid program under the Affordable Care Act. It is worth noting, however, that Medicaid enrollment is expanding on its own, even under the current eligibility standards. As an entitlement program, Medicaid must be funded for anyone who is eligible before the state can put money towards any other spending. The Senate budget highlights revealed that they will provide funding for 1,000 additional Innovations Waiver slots for individuals with intellectual and developmental disabilities. This is the better use of taxpayer funding to support our neighbors in need.
In recent months, Civitas has demonstrated why Medicaid expansion is not the way forward for healthcare policy in our state. There are plenty of free-market reforms that the legislature could pass this session to expand access and drive down health care costs for most North Carolinians. For example, whether through the budget or other legislation, the legislature could advance affordable healthcare in our state through repealing the state’s Certificate of Need laws.
Another area for improvement: cutting wasteful spending. Unnecessary spending in the form of pork spending and tax breaks for hand-picked industries or corporations is still part of the state’s budget proposal for this biennium. Removing those spending provisions and special carve-outs would allow the state government to put aside more money for future recessions or natural disasters, or to cut taxes further and allow North Carolina citizens and businesses to decide how to best spend their own money. True conservatives in the legislature will vote against pork spending and cronyism.
As the Senate budget process plays out, we can learn a lot from the strengths and weaknesses of the legislature’s budget proposals. The new political dynamics of the legislature this year, with a Democratic governor whose veto is meaningful with the loss of the Republican supermajorities in the 2018 election, mean that this budget process could end up being a long one. But ultimately, North Carolina will be better off if the final budget retains the strengths and corrects for the areas of weakness in the two chambers’ proposals.