N.C. LEGISLATORS PREPARE FOR LONG SUMMER

Paul Fogleman,

Unless there is a big surprise, it is likely that weeks of debates, compromises, and maybe a game of chicken, are ahead before the state has a spending and revenue plan for 2015-16. The concept sent to the House by the Senate this week was dramatically different from the vision from the House…and the governor.

Philosophical differences from within the Republican caucus making the process more complex. The conservative Civitas Institute largely funded by GOP patron Art Pope has weighed into the mix. Civitas is attacking the House plan as too expensive and prefers the Senate document. Gov. Pat McCrory is supporting the House plan which includes many of his priorities.

WHERE WE ARE NOW

  • House:   $22.15 billion in 2015-16;   $22.41 billion in 2016-17
  • Senate:   $21.47 billion in 2015-16;   $21.52 billion in 2016-17
  • Governor:   $21.52 billion in 2015-16;   $22.23 billion in 2016-17

Both the House and Senate loudly rejoiced at the $400 million budget surplus. The House viewed the surplus as a way to make up ground for cuts that were necessary in the recent recession. But the Senate said more of the surplus should go to the rainy day fund, as well as be used as an opportunity to lower corporate taxes.

REVNUE—WHO WINS, WHO LOSES

The House budget imposes a number of new fees, most notably in the Division of Motor Vehicles. There would be higher charges for renewing driver’s licenses and inspections. Some court fees are hiked. The gasoline sales tax would be increased after an adjustment period of one year.

No major adjustments are made to income or sales taxes.

Not so with the Senate plan. In three years, local governments would lose 80 percent of their sales tax revenue. Counties would retain 20 percent of sales collections with the 80 percent going back to the state for redistribution on a per capita basis. This would provide a windfall for rural counties without a major retail center. The Senate would require this new money be spent on education. Counties that have a major retail presence would lose millions of dollars. A late provision in the Senate budget would give those counties losing money the option to adopt up to a half cent more in sales taxes which they could keep. However public referendums would be required in quarter-cent increments.

Additionally, the Senate plan would expand sales taxes to veterinary services, pet care, car repairs, and other services. Mill machinery taxes would go up from $80 to $500 per machine. Large non-profits, including hospitals, would pay more sales taxes. Personal deductions—medical, charity, church, etc. – would be capped at $20,000 for couples filing jointly.

EDUCATION HIGHLIGHTS:

  • The Senate plan would sharply cut employment of teacher assistants—over 8,000 by the second year—but would reduce classroom sizes for kindergarten through grade three.
  • The starting salary for teachers would go up to $35,000 in both plans.
  • The House would give teachers and state employees across-the-board raise of 2 percent; the Senate would offer merit raises to teachers and state employees.
  • Lottery money for Teacher assistants would be phased out in the Senate budget.
  • Both plans set aside about $1.05 billion for the 58 community colleges system.

While both chambers have left funds for the Manufacturing Solutions Center and the Textile Technology Center intact, we are now entering the dangerous territory. Budget negotiations involve tradeoffs and cuts. We have long laborious weeks ahead.

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