House and Senate Reach Budget Compromise

House, Senate Budget Compromise Invests in Core Priorities, Delivers Dramatic Teacher Pay Raise and Middle Class Tax Cut 

Raleigh, N.C. – Senate Leader Phil Berger (R-Rockingham) and House Speaker Tim Moore (R-Cleveland) held a joint press conference Monday to announce details of the $22.34 billion budget agreement reached between Senate and House conferees this past weekend.

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The compromise budget includes a responsible 2.8 percent spending increase and achieves both chambers’ shared goals with Gov. Pat McCrory of prioritizing teacher pay raises, cutting taxes on the middle class, controlling the growth of government spending and bolstering the state’s savings.

It continues Republican state leaders’ commitment to dramatically raising teacher pay with a bold plan to boost average teacher salaries to $50,186 next school year and to nearly $55,000 within three years. The plan would set average teacher pay above $50,000 for the first time in state history and, when fully implemented, would mean average teacher salaries are up almost $10,000 – more than 20 percent – under Republican leadership since the 2013-14 school year.

The agreement also provides more than $550 million in salary and benefit changes for state workers, including a permanent pay increase and bonus for state employees and a cost of living bonus for state retirees. It invests hundreds of millions of additional dollars in public education and other core priorities and shores up the state’s rainy day fund by close to $475 million. And it includes provisions to help make college far more affordable and accessible to students across the state, strengthen and stabilize public universities with lower enrollment and stimulate regional economies.

Finally, the budget provides major tax relief to the middle class and small businesses by making the first $17,500 a family earns exempt from income tax over the next two years, with a family making the N.C. median household income of $44,000 annually seeing an additional tax cut of $110 next year alone. This will bring the total amount of tax relief provided by state Republican leaders since 2011 to approximately $3 billion per year.

“I am grateful to members of the Senate and House for reaching a compromise that continues the discipline and conservative principles of spending responsibly, taxing sparingly and saving wisely that have turned North Carolina’s fiscal outlook around from multi-billion dollar deficits to significant budget surpluses,” said Berger. “This budget keeps our promises to support our public schools and raise teacher pay above $50,000, let families and small businesses keep more of their hard-earned money, and control the spiraling costs of college.”

“This budget is the embodiment of what can be accomplished when common sense, conservative ideas are put to work – we are cutting taxes, reinvesting in the state’s infrastructure and saving money,” said Moore. “I am particularly happy that, in addition to teachers, we were able to deliver pay raises to our state employees and provide a one-time payment to our much deserving state retirees.”

Moore went on to say, “the Governor, President Pro Tempore Berger and I entered this short session with a shared desire to give meaningful raises to teachers and tax relief to working-class North Carolinians while still demonstrating fiscal discipline and conservative budgeting. Through close collaboration, House and Senate budget writers helped achieve these goals in a major way.”

Other highlights of the budget agreement include:

In Salaries and Benefits –

  • Lays the foundation to dramatically increase average teacher pay from $47,783 to $54,224 over the next three years, which will provide North Carolina public school teachers an average $4,700 permanent pay raise over the same period and propel the state to the top of regional rankings. This is in addition to the generous teacher pay raises legislators passed in 2014 and 2015.
  • Includes a 1.5 percent permanent pay increase and 0.5 percent one-time bonus for state employees, over $80 million for merit-based bonuses, and a 1.6 percent cost of living bonus for retirees.
  • Offers experienced-based step increases to teachers, assistant principals, principals, State Highway Patrol troopers, clerks and magistrates, appropriates $16 million to boost pay for correctional officers, and provides a 4.5 percent pay raise to assistant district attorneys, public defenders and other judicial branch workers.
  • Includes $10 million for a pilot program to provide performance-based bonuses of up to $6,800 for third grade reading teachers. $5 million would be available for the top 25 percent of teachers in each school district based on EVAAS growth scores, and an additional $5 million would be available to the top 25 percent of teachers on a statewide basis.
  • Establishes performance-based bonuses for Advanced Placement (AP) and Career and Technical Education (CTE) teachers when students are successful in completing AP exams and earning industry-recognized certifications and credentials.

In Education  –

  • Increases education funding by $512 million over the enacted 2016-17 budget.
  • Funds K-12 enrollment growth, community college enrollment and public university enrollment.
  • Continues the commitment to lower class sizes in the early grades – a step research has repeatedly shown is key to academic success – by hiring close to 450 additional first grade teachers.
  • Protects the Read to Achieve, School Connectivity, Teach for America, and Communities in Schools programs from being cut by the Department of Public Instruction.
  • Establishes an opportunity scholarship grant fund reserve of $34.8 million to award more need-based scholarships to children from working families and provides forward funding to add 20,000 children to the program over the next ten years.
  • Creates a teacher assistant tuition reimbursement pilot program in Anson, Franklin, Moore, Richmond, and Scotland Counties, which will provide tuition reimbursement of up to $4,500 annually for 25 local TAs to pursue a college degree leading to teacher licensure.
  • Fully funds teacher assistant positions at the 2014-2015 level.
  • Provides that school performance grading (A-F school grades) will continue to utilize a 15-point scale for the next three school years.
  • Allocates $10 million to support teacher professional development and technology infrastructure improvements.
  • Directs $3.5 million in additional funds to grow the Principal Preparation Program to meet the demand to train new and aspiring public school principals.
  • Authorizes an increase in the base budget for the UNC system of up to $40 million to fund the Access to Affordable College Education Act.
  • Guarantees no in-state tuition increases for a standard undergraduate college term (usually 4 years) at all North Carolina public universities, not only providing certainty to families who are budgeting for college costs and taxpayers who heavily subsidize tuition, but also additional incentive to students to complete their degrees on time. This tuition guarantee would also apply to active members of the military based in North Carolina.
  • Freezes student fees – often used to fund non-academic expenses – at all North Carolina public universities at current levels and limits future increases to no more than three percent per academic year.
  • Lowers tuition at select universities from the mountains to the coast to $1,000 per year for in-state students and $5,000 per year for out-of-state students, ensuring all North Carolinians have an affordable option. This would also help attract new students to universities with lower enrollment, make those schools more stable and competitive and stimulate struggling regional economies that sometimes transcend the state’s borders. The reduced tuition would apply to the following schools beginning in the Fall of 2018:
    • Elizabeth City State University
    • University of North Carolina at Pembroke
    • Western Carolina University
  • Directs $300,000 on a recurring basis to administer the new Cheatham-White Merit Scholarship Program for students at North Carolina Central and N.C. A&T Universities.
  • Provides a community college tuition and registration fee waiver to firefighters, EMS, and rescue and lifesaving personnel at military installations for courses that support their organization’s needs.
  • Expands an internship program for students at the state’s Historically Black Colleges and Universities.
  • Requires eight public universities with educator preparation programs to open and operate a lab school for K-8th grade students in a school district where 25 percent or more schools are identified as “low performing.”

In Taxes and Economic Development –

  • Provides an immediate $145 million tax cut this year and an additional $205 million tax cut next year, mostly benefitting middle class families and small businesses.
  • Increases the zero percent tax bracket over the next two years – ensuring all North Carolina taxpayers, regardless of income, pay no state income taxes on more of their earnings.
  • Creates a new international job recruiting office in the Department of Commerce focused on opportunities in Asian markets and designates close to $4 million for job recruitment advertising in domestic and international markets.
  • Provides $5.75 million for downtown revitalization grants in over 50 towns and cities across the state.
  • Enhances rural economic development and job recruitment by placing an economic developer in each of the state’s eight regional Prosperity Zones.

In Health and Human Services –

  • Repurposes a more than $300 million surplus in the Medicaid budget, made possible by Republican-led reforms that have gotten the chronically troubled program back on track.
  • Invests over $9 million to reform North Carolina’s child welfare program by requiring additional training, providing more positions and expanding in-home services to support children’s safety while keeping families together.
  • Builds a stronger Controlled Substance Reporting System that will use advanced analytics to detect and fight prescription drug abuse. 
  • Continues the commitment to improving education and retention of rural physicians by directing nearly $20 million to help establish new medical school programs in Fayetteville and Asheville.
  • Funds nearly $500,000 for Zika prevention and detection.
  • Directs proceeds from the sale of the Dorothea Dix property go toward services for the mentally ill, including $2 million to establish child facility-based crisis centers and $18 million to expand inpatient behavioral health beds targeting rural areas.
  • Funds over 300 additional slots for Alzheimer’s patients and their families through the Community Alternative Program for Disabled Adults.
  • Provides nearly $4 million in state funding for temporary assistance to adult care homes and facilities that serve special assistance recipients, bringing total available funding with local dollars to $7.5 million.

In Transportation –

  • Increases funding for the Strategic Transportation Investment (STI) law by over $32 million, which will allow new highway projects to be added over a ten-year period.
  • Allocates over $3 million to improve customer service and decrease wait times in high-volume DMV office locations.
  • Increases state assistance for urban and rural transit systems by $4 million and state aid to general aviation airports by $15 million.
  • Provides nearly $14 million in additional funding to improve freight rail tracks, crossing safety, and industrial, port, and military access. 
  • Repeals the $500,000 cap on state funding for light rail projects effective for the next round of project prioritization (P5.0).

In Justice and Public Safety –

  • Makes strategic investments in public safety by providing $1.3 million to get the Western Crime Lab up and running and $640,000 for equipment upgrades in the other two crime labs.
  • Includes $2.1 million to help close out the longstanding backlog at the State Crime Lab once and for all.
  • Provides $250,000 to digitize mental health records to help streamline background checks for gun purchases.
  • Invests $500,000 for School Risk Management Plans to be developed in 835 public schools to help keep our children and teachers safe while they are at school.

In Agriculture and the Environment –

  • Allocates over half a million dollars for international marketing of North Carolina agricultural products.
  • Increases funding for the Clean Water Management Trust Fund by $8.6 million.

Elsewhere –

  • Directs federal funds to a broadband initiative and water and sewer projects in public schools.
  • Improves government transparency by helping the office of the State Auditor conduct more specialized audits of state agencies and by implementing a new filing system for Statements of Economic Interest.
  • Provides recurring funding for the Human Relations Commission.
  • Establishes a cyber-security program for disabled veterans to develop their skills while protecting the state against cyber-attacks.
  • Adds $10 million to the Disaster Relief Fund.
  • Pays off an outstanding $37 million loan from the federal government that Gov. Jim Hunt borrowed in 1999 and deferred payment on for over 15 years, saving the state $45 million in interest over the next 30 years.
  • Invests $12 million to implement state of the art software to ease tax filing for North Carolinians.

The full budget agreement will be posted to the North Carolina General Assembly website at www.ncleg.net on Monday night.  

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