Senate Spends Nearly $800 Million Less Than House | Eastern North Carolina Now

    Publisher's note: The author of this post is Barry Smith, who is an associate editor for the Carolina Journal, John Hood Publisher.

Senate plan increases savings, cuts tax rates, eschews universal pay raises

    RALEIGH     Senate leaders on Monday began rolling out their proposed $21.47 billion General Fund budget that has some stark differences from the spending plan put forth by their House counterparts.

    Perhaps the starkest difference between the House-approved General Fund budget and the Senate leaders' proposal is in total overall spending. The House plan calls for spending nearly $22.2 billion in 2015-16, a 5 percent increase over the current year's appropriated budget. The Senate leaders' alternative would spend $21.47 billion, about 2 percent more than the current spending plan.

    "The Senate is proposing a balanced budget that protects the state's long-term fiscal health, smartly invests in public education in core priorities, cuts taxes, and supports job growth and economic development statewide," Sen. Harry Brown, R-Onslow, co-chairman of the Senate Appropriations Committee, told reporters at a Monday press conference.

    Brown noted that the Senate plan provides "broad tax relief" for the state's citizens, including several proposals that were not in the House plan. The Senate's plan includes a cut in personal income tax rates from the current 5.75 percent to 5.5 percent in 2016. It preserves the current drop in corporate income tax rates from the current 5 percent to 4 percent in 2016 and 3 percent in 2017.

    Other tax changes include redirecting the formula for local sales taxes, distributing 80 percent of local sales tax revenues based on population and 20 percent based on the point of collection. This would reverse the current system, which lets counties keep 75 percent of sales tax revenues they collect and send the remaining 25 percent to the state, where revenues are divided based on population.

    While the House and Senate agree to raise the pay for starting teachers to $35,000 a year, and advance veteran teachers one year or one "step" along their pay scales, the two bodies disagree on other pay increases.

    The Senate plan would result in an average 4 percent pay increase for teachers, with most of the money going to starting teachers. It eschews other across-the-board pay increases, opting instead to give department heads discretion to give targeted, market-based pay raises.

    The House plan adopts a 2 percent across-the-board pay raise, with higher increases in some targeted areas, such as corrections officers and law enforcement.

    Other differences include:

• A separate agency for Medicaid. Senators would create a special health-benefits authority to supervise Medicaid, removing it from the control of the Department of Health and Human Services. The House didn't move Medicaid from DHHS.
• Taking the "fun" out of DENR. The proposed Senate budget would move non-regulatory functions from the Department of Environment and Natural Resources and move them to a renamed Department of Natural and Cultural Resources, a measure requested by Gov. Pat McCrory. The revamped agency would get the state aquariums, science museums, state parks and recreational areas, and the state zoo.
• Saving more. The proposed Senate budget adds $500 million to the state's rainy day fund, bringing the total in that reserve account to $1.15 billion. The House version contributes $200 million to that savings account.
• More repairs. The Senate plan commits $300 million for repairs and renovations, compared to $200 million in the House budget.
• Smaller fee increases. Senators propose a 20 percent increase in fees charged by the Division of Motor Vehicles for driver's licenses, auto registrations, vehicle titles, and the like. The House budget would increase those fees by 30 percent.

    The Senate proposal also eliminates a $215 million annual transfer from the Highway Fund to the General Fund to pay for the Highway Patrol. Senate leaders say this change, plus the additional $100 million a year additional income from DMV fees would provide sufficient funds for highway construction, thus eliminating the need for a $1.5 billion transportation bond package proposed by McCrory.

    "The idea on transportation is that rather than borrow a billion or billion-and-a-half dollars, we could put $300-plus million annually - additional dollars - into transportation," said Senate leader Phil Berger, R-Rockingham. "The feeling was we could build the projects that are not being built presently and do it without borrowing money."

    The budget also provides more money for the court system, including new spending for interpreters, expert witnesses, and juror fees. It allocates an additional $5 million to support operation of the Administrative Office of the Courts.

    It provides money to add six technicians in the State Crime Lab and provides funds to train police officers on appropriate use of force.