Gov. Roy Cooper’s recommended budget adjustments for the fiscal 2024-25 year that begins July 1 would mark an eye-popping 16 percent year-over-year increase over this year’s approved spending plan. Cooper’s budget would mark the largest single-year budget increase in 40 years.

Cooper’s spending plan would mark the largest single-year budget increase in 40 years.

The recommended adjustments are to the second year of the biennial budget passed last year.

The Governor’s proposal would spend $4.75 billion more than this year, and that’s not counting the $3.5 billion he’d set aside into reserves, continuing the shell game of hiding billions of taxpayer dollars “off-budget.” Moreover, Cooper’s plan adds $3.6 billion to the second year of the two-year budget plan passed last year, $2.5 billion of which would be recurring, marking a significant increase in the budgetary baseline moving forward.

Such a stunning increase would be wildly irresponsible, especially so in light of growing signs warning of a coming economic slowdown, or recession. Fortunately, however, Cooper’s plan is merely a political document that will be dead on arrival at the legislature.

Significant spending hikes in Cooper’s proposal include:

  • Teacher pay raises of an average of 8.5%, including lifting average starting salary to $47.5k and restoring a boost for Master’s degree holders: $359 million
  • 5% across-the-board pay raise for most other state employees: $251 million
  • State employee retention bonuses of $1,500 for most employees: $400 million
  • Childcare and early education: $687 million
    • This is intended to help offset the end of temporary federal Covid relief funds for childcare expenses, which will run out July 1. Includes subsidies to childcare centers in the form of both direct grants and subsidizing increased reimbursement rates; along with increased funding for Smart Start and NC Pre-K programs.
  • Increase in Medicaid spending above previous estimates, largely due to expansion: $458 million
  • A $2.5 billion bond referendum to be on ballots this fall for school construction across the state. This would go against the pay-as-you-go trend for capital projects that the conservative legislature has wisely used the last several years that resulted in a significant reduction of state debt.

Cooper also includes a moratorium on the Opportunity Scholarship program, once again signaling his opposition to allowing school children the opportunity to pursue educational opportunities that are best suited to their needs. This would deprive the school choice program of $174 million.

On the revenue side, Cooper seeks to reverse tax cuts set in motion in previous years, denying hard-working North Carolinians a tax break at a time when the rising cost of living is crushing more and more household budgets. Surprisingly, he does include a reduction in the unemployment tax levied on businesses, but he couples that with increases in benefits.  Cooper’s recommendations on taxes include:

  • Reducing unemployment insurance (UI) taxes on businesses with 500 and fewer employees, on a sliding scale. The smaller the number of employees, the larger the percentage of the tax cut. The reduction is projected to save businesses $49 million in 2025. Cooper, however, pairs this with an increase in UI benefits, threatening another shortfall in the event of an economic downturn.
    • Cooper’s plan would increase both the minimum and maximum UI benefit levels, as well as alter how benefits are calculated in order to increase the average benefit payout. This could prove to prolong unemployment, especially when we enter another economic slowdown that sees unemployment rise.
  • Denying some North Carolinians a scheduled tax cut. Taxpayers filing jointly with income above $200k and $100k for single filers would see their tax rate remain at 4.5%, instead of falling to 4.25% in 2025 and 3.99% in 2026 as provided for in a previous budget bill. In its first year, the move would amount to a $127 million tax hike.
  • Freezing the corporate income tax at 2.5%, instead of allowing it to fall as previously scheduled. This would cost job creating businesses $74 million in FY 2024-25 alone.
  • Providing a refundable child and dependent care tax credit for families for eligible care expenses, projected at $58 million.

Cooper’s spending proposal is absurdly unrealistic and would mark the largest year-over-year state budget increase in forty years. It should be readily dismissed as an unserious document designed to score political points while being detached from fiscal sanity.