• Earlier this week, the North Carolina House and Senate both released their fiscal year (FY) 2024-25 budget proposals
  • Both budgets allocate funds to politically relevant areas, such as school vouchers and child care subsidies, but the Senate’s proposal, comparatively speaking, shows more fiscal restraint
  • The Senate’s recommended budget is almost $300 million less than the amount proposed by the House and does not provide additional raises to teacher and state employee pay

On Wednesday evening, while the House debated amendments and voted to issue an initial approval of its FY 2024-25 budget proposal, policymakers in the North Carolina Senate delivered a timely and unanticipated response by submitting their own budget proposal.

This brief highlights key differences and similarities between the House and Senate budgets. The complete budget documents are available here.

The Senate’s proposal aims to curtail spending relative to the recommendation put forth by the House. For FY 2024-25, the Senate proposed spending $31.4 million in General Fund net appropriations, approximately a 5.5 percent increase from the current fiscal year, accounting for more than $1.6 billion in new spending year-over-year. The House’s recommendation called for a 6.5 percent increase year-over-year, exceeding the Senate’s proposal by just under $300 million. Furthermore, when accounting for receipt-supported expenditures, the Senate’s proposal was just shy of $70.7 billion, more than $100 million less than the House’s plan.

However, it is worth noting that the Senate’s proposal surpassed the House’s recommendation in the allocation of funds into discretionary reserves. Once within discretionary reserves, these funds become receipts that policymakers can allocate without affecting General Fund appropriations. The Senate proposed allocating more than $3.3 billion in discretionary reserves, almost $200 million greater than the House suggested.

Key Differences between the House and Senate Budgets

  • The Senate’s proposal does not provide additional pay increases to teachers and state employees beyond the 3 percent approved last fall. The House’s proposal requested additional increases, an average of 1.4 percent for teachers and 1 percent for most state employees, on top of the previously-approved 3 percent. The starting salary for teachers would remain $41,000 under the Senate plan, compared to $44,000 provided for in the House proposal.
  • The Senate’s proposal does not reinstate increased pay for teachers who have earned a Master’s degree or provide a cost-of-living increase to state retiree pension payments. The House’s proposal restores increased pay for teachers with a Master’s degree and assigns a one-time 2 percent cost-of-living increase in pension benefits. Instead of Master’s pay supplements, the Senate’s proposal includes a limited program offering bonuses to teachers assuming leadership roles or achieving “classroom excellence” via student performance.
  • The Senate’s proposal does not allocate funds to UNC-Chapel Hill (UNC-CH) to establish a STEM program on campus. The House’s proposal provided UNC-CH $17.5 million for the “advanced planning” of a new STEM building and $8 million to establish a College of Applied Science and Technology.
  • The Senate’s proposal does not apportion funds to the NC Policy Collaboratory. The House’s proposal allotted $1.5 million to the NC Policy Collaboratory to establish and operate an Office of Learning Research.
  • The Senate’s proposal does not alter the Film and Entertainment Grant Fund. The House’s proposal increased the grant cap from $7 million to $20 million per film.
  • The Senate’s proposal allocates $400 million less to economic development reserves than the House’s proposal. However, the Senate set aside $250 million more than the House in the Medicaid Contingency Reserve and the Senate created two new reserves, the Education Reserve and the Child Care Reserve, receiving allotments of $254 million and $111 million, respectively.

Key Similarities between the House and Senate Budgets

  • Both proposals allocate an additional $248 million to the Opportunity Scholarship program. This amount is sufficient to provide school vouchers universally to all students who applied to the program. However, with the 2024-25 school year just around the corner, it is late in the game. Lamentably, it is likely that many students who have been on the waitlist will not have enough time to utilize the vouchers this upcoming school year by the time a final budget is passed.
  • Both proposals aim to alleviate the reported child care subsidy cliff by providing approximately $135 million in child care stabilization grants. This spring, child care subsidies became a politicized issue due to a substantial, yet always known, decrease in federal funding set to happen this summer. As noted above, however, the Senate plan would create a new “Child Care Reserve” fund, with an initial allotment of $111 million.
  • Both proposals recommend transferring $150 million from the Economic Development Project Reserve to the Randolph County Toyota Factory Megasite. This venture has already received a generous economic development incentives package potentially worth up to $79 million in tax reimbursements.
  • Both proposals copiously allocate funds to discretionary reserve accounts. Each chamber provided $700 million to the State Capital and Infrastructure Fund (SCIF) on top of the nearly $1.5 billion that is required by law. Furthermore, both groups of policymakers allotted $125 million to the Savings Reserve (Rainy Day Fund), $250 million to the contentious NCInnovation Fund, and $1 billion to the Clean Water and Drinking Water Reserve.
  • Neither proposal recommends any additions or changes to the set of current tax laws. Both proposals maintain the current plan to decrease the flat personal income tax rate to 3.99 percent by 2026 and eliminate the corporate income tax rate by 2030.