by Sarah Curry
Director of Fiscal Policy Studies
The Governor released his recommended $20.99 billion budget on the first day of session, and exactly two weeks later the Senate released their $21.16 billion budget. Normally the budget process is a long and drawn out event that takes up most of the summer, yet these legislators seem to be keeping their promise of having a truly short session.
Introduced to the public on Wednesday night, the Senate opted to bypass the traditional sub-committee meetings that focus on individual agencies and instead sent the budget to the entire appropriations committee for debate the following day. Friday, the Senate took up the budget legislation and held floor debates late into the night. The last vote on the budget was taken early Saturday morning, and the bill was subsequently sent to the House. There were a total of 21 amendments submitted during the Senate floor debates, and only two failed. One Democrat crossed party lines to vote for the budget. The House received the budget yesterday and has begun the subcommittee process of debating and making their own changes to the budget.
The largest increase from last fiscal year was in Health and Human Services, where the budget increased by more than $270 million. The majority of that increase was seen in the Medicaid budget, which received an additional $200 million under the Senate’s plan. The next largest increase was to the Education budget, where total dollars increased by almost $300 million compared with last fiscal year, a 2.6% increase. The majority of that increase is focused on K-12 Public Education, where teachers are to receive an average 11.2% pay increase equating to a $5,800 permanent pay raise.
Other areas of major change were the shift of the State Bureau of Investigation and the State Crime Lab from the Justice Department to the Department of Public Safety. Twenty-five new positions are created to oversee the cleanup and management of the coal ash spill. Both capital improvements and statewide reserves took approximately 17% cuts to help fund the large teacher pay increase. The Senate’s total budget is 2.6% larger than last fiscal year.
Senators made teacher pay raises their top priority for this budget. Where many of those in public policy agree that North Carolina’s teachers should have a pay increase, there is concern over a pay increase as high as the Senate has proposed and questions about where the money will come from to fund such a large increase. The last time teachers had such a large pay increase was in 1984-85, when both teachers and state employees received a 10% salary increase. A better approach would be a plan to give a smaller across-the-board raise now and set up a system where teachers can earn more based upon performance, working with at-risk students, or teaching challenging subjects. If the state gives teachers an 11% pay increase this year, there is a good chance there won’t be funds available for a pay increase in the future.
The reason for my concern over such a large pay increase is because of where the money was found to pay for it. A majority of the money comes from a shifting of revenue within the budget and a higher reliance on federal funds. The federal government offers grants or other funding options to states for jointly funded or government-mandated welfare programs, most of those being located in Health and Human Services. North Carolina budget writers have chosen to use all available federal funds to replace state funds that were previously being used for those same services. This allows state revenue that was originally allocated for a purpose in HHS to be redirected to other budget areas.
Other money used for teacher pay is coming from the statewide reserves and capital improvement accounts. What happens if a large hurricane hits North Carolina this year? What happens if another national recession hits the US and the unemployment rate rises again? What happens if the federal government shuts down and the state doesn’t get the federal money it was promised? These are all plausible events in the near future that would require the use of reserve funds. It would be a shame to give teachers a high pay increase this year and then have an unforeseen event occur leaving a tax increase as the only way to maintain the state’s budget.
The Senate’s budget was much different from the Governor’s budget, and now we will wait and see what the House releases. One can hope that the House will take the best options from both plans and come out with a budget that maintains the reserve account as well as giving teachers a pay increase.
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