By Natalie Anderson
natalie.anderson@salisburypost.com

SALISBURY — As the N.C. House and Senate negotiate the 2021-23 state budget, Rowan County’s lawmakers praise both proposals for increasing spending, granting raises, cutting corporate and personal income tax rates and replenishing the “rainy day” fund.

A new budget was not finalized in North Carolina for the 2019-20 and 2020-21 fiscal years, with Gov. Roy Cooper, a Democrat, vetoing the legislature’s approved budget in 2020 due to the exclusion of Medicaid expansion by the Republican-led General Assembly. As a result, the state has primarily operated on the spending amounts outlined in the 2018-19 fiscal year budget.

This year, the state has millions more dollars coming from the federal government and a surplus of millions from tax revenue. In June, senators passed a budget that allocates $25.7 billion from the general fund in 2021-22 and $26.6 billion for 2022-23. The House in August proposed nearly $8 million more in spending.

The budget is now in conference committees to reach a compromise before being delivered to Cooper for a signature. In the event of a veto, both chambers would need a few Democrats to join them in a veto override. In North Carolina, a three-fifths majority is needed in each chamber to override a gubernatorial veto, which amounts to 30 votes in the Senate and 72 votes in the House.

Included in both the House and Senate budgets are raises and bonuses for state employees and teachers. The House is proposing an average of 4% raises over the next two years for teachers and 5% over two years for state employees. Additionally, the House proposal provides master’s degree pay bonuses and eight weeks of paid parental leave for new mothers. State government retirees would receive 2% bonuses in each year of the House budget.

The Senate’s proposed budget includes 3% raises over two years and bonuses for state employees and teachers, but there’s no cost-of-living increases or bonuses for retirees.

The House budget proposes transferring an additional $1.7 billion over the biennium to the state’s reserves, or the “rainy day” fund. Doing so would bring the fund’s balance to nearly $3 billion. Meanwhile, the Senate proposes $5 billion in reserves. The House budget also invests much more in a state capital and infrastructure fund — $5.8 billion over the next two years compared to the Senate’s proposal of a little more than $4 billion.

Both budget proposals exclude Medicaid expansion for more than a half-million North Carolinians despite a federal match.

Medicaid expansion has been a sticking point for Cooper. In his budget proposal, Cooper called for $5 billion to be invested for the expansion of Medicaid, with American Rescue Plan funds providing an additional $1.7 billion to support the expansion without the state covering any costs for up to six years.

Instead, the House proposes increasing the number of waivers for various health services, primarily impacting those awaiting Medicaid assistance in the state’s community alternatives program for disabled adults, NC Innovations and parents of foster children who are making efforts to comply with court-order reunification. Additionally, the budget includes wage increases for health care workers to a minimum of $15 per hour.

Rep. Wayne Sasser, a pharmacist and Republican representing parts of Rowan, Stanly and Cabarrus counties, said providing health coverage to the hundreds of thousands without it is an ongoing challenge that “won’t be solved in one year’s budget.” He added that it requires difficult decisions, especially if changes to the system results in kicking some patients off the Medicaid system.

Sasser, who chairs the House Health Committee, said the state’s reluctance to accept millions from the federal government is because there’s no guarantee it will continue funding for the long term. Sasser says financial need may not be the best metric. Instead, Sasser said, those with chronic conditions — or those more likely to develop chronic conditions based on genetics — should be more of a priority.

“We’re going to have to look at redoing that system,” Sasser said. “We want to be fiscally responsible but hopefully compassionate in working toward these problems.”

Local inclusions in state budget

Rep. Harry Warren, a Republican representing Rowan County, said he has mostly attended weekly skeletal sessions to continue lobbying for funding he and other Rowan County lawmakers have requested for constituents back home. At this time, the budget includes $10.3 million for the North Carolina Transportation Museum to cover the costs of renovating the Powerhouse facility, constructing a garage to house historic rail cars and lost revenue from the pandemic. The budget also includes $4.7 million for a new Partners in Learning facility, $2.6 million for the ApSeed program extension into five counties, $1.5 million for Catawba College, $200,000 for N.C. Dental Society’s Missions of Mercy needs-based clinics, $200,000 for Bell Tower Green Park and $15,000 for an additional position in Rowan County District Attorney’s Office.

The largest request is for more than $23 million to go to the town of East Spencer to rehabilitate and extend its water and sewer services. The town is currently on a watchlist with the Local Government Commission due to financial issues with its water/sewer fund.

“That’s enough to completely replace their water system and extend it,” Warren said. “It’ll be a Godsend.”

Also included in the budget is a provision related to legislation Sen. Carl Ford supported that reins in the governor’s powers during a state of emergency.

Ford, a Republican representing Rowan and Stanly counties, has worked with Sasser to secure approximately $28 million for a project at Stanly County airport and $12.6 million for Rowan-Cabarrus Community College. Additionally, Ford said most volunteer fire departments should expect to receive at least $10,000 and likely more. He’s working to ensure $250,000 is allocated to Rowan Helping Ministries and $10,000 for the veterans park in China Grove.

‘Pick the budget apart’

Ford is currently involved in the conference committees as a member of the Senate’s Appropriations/Base Budget committee and chair of Appropriations on General Government and Information Technology. He said lawmakers next week will begin to “pick the budget apart” and concentrate on the differences. He anticipates being able to deliver the budget to Cooper by mid-September, and is optimistic in the event of a potential veto override since a number of Democrats joined the Senate in approving the budget.

He added that overall, it’s a budget taxpayers can be happy with “because we’re spending money properly and giving tax cuts because there is so much money.”

While both the House and Senate versions include cuts to increases to the state’s individual income tax rates and increases to the standard deduction, the House’s version calls for a reduction from 5.25% to 4.99% and the Senate reduces it to 3.99%. As for the corporate income tax rate, the House proposes reducing it from 2.5% to 2.25% in the first year, and then 1.99% in the second year. The Senate, however, phases out the rate entirely by 2028.

Additionally, the budget raises the standard deduction for personal income tax to $25,500, meaning North Carolinians wouldn’t pay that rate unless their yearly earnings meet that threshold.

Ford said he sees the tax rate reductions as a win for all North Carolinians.

“Every time … we’ve cut taxes — be it personal, corporate or doing away from the franchise tax — more and more businesses and more and more jobs come to our state,” Ford said. “When Democrats say we’re giving tax cuts to the rich, yes, we are. But we’re also giving them to the poor and everyone else.”

Critics of such tax cuts, such as the N.C. Justice Center, say they result in a shifted tax burden to low-income taxpayers, and that “investing in K-12 education and colleges, infrastructure projects across the state and more targeted support for Main Street and neighborhood revitalization initiatives presents a much better economic development strategy that will help drive the state forward.” Democrats have expressed concern it will reduce the state’s revenue in future years, posing a challenge during economic recessions.

The budget proposals also include tax forgiveness for businesses that received loans through the Paycheck Protection Program in addition to those receiving unemployment benefits throughout the pandemic.

In a tweet on Aug. 10, Cooper said both budget proposals included some positives, but criticized both for not expanding Medicaid, investing significantly more into education and quality child care and including sweeping corporate tax breaks. But he added that he’s looking forward to negotiating a compromise.

Warren said the budget increases spending overall while providing opportunities to replenish reserves lost to both natural disasters and the pandemic.

“We’ve got too much money now for us not to get a budget passed,” Sasser said. “There’s some good stuff in here for everybody. We all fail if we don’t pass this budget.”

Rep. Julia Howard, a Republican representing Rowan and Davie County, could not be reached for comment.

Contact reporter Natalie Anderson at 704-797-4246.