These could be a few of the biggest partisan fights ahead in NC’s budget summer

It will be a summer of threes.

North Carolina state government’s summer of 2021 will be dominated by the budget, as it was in 2019. The same three key players are still in power: Gov. Roy Cooper, Senate leader Phil Berger and House Speaker Tim Moore. But despite the leaders not changing, they’ve all said they hope the outcomes will — and the state will actually be able to pass a budget this year.

There are three other important factors this summer: the Senate budget, the House budget and the conference budget, which is the final legislative budget that is sent to Cooper’s desk. We have just finished round one: the Senate budget.

The Senate passed its budget on Friday with a veto-proof majority. Four Democrats voted with Republicans.

At stake are raises for tens of thousands of state employees, billions of dollars in coronavirus relief and potentially a significant tax cut.

Will the budget become law? Or be vetoed again? If so, will there be a veto override?

Cooper is a Democrat in his second term. Berger and Moore are Republican, as are the majorities in both chambers of the General Assembly. They’ve all said to the press that they want to work together enough that a state budget becomes law.

But there are some big differences in the Senate budget versus Cooper’s budget proposal.

One of the biggest so far is the Senate’s plan to give teachers a combined 3% raise over the next two years — which Cooper says they need to more than triple, to a 10% raise.

The central issue of the 2019 budget fight is off the table for this one: Medicaid expansion. That leaves taxes and raises for teachers and other state employees as key issues.

Cooper’s latest comment on the Senate budget came via a tweet on Wednesday evening: “The Senate budget mortgages the future health and education of our people to the corporations and wealthiest among us ($13B tax cut). Just awful. A measly 1.5% raise for teachers next year after no raise last year? Thank goodness the budget process has a long way to go,” Cooper wrote.

In total, Cooper has suggested spending around $1.7 billion more than the Senate, $27.4 billion to $25.7 billion.

North Carolina doesn’t allow deficit spending, though, so why such a difference in numbers?

Largely, the answer is their disagreement over taxes.

While Cooper’s budget did not call for any tax increases, Senate Republicans want to go a step further and continue cutting taxes, as they have done bit by bit since taking control of the legislature a decade ago.

Instead of cutting taxes, Cooper would spend a full $1 billion more on education than the Senate has proposed, $16.1 billion instead of $15.1 billion. Mostly, that’s to pay for the higher raises he is pushing. The other $700 million in extra spending supported by Cooper can be found in plans for public safety, public health and more.

Cooper vs. Senate on raises

The Senate budget has a 3% average raise over the next two years for most teachers and state employees. That breaks down to 1.5% each of the next two years. It is also inclusive of step increases, or changes that come with longevity, so some teachers won’t see that much.

The Senate budget includes a 7% average raise for corrections officers, who would also get a new salary schedule based on experience.

Cooper’s budget proposal calls for a range of raises.

He wants an average pay raise of 10% over two years for teachers and school administrators. He also wants 7.5% raises for school districts’ central office staff and noncertified public school employees over two years.

Republicans already raised the minimum wage for most state jobs to $15 an hour, in 2018, but they left out certain K-12 and community college employees. Cooper proposed a $15-an-hour minimum wage for noncertified public school employees like teaching assistants, custodians, cafeteria workers and bus drivers, but the Senate proposed $13.

For bonuses, Cooper wants $2,000 for teachers, principals, noncertified public school employees, university employees and community college employees this year and another $1,000 bonus next year. He also wants a $1,000 bonus each of the next two years for other state employees.

Other 7.5% raises over two years are in the governor’s proposal for UNC and community college employees. All other state employees would get a 5% raise over two years.

The Senate budget does not include a cost-of-living adjustment for retired state employees. Cooper wants to give them a recurring 2% increase and an additional 2% raise each of the next two years.

The Senate’s budget includes bonuses somewhat similar to Cooper’s. State employees who earn less than $75,000 a year would get $1,500, or $1,000 if they make more than that.

The Senate also wants bonuses of $1,500 for law enforcement, correctional officers and staff and employees of 24-hour residential and treatment facilities.

And additional $300 bonuses would go to teachers plus $1,800 for principals.

Taxes

Sen. Brent Jackson, the Senate’s lead budget writer and an Autryville Republican, said Monday that the state’s economic status lets lawmakers “cut taxes on folks who need more money in their pockets right now.”

The Senate budget cuts the personal income tax rate from 5.25% to 3.99% by 2026. The standard deduction, or tax bracket for paying zero taxes, would be raised to $25,500. The child tax deduction would be increased to $500 for each child. The Senate budget also starts phasing out the corporate income tax rate to zero.

Cooper’s budget didn’t contain any tax hikes, nor any across-the-board tax cuts, but he did have a targeted tax cut: He wants to reinstate the Earned Income Tax Credit, which helps low- and middle-income earners get smaller tax bills, or possibly even larger tax refunds. Democrats created the North Carolina version of it in 2007 but Republicans got rid of it in 2013, just weeks after Republican Gov. Pat McCrory replaced Democratic Gov. Bev Perdue. GOP lawmakers have resisted calls from Democrats in recent years to put it back into state law.

The Senate tax plan would phase in over five years and cost the state a combined $13.9 billion in that period, for an average cost of $2.8 billion per year. Cooper’s plan returns less money to people and businesses. He estimated his EITC plan that would cost the state $575 million over the next two years combined.

Comparing state agencies

Despite their total $1 billion difference on education spending in general, both Cooper and the Senate agree on funding the UNC System at around $3.5 billion.

The differences come in the form of Cooper proposing $11.1 billion for K-12 ($750 million more than the Senate) and $1.4 billion for community colleges ($200 million more than the Senate).

On public safety, Cooper also proposed spending more than the Senate, by a smaller margin compared to their education budgets — about $43 million.

The main difference is that Cooper wants to create more new jobs in various public safety agencies, which include prisons, the courts, the Highway Patrol and more. Cooper proposed the full-time equivalent of 354 new public safety jobs, compared to 135 in the Senate plan.

On the Department of Health and Human Services — the biggest non-education part of state government — Cooper again proposes spending slightly more, $5.9 billion instead of $5.8 billion. On public health efforts in particular, as the state comes out of a pandemic, both budgets propose raising the state’s public health spending from its current level of around $158 million. The Senate proposes bringing it up to $161 million and Cooper would add another $10 million on top of that.

Farms and agriculture are one area where the Senate would spend more than Cooper. The Department of Agriculture’s current state funding would grow from $134 million to $189 million under the Senate plan, compared to $153 million under Cooper’s plan.

‘Power grab’

Budgets often become a home for policy that by itself wouldn’t pass or that would be opposed by the governor. This time, the Senate put in a provision to change the state law regarding the Emergency Management Act, which would limit the governor’s power in issuing and extending certain executive orders.

That Republicans want to limit Cooper’s power isn’t a surprise — there have been a series of bills attempting to change how and when he issues executive orders. But putting it in the budget may or may not be a factor on whether Cooper signs or vetoes it.

The budget also continues several longstanding political battles between various Republican and Democratic state officials.

The budget for the N.C. Department of Justice, which is run by Democratic Attorney General Josh Stein, is slated to shrink by about $3 million over the next two years. Stein’s office said that’s not new, but rather a continuation of a $10 million budget cut lawmakers gave his office in 2017, when he was sworn in to his first term.

But the bigger change is a massive policy shift, unrelated to money, that Republicans have proposed passing via the budget instead of a standalone bill. It would limit Stein’s ability to involve North Carolina in political lawsuits, potentially making North Carolina the only state in the nation with such a rule — following a failed 2019 attempt by GOP lawmakers in Iowa to do the same to their Democratic attorney general.

Republican attorneys general around the country involved their states in lawsuits against the Obama administration and for the Trump administration, and Stein and other Democrats have done the opposite. In two recent decisions from the Supreme Court that made national news, Stein was on the winning side in a major Affordable Care Act lawsuit and on the losing side in a case about a school district that punished a student for cursing on Snapchat. He also previously joined in lawsuits opposing things like the Trump administration’s attempt to ban immigration from several Muslim-majority countries.

But the Senate budget includes new legal language saying the attorney general can’t involve the state in any lawsuit that might not bring back money for the state, unless he gets the permission of the elected officials on the Council of State. And another law would ban any lawyer in his office from settling lawsuits over state law without permission from the state legislature. Both the legislature and Council of State have Republican majorities.

“We’re still reviewing these but they appear to violate the Constitution,” said Stein spokeswoman Nazneen Ahmed.

The restriction on Stein’s ability to engage in lawsuit settlements without GOP lawmakers signing off are inspired by a 2020 election lawsuit. The N.C. State Board of Elections, which like other state agencies was represented by Stein’s office, settled that lawsuit to extend the deadline for mail-in voting last year.

The budget also targeted the elections board, originally seeking to force the board to cut a third of its employees including most of its IT staff.

It was not a cost-saving measure. Instead the budget contained language saying the elections board was not allowed to use federal funding from a program called the Help America Vote Act, or HAVA, which had to be used on issues like cybersecurity. The budget would have forced the elections board to lay off all 30 people whose salaries were paid for by that federal funding, which board spokesman Pat Gannon told The News & Observer “would completely destroy our security roadmap.”

In an interview Wednesday, Republican Sen. Ralph Hise — a top budget writer and top elections law writer — dismissed the concerns. He said if the elections board was worried about cybersecurity after being told not to use the federal funds, then its leaders could always cut other parts of their budget to move money around.

But on Thursday during debate on the House floor, Hise did an about-face and supported Democrats’ request to let the elections board continue using that federal funding.

The amendment, which was from Democratic Sen. Ben Clark, passed. Clark went on to be one of four Democrats who voted in favor of the budget, giving the Senate a supermajority that would be needed for a veto override.

The budget still takes other swipes at the elections board, though, like removing its ability to investigate claims of election fraud. Instead those powers and staff would be moved to the State Bureau of Investigation.

Gannon said that will result in fewer investigations into election allegations, since the SBI has much more to do than just investigate those claims. But Hise said he thinks the board has gotten too political, citing that lawsuit settlement.

“As long as the board of elections continues to present itself as a partisan organization ... there will be partisan conflicts,” he said.

Step two of the budget

Lawmakers on Thursday kept referring to the Senate budget as “the first step” in the budget process. The House, which will present its budget likely in mid-July, is step two, then the conference budget, coming in August, is step three.

However senators from both parties briefly referenced a step four during the Senate debate. That fourth step would only be needed if Cooper vetoes the budget.