NC Budget and Tax Center

What we know—and don’t know—about how the Governor’s budget proposal would address pressing needs facing North Carolinians

It’s been a month of Sundays since North Carolinians have seen a decent state budget that makes smart, targeted investments in the programs that reduce poverty and build a more inclusive economy. Since 2008, the norm has been budget cuts and underinvestment due to the recession, very slow economic recovery, and lawmakers’ choice to enact three years of deep tax cuts.

That norm isn’t poised to change all that much based on the snippets of the Governor’s 2017 fiscal year budget proposal that he released last Friday. It appears that the Governor will in large part stay-the-course and propose a modest level of reinvestment in the state budget for education, public and mental health, safety, and a mix of bonuses and salary raises for teachers and state employees. His $22.3 billion proposal is about a 2.8 percent—or $608 million—increase over the current 2016 fiscal year budget.

At a time when huge unmet needs persist, staying the course means that many North Carolinians and communities could go another year without adequate public investments that help boost economic mobility and improve overall well-being. To what extent the Governor’s budget would address or ignore unmet needs remains unknown until he releases his entire budget plan later this week.  Here is what we do know.   

Three examples of how Governor’s budget plan boosts funding but still falls short of what’s needed:

  1. Pre-Kindergarten investments. His budget boosts Pre-K investments by $4 million, expanding the number of slots for at-risk four-year-olds by 800. Yet, this boost in slots falls far short of the number needed for the 7,200-plus children on the NC Pre-K waiting list. And even with the boost of 800 slots, there would still be more than 5,000 fewer children participating in the program compared to recession levels.
  2. Classroom materials and equipment. His budget boosts classroom resources by $10 million, which increases funding on a per-pupil basis to nearly $35 from $27.* But this level of investment falls short of the state board recommended per-pupil level of $59, meaning teachers are very likely to incur out-of-pocket expenses for such resources.
  3. Pay Bump for State Employees. His budget provides a one-time 3-percent bonus for state employees. These workers received a one-time bonus of $750 last year and $1,000 in FY15. In fact, FY2013 is the last time that these workers have received a salary increase (1.2 percent)—which is different from a bonus because it is recurring and is factored into their benefits, allowing them to save for a modest retirement. State employees’ pay has fallen by nearly 9 percent since 2010 when accounting for cost-of-living increases, according to the State Employees Association of North Carolina.

Here are 3 critical questions, among many others, about unmet needs that are unanswered at this point:

  1. Which teachers get a raise versus a bonus? His budget provides $426 million for teacher compensation—some of which goes to boost teacher pay, on average, by 5 percent and also to provide for a 3.5 percent bonus. It is unclear who will receive the salary increase and who will receive the one-time bonus (it could be a mix of the two, but that is an uncommon practice). Over the past two years, some teachers—such as novice teachers—received raises while others received only a one-time bonus. Will his budget continue this practice?
  2. How does the Governor plan to “make our state affordable to live, work and play,” as he stated as a budget goal? It is unclear what investments he will use to meet this stated goal. Key areas that rise to the top in terms of much-needed reinvestment are affordable housing, affordable childcare through the subsidy program, supports and services for vulnerable older adults, and expanded public transit.
  3. Will the Governor restore the worst of the cuts enacted to k-12 schools? Due to prioritizing tax cuts over reinvestment over the last few years, we know that he could never propose a budget that restores the worst of the cuts without returning to a progressive income tax and true tax reform. It remains to be seen if he will boost funding for school nurses to get in line with national standards, for textbooks so that children are not forced to learn from outdated materials, or for high-quality professional development opportunities for teachers who shape the minds of our future workforce.

*Assumes updated enrollment projections outlined in the NC DPI documents here.  

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