NC Budget and Tax Center

Governor Cooper’s budget compromise is a reasonable way forward

This morning, Governor Cooper released a proposal seeking a compromise between the budget his office released earlier this year and the conference budget he vetoed last month. The compromise keeps nearly every major component of the General Assembly’s conference bill but includes a clean Medicaid expansion and eliminates tax cuts to corporations, using that revenue to invest in teachers and schools.

Here are some of the major provisions:

Expand Medicaid without reservations

The Governor’s proposal would provide health care for hundreds of thousands of North Carolinians through Medicaid expansion. Cooper has noted that, unlike proposals in the NC House, this proposal is free of harmful provisions like work requirements and premiums that could restrict access for those who need care the most. 

Increase teacher pay and restore Master’s Pay

The compromise proposes an average 8.5 percent increase in teacher pay over two years. This falls between the Governor’s original recommendation of 9.1 percent and the General Assembly’s proposal of 3.8 percent. In addition to increasing base pay, the Governor’s compromise will restore Master’s Pay for teachers, a long-time bonus eliminated by the General Assembly in 2013.

State employees

The Governor’s compromise includes pay raises for state employees at a level significantly higher than the conference budget. Additionally, the compromise doubles the cost-of-living adjustment for state employee retirees to 2 percent. 

Funding for school infrastructure projects

The Governor proposes a compromise on how to pay for needed school construction and repairs across North Carolina, while also supporting state capital infrastructure needs on an ongoing basis. Legislative leaders in the Senate have resisted the Governor’s call for a bond and pushed instead for a pay-as-you-go model using General Fund revenues each year. Analysis of proposals made earlier this year show that the bond would be a larger net positive for education funding, and a bond would also allow schools to plan for large, multi-year projects, without worrying that future legislatures would cut the funds available. The Governor’s proposal today would reduce the overall size of the bond from $3.9 to $3.5 billion, keeping all of the capital projects currently funded in the Legislature’s budget. At the end of the day, the Governor’s proposal would devote $2 billion for school construction and repairs, more than the amount projected in the Legislature’s Conference Budget. 

Eliminates the franchise tax cut

The Governor rightly rejects the legislature’s attempt to give large corporations yet another tax cut that they don’t need. Since 2013, Republicans in the legislature have already slashed the corporate tax rate from 6.9 to 2.5 percent, and reducing the franchise tax would only shift more wealth to corporate coffers and their wealthy shareholders. In 2016, 75 percent of franchise tax payments came from companies with more than $20 million in net assets, so this move would tip the scales even more in favor of large and wealthy companies while further draining state revenues needed for vital public services.

Increase investment in Early Childhood Education 

In his compromise, the Governor proposes to increase investments for NC-Pre K rates for child care centers and eliminate one-time dollars for Smart Start program, North Carolina’s statewide initiative that helps working parents pay for quality child care. Such investments would help address existing unmet needs, including the approximately 33,098 eligible children on the waiting list, the presence of persistent child care deserts, and barriers to enhancing quality for early childhood workers. 

While this compromise contains many positive proposals, it is far from perfect. Without committing to raising revenue in a way that is equitable and sustainable, we cannot fully invest in the things that grow our economy and ensure that every North Carolinian can succeed. However, this is an important and reasonable first step in getting North Carolina back on the right track.

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