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NC Budget and Tax Center

Yesterday, legislative leadership unveiled a joint budget deal that puts the train on the wrong tracks by pursuing deeper tax cuts at the expense of strengthening public education, public health and safety, and the other building blocks of a strong economy. The deal includes another costly round of income tax cuts, additional tax breaks for selected industries, and an expansion in the sales tax base to include installation, repair, and maintenance services. The tax plan will lose $383.6 million over a two-year period, with the annual loss ballooning to $692.9 million in by the fifth year.

The state Senate is scheduled to give preliminary approval of the 500-plus page deal at 2pm today and final approval tomorrow, despite its 11:30pm release last evening. The House is expected to vote on the deal as early as Thursday, with it headed to the Governor’s desk after a final vote. The stop-gap spending measure that is currently in place expires Friday at midnight and would need to be extended for a fourth time if a final budget deal is not in place by then.

While most of the public budget debate this week will be on the spending side, examining how lawmakers pay for the budget deal is just as important. This is especially true due to this new round of costly tax cuts that come on top of the $1 billion annual tax cuts approved two years ago. Both tax plans drain resources that otherwise could have been used to build opportunity and replace the worst cuts enacted since the economic downturn. Read More

Commentary

As rumors continue to swirl on Jones Street about a deal reached Friday night on the FY2015-2017 budget (details to be released Monday), investments in North Carolina’s community colleges and workforce development programs remain an area of critical concern. These programs are essential for improving the skills and competitiveness of our labor force and ensuring that low-income workers have accesses to the training resources they need to achieve long-term upward mobility in their careers and lifetime earnings.

Job training and basic adult education are critical investments that give workers—especially those at the bottom of the income scale—the tools they need to enter higher-wage occupations. For many, these programs can mean the difference between a life trapped in poverty-wage jobs and a life with opportunities to climb the career ladder and enter the middle class. Career pathway programs in particular create avenues for workers to build occupation-specific skills consecutively over the course of a career, creating stepping stones for long-term advancement within that occupation.

As a result, these programs provide a powerful policy-level antidote to income inequality and wage stagnation. As the recent State of Working North Carolina report points out, wages remained largely flat in decade prior to Great Recession and then experienced significant decline in years since the recession. This is largely the result of policies that allowed corporate executives and investors to earn the lion’s share of increased productivity achieved by technological advancements.

Building skills through job training and workforce development is an important tool for returning these productivity gains to workers—both by strengthening the ability of individual workers to bargain for better wages and by improving the overall recognized skills of the state’s workforce, a key competitive advantage that will create more quality jobs in North Carolina.

Given this reality, all eyes are on the emerging final budget deal to see how legislators treat these important programs. Thus far in the budget debate, the Senate has cut more funding for these investments than the House in its proposal. In the House proposal passed earlier this summer, the Community College System received a $52 million cut compared to the $59 million cut served up by the Senate. Similarly, the House provides $15 in new money for instructional equipment at the community colleges, while the Senate provides just $5 million. And while the House provides $1.9 million for job training in economically struggling areas, the Senate does not, instead opting to invest $1.5 million to put community college “coaches” in high schools with the goal of helping high school students transition into vocational training programs upon graduation.

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NC Budget and Tax Center

As we edge closer to the 16th anniversary of Hurricane Floyd, it is important to review the vital role that state emergency funds play when disaster strikes. Lawmakers in North Carolina tapped into state “rainy day funds” to help cope with the storm’s aftermath: the cost of providing assistance to families in need and rebuilding destroyed communities. Unfortunately, the North Carolina Senate is seeking to weaken access to our rainy day fund, even in times of true emergency.

Floyd, which hit about a week and a half after Tropical Storm Dennis, caused some Tar Heel families to lose loved ones, jobs, and all of their possessions in drowned cities. The storm caused $6 billion in damage and destroyed entire communities, including homes, farms, and businesses. Response efforts also put stress on the state budget, causing mid-year budget freezes and cuts totaling $504 million.

There is no doubt that the state’s response would have been far weaker in the absence of state and federal emergency funds. Then-Governor Hunt called a special session and North Carolina lawmakers approved nearly $286 million to be pulled out of the rainy day fund, which supplemented $838 million in federal emergency funds to support the response efforts. Read More

News

Having worked through the Labor Day weekend, lawmakers are indicating that budget talks have been productive and that we could see a budget agreement hammered out—2.5 months late—between House and Senate leaders by week’s end.

It’s been a very long seven (?) months since the start of this year’s legislative session, so in case you’ve gotten so weary you’ve lost track of what’s at stake for public education, here are seven big issues.

Teacher assistants. Yes, once again, TA jobs are on the line and serve as one of the biggest sticking points between the House and the Senate. The House wants to preserve their jobs (of which there are already far fewer than pre-recession levels), while the Senate wants to do away with more than 8,500 TA jobs over the next two years in favor of reducing classroom sizes.

Educators say wait: not enough space or time at this point to reduce class sizes and, by the way, who will drive the buses, administer the medicines, and keep kids safe—not to mention who will make sure third graders are reading proficient?

Driver’s education. The Senate wants to defund driver’s ed and make parents pay $350+ for their kids to learn how to drive. Sen. Dan Soucek (R-Boone) says kids just need to sit behind the wheel for a while—instruction isn’t necessary. The House wants to keep the program going, which some say has markedly improved thanks to recent efforts to increase oversight and coordination between the DMV and driver’s ed programs.

Meanwhile, thanks to funding uncertainty, some school districts have already quit providing driver’s ed. And the person at DPI who some say is responsible for making the program better? He got laid off.

Teacher pay. Lawmakers have said they’ll fund the step increases that were foreshadowed in last year’s set of pay raises, which is welcome news to teachers who thought they would have seen those pay bumps earlier this summer. Beginning teachers will see their base pay rise again to $35,000, a promise that was made last year. Everyone else? $750 Christmastime bonuses, which isn’t really a salary increase, but, well—a bonus.

All of these promises were made verbally, though, so let’s see how things actually pan out in the budget documents.

Reminder: NC ranks 42nd in teacher pay, 47th in per pupil spending, and new teachers have no tenure rights. And next year, new teachers may not be able to look forward to…

Health retirement benefits. Senate lawmakers want to end a much-treasured benefit that comes with working for the state government for many years at comparatively lower wages than what private industry pays: state-paid health retirement benefits. Teachers and state employees hired after January 1 of next year would not be eligible for free health insurance upon retirement. House and Senate leaders have been pretty quiet on the budget provision, and we’ll see if it makes it into the final budget.

A-F school grades. The Senate wants to require local school districts to come up with improvement plans for schools that receive Ds or Fs under the state’s new school grading system—but they offer no funds in order to help local schools implement the plans. (See why this is especially important at the bottom of this post.)

“We believe money is not the answer,” said Sen. Brown, explaining instead that districts must identify other ways to deal with factors that contribute to poor performance at failing schools.

Neither Senate nor House budget proposals also do not include language that would change how schools receive A-F school grades, in spite of interest expressed on both sides of the aisle for the school grading system to be amended so that the grades better indicate how well schools are able to help their students improve academically over time.

If the A-F grading system remains as is, by and large high poverty-serving schools with fewer resources would continue to receive failing grades while schools that serve higher income populations would receive better marks—a trend we just saw continue for the second year in a row.

School vouchers. The House and Senate want to expand the Opportunity Scholarships program by $6.8 million, bringing the total cost of the program to $17.6 million each year of the biennium. The vouchers allow low-income students to attend unaccountable private schools with taxpayer dollars.

Now that the state Supreme Court has ruled the program constitutional, we’ll see if legislators move to expand the program even further.

Textbooks. The Senate proposes $58 million over two years for textbooks and digital resources—less than half of what the House has proposed. Funds for textbooks have been slashed to the bone over the past five years and House and Senate proposals still do not restore textbook funds to their 2011 levels.

Meanwhile…

Bonus issue: Achievement School District. It’s not in the budget, but hey, who knows — anything can end up in the budget.

The ASD is an idea being shepherded by Rep. Rob Bryan behind closed doors. The proposal allows charter school operators to take over low-performing schools, fire the teachers and staff, and catapult students’ academic performance into the top 25 percent within a few years. A wealthy businessman from Oregon is financing lobbying efforts associated with the possible legislation.

Word on the street is that Bryan’s bill is being met with pushback and key Republican lawmakers haven’t been converted on the idea. Stay tuned to see if the ASD proposal gets inserted into a gutted Senate bill (SB 95) and heard in committee, or if it makes it into budget documents.

News

*This post has been updated to reflect comments from Senate budget writer Harry Brown indicating that all state employees AND teachers will receive $750 bonuses during the 2015-16 fiscal year.

The News & Observer is reporting that House and Senate leaders have reached an agreement on how much to pay teachers and state employees for this fiscal year, nearly two months after their June 30 deadline for making these decisions.

All state employees, including teachers, will receive $750 bonuses toward the end of 2015, said Sen. Harry Brown (R-Onslow). That amounts to $62.50 per month, before taxes.

Making good on last year’s promise, beginning teachers will also see their base pay rise to $35,000 per year, up from $33,000 that was enacted last year.

Experienced teachers will also receive step increases, presumably as laid out in the state’s streamlined salary schedule, which lawmakers enacted last year—although budget documents detailing the step increases were not made available Wednesday. (See here for the 2014-15 salary schedule.)

It’s unclear whether teachers who are scheduled for step increases as well as beginning teachers will be paid retroactively beginning with the July 1 start of the fiscal year.

A spokeswoman for House Speaker Tim Moore said their priority will be to focus on “shoring up funds so we can give meaningful raises” next year, according to the N&O.

For a teacher with 15 years of experience and a bachelor’s degree, receiving a step increase will mean jumping up from a base salary of $40,000 to $43,500 (excluding local supplements). Step increases for teachers are scheduled every five years, stopping at year 25 and capping base salary at $50,000.

WRAL reports that budget negotiators are still discussing how much of a pay increase to give state retirees. And there’s no resolution yet about teacher assistants—the Senate wants to slash 8,500+ TA jobs in exchange for reducing classroom size, while the House wants to preserve those positions.

House Speaker Tim Moore announced Wednesday that the General Assembly will pass a third continuing resolution tomorrow. The measure, which will keep state government operations running as lawmakers finalize a budget, will run through September 18—although they hope to reach a final agreement sooner, at which time the above mentioned raises & bonuses will be set in law.