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Proposed NC Senate budget provides salary increases for state workers, tax cuts, wage increase for many

The budget tax cuts would reduce the personal income tax rate to 3.99 percent over five years...
The budget tax cuts would reduce the personal income tax rate to 3.99 percent over five years and increases the zero-tax bracket to $25,500 for married filers.(WNCN)
Updated: Jun. 21, 2021 at 3:38 PM EDT
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RALEIGH, N.C. (WNCN) — The North Carolina Senate proposed 2021-23 budget sets in motion a 10-year, $12 billion cash infrastructure and capital plan which also includes a sweeping tax cut and salary increases for most state employees, including teachers and community college employees.

The budget tax cuts would reduce the personal income tax rate to 3.99 percent over five years and increases the zero-tax bracket to $25,500 for married filers.

“A decade of responsible budgets and growth-oriented tax policy has North Carolina in the best fiscal shape in a generation. This surplus came largely out of the pockets of North Carolina citizens and they deserve to see some of it returned to them,” said Senate Leader Phil Berger (R-Rockingham).

In addition to tax cuts and infrastructure, the proposal sets a $13 minimum wage for non-certified school employees and community college employees.

“Our budget helps North Carolinians by reducing taxes for all citizens and supporting critical infrastructure improvements across the state,” said Sen. Brent Jackson (R-Sampson).

“A decade of smart governance means we’re now in a position to use cash, not debt, to improve North Carolina’s infrastructure — while simultaneously cutting taxes,” Sen. Kathy Harrington (R-Gaston) said.

The proposed budget dedicates $4.3 billion to the State Capital and Infrastructure Fund (SCIF) over the next two years, $3 billion of which is available for projects ($1.3 billion is obligated to pay for previous debt).

It also requires annual cash contributions to capital and infrastructure projects totaling $16.6 billion over 10 years, of which $12 billion can be used for infrastructure projects. (The remaining $4.6 billion will be put toward paying previous debts.)

Increases in the child tax deduction by $500 per child are also included in the Senate proposal.

A three percent raise over two years for most state employees, including teachers and UNC/community college employees, would also be included.

“Improving infrastructure and cutting taxes will continue to attract families and businesses to North Carolina,” said Sen. Ralph Hise (R-Mitchell).

The budget would also create a new “experience-based salary schedule for correctional officers, which results in an average seven percent raise.

Full details of the proposal are below.

Topline

  • The total proposed General Fund allocation is $25.7 billion in 2021-22 and $26.6 billion in 2022-23.
  • The total allocation of State Fiscal Recovery funds is $5.1 billion across the biennium.
  • The total State Capital Infrastructure Fund allocation is $4.3 billion over two years.
  • It replenishes the state’s reserves, including the Rainy Day Fund.

Capital/Infrastructure

  • Dedicates $4.3 billion to the State Capital and Infrastructure Fund (SCIF) over the next two years, $3 billion of which is available for projects ($1.3 billion is obligated to pay for previous debt).
  • Requires annual cash contributions to capital and infrastructure projects totaling $16.6 billion over 10 years, of which $12 billion can be used for infrastructure projects. (The remaining $4.6 billion will be put toward paying previous debts.)
  • Allocates $2.8 billion over the biennium for Strategic Transportation Investments.
  • Increases the General Maintenance Reserve by $250 million over the biennium to respond to storms and conduct routine maintenance. The reserve will be funded at a total of $1.4 billion over the biennium.
  • Invests more than $1.2 billion over the biennium for road resurfacing projects.
  • Provides more than $560 million over the biennium for the Bridge Program and over $140 million for bridge preservation.
  • Fully funds the UNC System’s repairs and renovations request over the next four years, with $500 million allocated this biennium.
  • Provides $400 million to state agencies for repairs and major renovations.
  • Funds stream debris removal at $138 million over the biennium.
  • Funds construction of the Brody School of Medicine with $76 million. The total authorized cost of the project is $215 million.
  • Provides $55 million for NC State University’s new STEM building. The total authorized cost is $80 million.
  • Funds the UNC-Pembroke Health Sciences Center with $32 million. The total authorized cost of the project is $91 million.
  • Provides $64 million over the biennium to Elizabeth City State University for a residence hall, sky bridge, dining facility, and flight school. An additional $20 million to complete the flight school is also authorized.
  • Uses $430 million in cash to pay down state debt: $400 million for the remaining Connect NC bonds left to be issued, and $30 million for the remaining balance owed to the federal government for the Falls Lake Recreation Area. This will eliminate future interest payments.

Tax Cuts

  • Increases zero-tax bracket to $25,500.
  • Cuts the personal income tax rate from 5.25% to 3.99% by 2026, starting with 4.99% in 2022.
  • Increases the child tax deduction by $500 per child.
  • Otherwise mirrors the tax plan that previously passed the Senate.
  • A family of four earning the median household income would see a 37% income tax cut.

Salaries and Benefits

  • 3% raises over the biennium for most state employees, including teachers and UNC/community college employees.
  • Creates a new experience-based salary schedule for correctional officers, which results in an average 7% raise.
  • Bonuses for all state employees using federal funds: $1,500 for state employees who make less than $75,000, and $1,000 for state employees who make more than $75,000. Law enforcement, correctional officers and staff, and 24-hour residential or treatment facility employees receive $1,500.
  • Gives an additional across-the-board teacher bonus of $300 from repurposed state funds previously appropriated for performance bonuses that cannot be paid due to COVID-19 related data issues.
  • Gives an across-the-board additional principal bonus of $1,800 previously appropriated for performance bonuses that cannot be paid due to COVID-19 related issues.
  • Provides a $13 minimum wage for non-certified employees in local public schools and community colleges.
  • Fully funds retirement and state health plan, and appropriates $300 million to the State Treasurer to pay down unfunded retiree benefits.
  • Uses $100 million of federal funds to provide a $1,500 bonus for eligible direct care workers who have worked on the front lines throughout the COVID-19 pandemic. An additional $17.5 million will be used to increase direct care worker wages.

K-12 Education

  • $10.4 billion in 2021-22 and $10.5 billion in 2022-23, which represents an additional half-billion dollars in state dollars to public school education.
  • $40.9 million each year for school psychologists, which includes an additional $9.8 million to ensure that every school district has at least one psychologist.
  • $459 million transfer over the biennium from the N.C. Education Lottery to the Needs-Based Public School Capital Building Fund, and $200 million to the Public School Capital Fund. Over the course of the next 7 years, a projected $2.4 billion will be spent on school capital.
  • $6 million for science of reading/Excellent Public Schools Act implementation.
  • Continues funding to provide for a lower teacher-to-student ratio in districts with more disadvantaged students.
  • Creates a $22 million reserve fund to cover increased costs for schools in the event DPI under-projects student enrollment growth.
  • Appropriates the remaining $338 million in federal education relief funds, for a total of $3.6 billion, to address statewide education needs related to the pandemic.

UNC System

  • Fully funds UNC building reserve request of $54.9 million over the biennium.
  • Fully funds NC Promise tuition program at $137 million over the biennium.
  • Consolidates two scholarship programs for students with special needs into the North Carolina Personal Education Student Account for Children with Disabilities Program, and fully funds the program by adding $15.6 million per year.
  • Increases the University of North Carolina Need-Based Financial Aid Program by 5%.
  • Funds NC A&T doctoral programs with $11 million over the biennium.
  • Fully funds the NC School of Science and Math Morganton campus so it can open in 2022.
  • Expands eligibility and increases funding for the Opportunity Scholarship program by $76.8 million.
  • Provides $15 million for the North Carolina Policy Collaboratory’s research on PFAS as part of the 2021 Water Safety Act.

Community Colleges

  • Funds community college system at $1.26 billion in 2021-22 and $1.32 billion in 2022-23.
  • Allocates $76 million in federal funds to stabilize community college budgets due to enrollment declines.
  • Provides $15 million in federal funds to improve broadband access for 25 rural community colleges.
  • Increases the Community College Need-Based Assistance Program by 7.5%.
  • Provides $5.2 million over the biennium to assist community colleges in starting programs in high-demand career fields that require significant start-up funds.
  • Establishes the North Carolina Community College Short-Term Workforce Development Grant Program and allocates $3 million in each year of the biennium to provide up to $750 to students pursuing workforce credentials.
  • Adds $1.5 million per year for childcare grant funding, which aids community college students with childcare expenses.

Information Technology

  • Allocates nearly $700 million in federal funding for rural broadband, plus $30 million over the biennium using state funds, to the NC GREAT program.
  • Allocates $10 million for cybersecurity risk management.
  • Provides $600,000 for Department of Employment Security program integrity.

General Government

  • Funds the JOBS and Small Business Recovery Grants with $1.5 billion in federal funding to provide economic support for businesses that suffered substantial economic damage during the pandemic.
  • Appropriates $20 million from the State Fiscal Recovery Fund for the ReToolNC program, which administers grants to small, historically underutilized businesses.
  • Allocates a combined $21.4 million for organizations to assist victims of domestic violence, sexual assault, and human trafficking.
  • Provides $4 million in additional funds to Scholarships for Children of Wartime Veterans, bringing the total program amount to $21.8 million over the biennium.

Justice and Public Safety

  • Allocates $10 million for testing of new rape kits and clearing the state’s rape kit backlog.
  • Funds a $16 million grant to keep 150 victim services coordinators in district attorneys’ offices across North Carolina.
  • Funds the creation of use-of-force database and officer discipline and decertification database.
  • Appropriates $4 million over two years for addiction treatment in jails as part of existing reentry programs.
  • Allocates $5.5 million for new prison security measures, including man-down technology and critical safety upgrades to facilities
  • Provides funds to open a long-term care facility at Central Prison to ensure it is fully operational by FY 2022-23.
  • Funds enhancements to the North Carolina Hazard Mitigation Plan through the North Carolina Office of Recovery and Resiliency (NCORR).
  • Creates a new Department of Correction within the Governor’s cabinet and a separate Division of Juvenile Justice and Division of Community Supervision and Reentry within the Department of Public Safety.
  • Provides $7.3 million in grant funding for sheriffs’ offices in Tier 1 and 2 counties to be used for expenses incurred by the offices.

Agriculture and the Environment

  • Allocates over $1 billion of federal American Rescue Plan funds to provide grants to local governments for water and sewer utilities.
  • Provides $100 million in federal funding to create a new program to assist local governments with stormwater infrastructure and management.
  • Allocates $40 million in federal funds to North Carolina food banks to meet increased demand.
  • Provides $12.8 million in federal funds for the State Fair, $5.7 million for state aquariums, and $1.9 million for the North Carolina Zoo to replace receipt losses due to the COVID-19 pandemic.
  • Provides $50 million in federal funding for rural downtown transformation grants in Tier 1 or Tier 2 counties.
  • Transfers $2.7 million from the Jobs Maintenance and Capital Development special fund to the Film and Entertainment Grant special fund.
  • Two dozen new positions for DEQ for emerging contaminant response, landslide mapping, dam safety, permit transformation, and underground storage tank management.

Health and Human Services

  • Allocates almost $40 million of federal funds across the biennium to long-term care facilities that care for low-income residents and residents with developmental disabilities.
  • Fully funds critical projects for the state to transition Medicaid from a fee-for-service system to one in which insurance companies are fully responsible for managing the health care needs of Medicaid patients.
  • Extends full Medicaid benefits for eligible postpartum mothers from 60 days to 12 months beginning April 2022.
  • $32.9 million to fund an additional 1,000 Innovations Waiver slots for individuals with intellectual and developmental disabilities to help families access additional healthcare supports.
  • Directs $8.5 million of federal funds to free and charitable clinics across the state.
  • Provides $3 million over the biennium for the Rural Health Loan Assistance Repayment Program to fund loan repayment incentives to recruit doctors and other healthcare professions to rural areas.

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