State employee raises and bonuses, extra tax cuts proposed in NC Senate budget

With a rosy economic outlook for North Carolina, lawmakers outlined a first draft of the state budget Monday, with bigger tax cuts along with raises for tens of thousands of state employees, though not as much as some might have hoped.

The budget proposal written by the Republican-led Senate is expected to get its final vote by the weekend. Then the House, which is also Republican-majority, will release its budget and the two General Assembly chambers will agree on a final version to send to Democratic Gov. Roy Cooper’s desk later this summer.

Budget documents with details have not yet been released and are expected later Monday.

Teacher, state employee raises and bonuses

As lawmakers described it, the Senate’s proposed budget would give 3% raises over the next two years for most state employees, including teachers and UNC System and community college employees. State employees would also get bonuses, according to the proposal.

One category would get much higher raises — 7% on average for corrections officers, who will also get a newly created salary schedule based on their level of experience.

The budget calls for using federal money to pay bonuses for state employees, including teachers. State employees who earn less than $75,000 a year would receive $1,500, and those who make more than $75,000 would receive $1,000 bonuses.

There would also be bonuses of $1,500 for law enforcement, correctional officers and staff and employees of 24-hour residential and treatment facilities.

Additional bonuses across the board, using state funds, would go to teachers, who would get $300, and principals, who would get $1,800, respectively.

While some state employees received raises in the 2019 budget, teachers did not, as the budget battle stalled out between Cooper and the Republican-led legislature. Cooper’s budget proposal this spring called for 10% raises for teachers over the next two years.

There is no cost of living adjustment for retired state employees in the Senate budget.

Tax cuts

The Senate previewed its budget tax plan in a bill passed last week. But the sunny new revenue forecast predicted even more money in tax collections coming into North Carolina coffers. So the tax cuts in the Senate budget are even bigger.

The budget’s tax cuts include cutting the personal income tax rate to 3.99% by 2026. The current tax rate is 5.25%, and the budget would reduce it to 4.99% in 2022.

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. Senate Republicans said a family of four that earns the median household income would get a 37% income tax cut if the budget becomes law.

The budget also includes some of the same tax cuts plan the Senate already passed, including phasing out of the corporate income tax entirely.

The Senate’s budget would spend $25.7 billion in 2021-22 and $26.6 billion in 2022-23. The Senate and House agreed on a total spending number a few weeks ago after months of negotiations. Senate leader Phil Berger, House Speaker Tim Moore and Cooper have all said they hope to work together on getting a budget into law this year, after the 2019 stalemate that resulted in a series of “mini” budget bills.

The Senate budget also allocates $4.3 billion over the next two years to the State Capital Infrastructure Fund, which funds several building projects across the state, including the Department of Health and Human Services move from Dix Park to Blue Ridge Road in Raleigh. In the 2019 budget that failed to pass, the N.C. DHHS headquarters would have moved to Granville County. This time it stays in Raleigh.

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