With State Coffers Flush, Tax Cuts and Infrastructure Dominate Senate Budget Proposal
Budget sets in motion $12 billion in cash for infrastructure, capital projects over 10 years
Budget includes sweeping tax package that reduces median household income tax payments by 37% in 2022
In addition to tax cuts and infrastructure, the proposal sets a $13 minimum wage for non-certified school employees and community college employees
Provides salary increases and bonuses for all state employees
Raleigh, N.C. — North Carolina’s fiscal position is strong with state coffers flush because of a decade of prudent budgeting, and the Senate proposes to use the state’s solid position to return a portion of surplus revenues to taxpayers and advance needed capital infrastructure projects.
The Senate’s proposed 2021–23 budget sets in motion a 10-year, $12 billion cash infrastructure and capital plan, including $3 billion in cash over the next two years for projects.
The Senate’s budget also includes a sweeping tax cut that reduces the personal income tax rate to 3.99% over five years and increases the zero-tax bracket to $25,500 for married filers.
Senate Leader Phil Berger (R-Rockingham) said, “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.”
Sen. Brent Jackson (R-Sampson) said, “Our budget helps North Carolinians by reducing taxes for all citizens and supporting critical infrastructure improvements across the state.”
Sen. Kathy Harrington (R-Gaston) said, “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. Ralph Hise (R-Mitchell) said, “Improving infrastructure and cutting taxes will continue to attract families and businesses to North Carolina.”
Details of the proposal are below.
- 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.
- 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.
- 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.
- $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.
- 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.
- 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.
- 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.
- 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.