North Carolina Senate leaders are proposing a $32.6 billion budget that includes small raises and bonuses for teachers and state employees, while cutting programs and vacant positions across state government — all as they expand controversial scheduled income tax cuts.

Most state workers would get a 1.25% raise starting in July, along with bonuses totaling $3,000 over two years. Teachers would receive an average 2.3% pay raise and would also get bonuses.

Overall, the tight budget proposal would increase state spending by about $800 million, or 2.75%, over the current year — far less than budget proposals from recent years. Senate Leader Phil Berger said Republican budget subcommittee chairs looked to find cuts to make room for their spending priorities.

“They have taken a fine-tooth comb to area budgets to try to find as much cost savings as possible, from eliminating obsolete programs to slashing some of the bloated portions of the bureaucracy, all in an effort to better serve the people of the state of North Carolina,” he said at a news conference Monday.

Gov. Josh Stein has called on lawmakers to pause scheduled corporate and personal income tax cuts, pointing to a projected revenue decrease even as the state grows. But the Senate budget sticks to the rate cuts and even adds further cuts in future years, assuming the state hits certain revenue targets. The personal income tax rate could eventually drop as low as 1.99% under the bill; it’s currently at 4.25%.

Berger was dismissive of revenue forecasts produced by nonpartisan economists working for the legislature and Stein’s administration.

“As long as the economy continues to grow, it is our belief … that revenue to the state will be more than adequate to address the funding requirements that we have as far as the state budget is concerned,” he said.

The budget does, however, significantly increase the tax rate paid by sports betting operators.

Senate Minority Leader Sydney Batch, D-Wake, called the budget bill “a blueprint for neglect and cowardice.”

“It offers pathetic raises to public servants, abandons our law enforcement officers, and shortchanges the public infrastructure North Carolina desperately needs,” Batch said in a news release. “At a time when families are squeezed by rising costs, schools can’t find teachers for their classrooms, and emergency services are stretched to the brink, Senate Republicans have made the active choice to sit on billions of taxpayer dollars.”

Batch was referring to Republicans’ decision to move money back into the rainy day fund, bringing the savings amount to $4.75 billion.

Jobs, programs on the chopping block

Berger was hesitant to discuss details of proposed budget cuts during Monday’s news conference, but here are some examples in the bill:

• Hundreds of vacant positions across numerous government agencies would be eliminated. State agency leaders have said for years that they’ve been struggling to fill positions. The budget targets those that have been vacant longest.
• A handful of positions that aren’t vacant would be eliminated, including several jobs related to environmental justice, science and employment discrimination. Some are leadership roles, such as the chief scientist at the Office of State Budget and Management.
• $57 million would be cut from the state’s community college system.
• The N.C. Innocence Inquiry Commission, which investigates wrongful criminal convictions, would be eliminated.
• The Office for Historically Underutilized Businesses would be shut down. It helps firms owned by minorities, women and people with disabilities access state government contracts.
• PBS North Carolina would have its funding cut by $4 million, nearly half of what it receives from the state.
• The Minority Male Success Initiative, which helps non-white students, would be eliminated.

Big policy changes tucked inside

As lawmakers have in past budgets, the Senate’s 439-page budget bill is filled with policy proposals, including the entire text of several bills that were introduced separately – some of which have already passed the Senate.

They include:

• New tolls on state ferry services that are currently free. A trip from Hatteras to Ocracoke, for example, would cost up to $40.
• An increase in the maximum weekly unemployment benefit from $350 to $400 (a figure the House has voted to set higher)
• Elimination of Certificate of Need regulations on new healthcare facilities and equipment
• A mandate that UNC-Chapel Hill and N.C. State University play against each other regularly in basketball
• A requirement that school districts enact policies restricting students’ use of cell phones and electronic devices in the classroom.
• The creation of a new Board of Motor Vehicles that would appoint the commissioner of the Division of Motor Vehicles (currently appointed by the secretary of transportation)
• Legislation eliminating a mandate that Duke Energy reduce its carbon dioxide emissions by 70% before 2030

What’s next

The Senate plans to hold committee hearings on the bill Tuesday, with floor votes scheduled for Wednesday and Thursday.

That won’t be the final step in developing a spending plan. The House will develop its own proposal in the coming weeks, and then leaders from both chambers will meet privately to hash out a compromise between the two budget bills.

Then it’s up to Stein to decide if he’ll sign it or veto it. And if he picks the latter approach, House Republicans are one vote short of a veto-proof majority this year.

It’s also possible a budget bill might never make it to the governor’s desk. That’s what happened last year when the House and Senate couldn’t reach an agreement on the details, which meant spending levels remained unchanged from the previous fiscal year.