It's 5.05 and welcome in to a Wednesday edition of the Carolina Journal News Hour on Charlotte's FM News Talk, 107.9 FM, WBT, I'm Nick Craig. Good morning to you. All eyes this week on the North Carolina General Assembly. After months, lawmakers announcing a budget deal. We finally have some details on the budget.
More than 634 pages, more than $34 billion in state prescribed spending. To walk us through some of the details this morning, the Senior Vice President of Research over at the John Locke Foundation, Brian Balfour, joins us here on the Carolina Journal News Hour. Brian, it's been over a thousand days since the last time the state of North Carolina officially enacted a budget. I know you've been busy over the last couple of days diving into these multi-hundred-page reports. What's the latest that you're following?
Yeah, well, you mentioned it, more than $34 billion. The budget dropped in the last day of the current fiscal year.
So, the new fiscal year starts July 1st.
So, there won't be any budget in place for the new fiscal year, but at least there is some sort of budget agreement that appears to be heading. most likely towards Governor Stein's desk in the next couple of days. In comparison to, for example, Governor Stein's budget proposal that he had put together for this year, Stein wanted to increase spending year over year by 11 percent. The legislature a little bit less than that at 7.7 percent.
However, I did discover that the legislative budget were setting aside about $3 billion into these special reserve funds where they play this kind of shell game where they move money into a reserve fund and then they go ahead and spend it out of the reserve fund, but then call it a receipt-supported expenditure.
So, it doesn't really count against the bottom line of the total general fund spending.
So, it's not a great look for transparency when they do that, and it kind of shields the actual total true spending of what they're undertaking in the budget.
So, if you factor those dollars into play, the legislative budget would actually spend more than Stein's proposal. Let me ask you about that. We chatted about a month ago. You had a great piece over at the John Locke Foundation laying out your top five budget priorities. And you mentioned this same idea where they kind of this shell game where money is put into these reserve funds.
And you mentioned that they're considered a receipt and so that they're able to justify that, I guess, on their balance sheet. What's the point of that? Why put it into these reserve funds and then put it back into the general fund or spend it? Why not just put it in the entire budget? What's the purpose?
Well, in my opinion, my estimation is that they do it. For that very purpose, to make it less transparent, to try to conceal, they can say, oh, hey, look, we only increased spending by, in this case, 7.7%, but that's not really telling the whole story. It's not telling the whole story about all the money that's actually being allocated. In this case, $3 billion. A few years ago, when this practice first really started to explode and come on our radar, it was over $7 billion they were doing a few years ago in one year's budget.
And this is a relatively new practice just emerging in the last handful of years. The normal practice was when they were moving money even into a savings reserve fund, totally justified. uh and and uh laudable action that counted they used to count that as part of the general fund spending.
Now they put that what they call above the line where it's not part of the availability and it doesn't count against what most people look at in terms of the total general fund spending. Let me ask you about this. North Carolina is one of the fastest growing states in the nation. Depending on the survey or the research that you look at, it's somewhere in the top three.
Sometimes it's second, sometimes it's third. We are a booming state. A lot of folks want to be in North Carolina. A lot of businesses want to be in North Carolina. That's in large part due to some of the very successful work that lawmakers have done over the last 15 years as it relates to tax policy.
Brian, is it a normal practice to see the budget increasing at this clip seven if you factor in some of these other $3 billion, maybe 11 or 12% with the state that's growing in population? It's an interesting spot for lawmakers to manage because there is so much explosive growth here in the Tar Hills state. See? Yeah, yeah. Another thing to remember: not only are we experiencing a lot of growth, but year-over-year comparison is to.
Last year, well, the current year that's finishing up, but last year, there was no budget passed.
So spending was largely held at the prior year's budget.
So this is kind of a budget where comparing the expenditures to largely two years ago. And that's a frustrating thing on a very personal level as a fiscal policy analyst who looks at budgets over time and tries to chart trends over many years. And when there's years where there's no budget passed, it makes it, you know, there's a gap in the trend line.
So it makes it a little frustrating, a little difficult to accurately track the trend line.
So, but yeah, and I mean, the economy still has been holding up and growing at a rapid clip. Again, North Carolina is growing population-wise.
So I don't think it's necessarily way out of line. In terms of if you'd want to compare it, say, against the baseline of population plus inflation growth. I don't think it's really out of line much with that specifically. But that said, It's still a little bit, you know, we start getting close to looking at double-digit annual increases. That starts to get a little bit concerning, especially when you're starting to see cracks and warning signs in the economy for a multitude of reasons.
You know, the good times don't last forever in our economy. And so I think there needs to start to be a little bit more caution exercised here in terms of state. Appropriations with the budget and maybe trying to not commit the state to such high rates of expenditures because there could very well be a downturn coming. It might be within the next year or two, a few years down the loan, down the road, maybe sooner than that. But it seems like it's something that's coming that we should start preparing for a little bit better.
It should be no surprise to anybody that some of the largest items in the budget are actually going towards people. This is the case in government and almost every single private business as well. The cost of having individuals working for you or in your organization tends to be some of the top expenses. And looking at this state budget, again, it's been more than 1,000 days since the state last enacted one. Brian, there's some pretty serious pay increases for state employees in a variety of different professions.
Yeah, exactly right. I think that the headline that most people are going to see is the average 8% pay increase for teachers. And I was looking at the number for this coming budget year. Uh, just for this year alone, that will cost, I think, uh, around 450 million dollars.
So, so, just to kind of put it put that in perspective, um, you know, it's easy to look at the pay rate increase for an individual teacher, but then just to kind of see how much is actually going to cost overall for that, and that becomes basically a recurring expenditure. You know, right, once you ratchet up those salaries, that's a new baseline from which. Future salary increases are going to be built upon.
So, you know, so that's something really to keep an eye on. I know there was some catching up to do, given there was no budget last year in terms of salaries, especially teacher salaries. But, you know, another thing that we don't talk enough about, I think, is the rapidly increasing cost of the benefits for state employees, the retirement benefits, the health benefits. We saw the state health plan needed to get a lot more money recently. They were running out of money, basically, running a deficit.
So All those things add up that we do need. I think we really need if we want to be serious, if legislators want to be serious about budgetary reform, they have to take a look at. at uh those salaries and benefits and the number of state employees. Yeah, you mentioned some of those recent decisions, pretty tough ones, I'll admit, for state treasurer Brad Briner as he had to increase people's monthly health care premiums in some cases pretty significantly to begin the process of digging out of the hole that had been created by the previous treasurer here in the state of North Carolina. One of the things that you warned about when we chatted a month ago or so, Brian, was that Medicaid expansion is going to continue to have a major impact on the state of North Carolina going forward.
How does this budget deal with an area that we've seen a total explosion in growth in just over the last couple of years since it was fully enacted?
Okay. Yeah, so we see the state having to increase spending on Medicaid by about a billion dollars. uh going into next year. And that's just a state share, that's not counting overall. Obviously, the federal government handles going to handle about two-thirds of that roughly.
But yeah, I mean that that's a rapid increase and that that's pretty I mean That may be unprecedented, a $1 billion increase just year over year for the Medicaid program for state expenditures. They're using some of those special reserve funds to help pay for this increase. I think about $200 million they're going to be dipping into a reserve and $800 and some million in new appropriations.
So, yeah, that's definitely going to be something to keep an eye on. And then, if there are some of the federal regulations that are going to alter the ability of states to raise money to pay for their expansion population, I think North Carolina needs to start making some preparations for that as well, because that's coming down the line in just the next couple of years. And that could leave North Carolina really holding the bag on billions and billions of dollars of Medicaid expenditures for that expansion population. The budget itself, 634 pages, another supplemental piece of that, more than 700 pages where you can essentially almost go line by line and see where some of the spending is. Brian, you've been digging through that.
Anything else that popped off the page at you as you were scrolling through that and doing some research? Yeah, well, one thing that did kind of pop up was there was about 720 line items. Of what they labeled special appropriations, which were basically earmarks to local governments. Various local charities, everything from ball fields to fire department expenditures and walking trails, things of that nature. That really struck me.
That may be the longest such list that I've seen in my near 20 years of looking at the budget.
So that really, really caught my attention. And a lot of that was funded from some of those special reserve funds. don't count against the bottom line of the general fund expenditures that most people are going to report on. Yeah, I would suspect that is probably some of the work of the North Carolina House, obviously having so many more lawmakers there, everybody trying to bring back a little piece of the pie to their district. All right, Brian, final question for you.
You've had some time to go through all the details, go through all of it. Give us your overall 50,000-foot view. Is this a good budget for the state of North Carolina moving forward? I think overall it's a solid budget. There's some good wins in there, market reforms, funding for opportunity scholarships to keep advancing school choice, increased funding for education savings accounts for special needs students.
There's a small partial repeal, certificate of need laws for specific facilities, which is a good step in the right direction. We'd like to see full repeal. We did avoid any funding for Major League Ballpark in the budget, which was kind of a last-minute thing that cropped up and was a point of debate. I was curious, though, of the absence of any action on NC Innovation funds. $500 million, we thought there would be a good chance of those dollars being clawed back, but that was left out of the budget, so a little bit of just disappointment there.
It is interesting about NC Innovation because seemingly everybody was on board with that, including the Democrat governor and Josh Stein.
So maybe we'll see some additional legislative action in the next couple of weeks to claw back some of those funds. As I mentioned at the top, it is said to be a very busy couple of days in Raleigh votes taking place over the next few days to get this budget finalized and to the governor's desk. We will have extensive coverage of this over on our website, CarolinaJournal.com. We appreciate the update this morning. Brian Balfour from the John Locke Foundation joins us on the Carolina Journal News Hour.
It's 5:23. Welcome back to the Carolina Journal News Hour, Charlotte's FM News Talk, 107.9 FM, WBT continuing our coverage this morning of a major day yesterday in Raleigh. As we just talked about with Brian Balfour from the John Locke Foundation, state lawmakers unveiling a $34.4 billion spending plan, more than 634 pages, as the state has gone more than a thousand days since the last time it enacted a full state budget. The schedule, as we understand it right now, lawmakers will be making their way back to the General Assembly today and tomorrow for first and second votes of the budget. After that, if everything goes as planned, which is what we are anticipating, what we are being told right now over at CarolinaJournal.com, that will make its way to the governor's desk by the end of the week, setting up what could be a very interesting couple of days as the governor.
Will have three options with this state budget: sign it into law, veto it, forcing lawmakers to come back and vote if they want to enact it into law, which presumably they would. Or the third option, after it being presented to the governor and laying on his desk for 10 days, the bill would become law regardless of the governor's actions.
So we just talked about some of the top-line issues and some of the top-line dollar amounts with Brian Balfour and looking at some of the other details in here. House Speaker Destin Hall, the Republican from Caldwell County, framed the budget plan as a plan focused on accountability, public safety, and government accountability. With Hall saying, the budget invests in the people of North Carolina. It delivers historic raises, keeps taxes low, strengthens public safety, and protects taxpayer dollars by making targeted investments to crack down on waste, fraud, and abuse. Every dollar reflects our commitment to build a North Carolina that is a better and more affordable place to live, work, and raise a family.
Senate Leader Phil Berger, the Republican from Rockingham County, described the plan as fiscally responsible, pointing to tax reductions, education funding, and public safety investments. Berger said, our state's fiscal health remains in great shape. This is a responsible spending plan that takes aim at bureaucratic bloat without endangering core services. This keeps our promise to reduce the tax burden for all North Carolinians while expanding access to incredible education opportunities, keeping our communities safe, and solidifying North Carolina's status as the best state in the nation. All right, some of the details.
We'll start off with.
Some of the things that are getting the most play. We'll start off with raises. The final agreement unveiled yesterday by state lawmakers in Raleigh includes an average 8% pay raise for educators across North Carolina, with budget negotiators saying that the plan would make North Carolina's starting teacher pay number one in the South. With teachers also receiving bonuses ranging from $500 to $1,000. That's on the education front.
Across the board, all other state employees are set to receive, if this budget goes forward, a 3% raise with larger increases in certain high-need areas of state government. Think law enforcement correction officers there. State employees would also be receiving bonuses ranging from $1,000 to $2,000 based on the position that they are in and the amount of money that they currently make every year. The deal includes raises for law enforcement officers, including a whopping 20.3% average increase for State Bureau of Investigation and ALE officers, a 17.7% average increase for members of the State Highway Patrol, and a 15.4% average increase for correctional officers across the state. Continuing with this, another 10.1% average increase for probation and parole officers.
And finally, a 13% average increase for other law enforcement officers. That includes individuals like State Capitol Police and local law enforcement officers are receiving a one-time bonus in this budget of $1,750.
So some major emphasis there from state lawmakers. As I just read through the quotes from both Hall and Berger, some big-time look at law enforcement and those in and around public safety and some major salary increases there. Moving on to tax cuts, the agreement makes no changes to the corporate income tax rate reduction schedule. The deal would lower the personal income tax rate to 3.49% from calendar years 2027 through 2029. Then another scheduled reduction to 3.24% from 2030 through 2032.
If things all go well and the economy stays in a semi-healthy status, 2.99% percent from 2033 to 2034. After that, two additional revenue trigger cuts of a quarter percentage point each could potentially bring the tax rate as low as 2.49% sometime in the mid or late 2030s. Obviously, still pretty far away from that. The tax package also includes several business and industry-related changes, including closing a sales tax reimbursement provision for large hospitals and their affiliates by treating them as a single entity for reimbursement purposes. In addition to that, the budget repeals the sales tax exemption on electricity for data centers following growing scrutiny of the cost for data center incentives and their impact on electrical demand across North Carolina.
With the bill also raising tax rates on sports wagering operators from 18 to 23 percent and changes in how sports betting tax proceeds proceeds rather are distributed across the state, including funding for athletic departments. At UNC System Schools. There's a lot more in this budget, including details on some additional Hurricane Helene funding, opportunity scholarships, healthcare, and more. We'll get into those details coming up here in just a couple of minutes. It's 5:37.
Welcome back to the Carolina Journal News Hour, Charlotte's FM News Talk, 107.9 FM, WBT, a very busy Tuesday in Raleigh. As state lawmakers unveiled a 634-page, $34.4 billion budget that is expecting to get votes in the North Carolina House and Senate today and tomorrow, setting up the potential for the state budget to make its way to the governor's desk sometime potentially late on the day, Thursday or Friday morning. We've been talking about some of the details. It's about a 7% increase from the last state budget, which I'll note was not voted on or has not taken place in more than a thousand days.
So, some big-time increases there. Talked about raises for state employees and some tax cuts, diving into some of the additional details for Hurricane Helene. The bill transfers previously approached. Appropriated or allocated funds into the Helene Fund and allocates more than $700 million in non-recurring funding for the 26-27 fiscal year, which actually starts today, July the 1st. That includes money for state and local share of federal disaster recovery programs, local government capital needs, volunteer fire departments, housing recovery, private roads and bridge repair, temporary relocation assistance, and other rebuilding efforts in western North Carolina.
This is now, I've lost track at this point, but this is now the probably fifth or sixth time that state lawmakers have allocated these large chunks of money, three, four, five, $700 million, upwards of a billion dollars for Western North Carolina relief. We'll be keeping an eye on that. On the education front, the budget does keep, no surprise, the Opportunity Scholarship Funding Program unchanged, maintaining the state's existing commitment on the school choice program. The plan also identifies roughly $35.8 million in savings from the 24-25 to 25-26 school years tied to students receiving scholarship grants below 100% of the average state per pupil allocation, with those savings redirected to public school needs. This was a major topic and major battle of discussion before the budget was unveiled.
Democrats like Governor Josh Stein in North Carolina heavily advocate. For the North Carolina General Assembly to put a moratorium and then begin the process of rolling back the Opportunity Scholarship Program for Republican lawmakers, who just a couple of years ago made the Opportunity Scholarship Program reality for all those across North Carolina. There was seemingly no way lawmakers, Republican lawmakers, I should say, were going to take the advice of Governor Josh Stein or other Democrats here in North Carolina, and they in fact did not with the OP OSP program remaining unchanged here in North Carolina. Let's move on to healthcare. Health and human services spending includes more than a billion dollars for Medicaid and more than $333 million worth of Medicaid contingency reserves.
The budget also strengthens oversight of high-growth Medicaid services by requiring closed networks for peer support, research-based behavioral health treatment, and community support services. This is pretty major. The plan includes. New guardrails for things, for example, applied behavioral analysis or ABA therapy, which has drawn some increased scrutiny from lawmakers and state watchdogs, like state auditor Dave Bollick, in recent months after a rapid growth in Medicaid-funded autism therapy costs. Under the proposed state budget, ABA therapy assessments would have to be conducted in person.
Service plans would be required, would require approval from prepaid health plans or the Department of Health and Human Services, and plans involving more than 16 hours of therapy per week would face more frequent reapprovals from either the prepaid health plan or the Department of Health and Human Services. The budget also releases more than $208 million in non-recurring ARPA temporary saving fund money for a North Carolina children's hospital. This is set that group is set to construct a new children's hospital in the Apex area. That's just in southern portions of Wake County, not far from Raleigh, including things like behavioral health hospitals. Included in the budget is a repeal of certain certificate of need laws for inpatient rehabilitation services, facilities, and beds, and a law.
Long-running point of debate among healthcare providers and free market policy groups. It seems like over the last couple of years, we've seen continued work by state lawmakers to begin the process of rolling back certificate of need essentially piece by piece.
Next, we'll move on to capital investments as the budget includes a range of capital infrastructure and economic development provisions, including dealing with PFAS, those are forever chemicals, and emerging contamination funding. $133.9 million for implementations tied to the Jet Zero economic development project, which is slated over at the Piedmont Triad International Airport. New positions at the State Board of Elections, $15 million to upgrade the state election management system, which is, by the way, about a quarter of what was actually asked for, and additional funding for the Office of the State Auditor. One major item that is not included in capital. Investments in this final version of the budget is proposed a proposed funding framework for Major League Baseball and an MLB stadium tied to a possible Raleigh expansion bid.
The stadium proposal had been a pretty large point of contention in budget negotiations and had gained some pretty significant momentum in recent weeks, particularly following the Carolina Hurricanes at Stanley Cup victory and a renewed attention around professional sports in and around the Triangle area.
So that does not mean that Raleigh and the state as a whole cannot be part of MLB expansion. Still would suspect that North Carolina could be pretty high there towards the top of the list. But as of right now, state lawmakers are not doling out which could have been reported as nearly half a billion dollars to try and lure Major League Baseball investment groups and others to the state of North Carolina. That conversation could come back. We'll be keeping a close eye on that.
The budget. It allocates more than $450 million to the Rainy Day Fund, bringing the total to just over $4.2 billion. It also includes a $1.325 billion stabilization and inflation reserve fund, a $333 million Medicaid contingency reserve fund, and $350 million in the State Emergency Response and Disaster Relief Fund. The budget deal follows weeks of uncertainty over whether lawmakers would complete a spending plan before the start of the fiscal year, which kicks off today. As recently as last week, Senate leader Phil Berger told reporters that the timeline remained uncertain.
How things have played out over the last couple of days have been very interesting to watch. We were expecting the full release of this budget about two weeks ago.
However, as budget negotiators continue to hammer out some of the details, that timeline did slip down a little bit. No surprise there as there was a lot in this budget, as I mentioned, more than 634 pages.
So a very lengthy piece of legislation here from state lawmakers.
So here's the process. This is how we expect things to play out over the next couple of days. The North Carolina House and Senate are both expected to be back in session today, at least what we know from House Speaker Destiny. Hall. Republicans and Democrats in the North Carolina House will make their way to the chamber after lunch around one o'clock this afternoon to begin the process of the debate on this.
It is not clear, at least as of this morning, how lengthy the debate will be. We have not heard a lot yet from Democrats in Raleigh on social media or in news reports about what they think on this budget.
So we could be looking at potentially hours worth of debate in the North Carolina House today, or if Democrats like more than they don't in the budget, the debate could be a little bit more muted, and we could see just a couple of contentious points being debated before a first reading vote is taken in the North Carolina House and Senate today. Due to rules in both of those chambers, the budget cannot fully pass today. Lawmakers will be back on Thursday for an earlier session, according to House Speaker Destin Hall. 10 o'clock Thursday morning is where a final vote is. Will take place on the budget from the North Carolina House.
After that, Making its way to the North Carolina Senate and potentially making its way to Democrat Governor Josh Stein's desk by the end of the week. That gives the governor three different options with the budget, which, for all intents and purposes, is like any other piece of legislation coming out of the North Carolina General Assembly. He can either sign the budget into law, he can choose to veto the budget, which could potentially force lawmakers to make their way back to Raleigh after the July the 4th holiday to conduct a veto override vote to get that over the finish line. Or if the governor takes no action on the legislation 10 days after it has been delivered to him and has been laid upon his desk, the bill will become law and the budget will be enacted automatically after that 10-day period of time. We probably will have a pretty good idea what the governor will do depending on what the final vote is in the North Carolina House and Senate.
If the vast majority of Democrats vote against this budget, I would suspect that will set up the scene for a veto from Governor Stein. If a plethora of Democrats work across the island, do in fact vote in favor of this budget, would probably be an interesting position for the governor to veto it and then have multiple members of his party not sustain his veto and override it.
So we could likely have some more idea as to what that's going to look like today. Nevertheless, it is going to be a very busy couple of days as we approach the July the 4th holiday coming up on Saturday. We have extensive and we'll have continuing coverage over on our website, CarolinaJournal.com, over the next couple of days. Andrew Pomerance, other members of our Carolina Journal team, scouring the halls of the North Carolina General Assembly the last couple of days, and will remain doing so, bringing you the most comprehensive and complete coverage of this budget detail. Those details over on our website, CarolinaJournal.com.
Good morning again. It's 5.53. Welcome back to the Carolina Journal News Hour, Charlotte's FM News Talk, 107.9 FM, WBTA, a very busy Tuesday in Raleigh. As we've been talking about all morning, state lawmakers unveiling a $34.4 billion, more than 630-page budget. Votes expected today in the General Assembly.
We'll be keeping a close eye on that. The North Carolina House, even not debating the budget, was in session until almost 7 o'clock. o'clock last night as they dealt with dozens of measures in the North Carolina House. One of them pretty interesting as the North Carolina House Finance Committee advanced legislation that eventually made its way to the House floor yesterday that would allow businesses to help fund benefit accounts for independent contractors without reclassifying them as employees. This is something that has gotten some pretty significant play in state legislatures across the nation.
Over the last couple of years, it's House Bill 1083. It's called the Voluntary Portable Benefits Plan Act, and it officially passed that committee without opposition. Made its way to the House floor and received a green vote and a vote of approval on the House floor Tuesday. The primary sponsors of the legislation, Representative Timothy Reeder, the Republican from Pitt, Alan Chester, the Republican from Nash, Heather Ryan, the Republican from Lincoln, and Mike Sheetzel, the Republican from Wake. This bill would create a new framework in state law for portable benefit accounts owned by independent contractors.
Those accounts could be used to purchase benefit plans, including health insurance, unemployment insurance, income replacement insurance, disability insurance, life insurance, and other retirement benefits. Under the bill, a portable benefit plan would be administered by a third-party benefit plan provider, chosen by the independent contractor and assigned to a benefactor rather than a hiring party. Supporters say that the proposal is designed for. a changing workforce in which more North Carolinians earn income through contract work, gig work, apt-based platforms, or other non-traditional work arrangements. Rather than tying benefits to a single employer, the bill would allow them to follow the worker from gig to gig.
According to Representative Reeder, he says the bill authorizes a person who works as an independent contractor from their hiring party to volunteer and contribute funds for benefits, whether they be retirement benefits or health benefits. These benefits will be available to an estimated 900,000 people in North Carolina who work as independent contractors. Under the bill, a hiring party could voluntarily contribute money to an independent contractor's portable benefit account for work that they perform. The definition of a hiring party includes any public or private person or entity, including an internet or Application-based company. Think of apps like a DoorDash and Uber Eats that hires or enters into a contract with an independent contractor.
Donald Bryson, the president and CEO of the John Locke Foundation, said, quote, House Bill 1083 recognizes that today's workers and businesses need more flexible benefit options than traditional employment models alone can provide.
So this is something interesting coming forward. There was actually some pretty big discussion on this back at our Carolina Liberty Conference that the John Locke Foundation hosted earlier this year. That legislation now makes its way to the North Carolina Senate. We'll be tracking that this week alongside the state budget. Again, votes on that taking place.
Today in Raleigh, a house session scheduled for one o'clock this afternoon. We'll be keeping you up to date throughout the day over on our website, CarolinaJournal.com. That's going to do it for a Wednesday edition. WBT News is next, followed by Good Morning BT. We're back with you tomorrow morning, 5 to 6, right here on Charlotte's FM News Talk, 107.9 FM, WBT.
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