House passes budget in midnight session

by Matt Caulder, NC Capitol Connection, September 18, 2015.

After more than five hours of debate Thursday night, House legislators took a vote on the conference budget report, passing it in a 80-35 vote, before taking a final vote on the budget Friday, after midnight.

The House recessed around 10 p.m. Thursday night for a two-hour break before coming back in after midnight for a final vote on the $21.74 billion spending plan.

House leaders spent more than an hour explaining the budget compromise Thursday evening before four hours of legislators on both sides of the aisle rising to debate the report, and sometimes nearly begging for a vote on the conference report, before taking a vote on the spending plan.

In contrast, legislators spent almost no time debating the budget on the House floor Friday morning just after midnight before taking the inevitable final vote giving approval to the budget Gov. Pat McCrory has already promised to sign in an 81-33 vote.

McCrory announced his intention to sign the budget Thursday after his office reviewed the 429-page document.

The Senate passed the conference report earlier this week in a 37-13 vote.

Now the budget will head to the governor’s desk for signing Friday before the latest of three continuing resolutions (CR) expires tonight.

State leaders have spent the last few months working out a budget deal for the fiscal year, which began two-and-a-half months ago.

Since then state leaders have passed three CRs to keep the lights on while a budget compromise could be made.

The current CR, set to expire Sept. 18, is the continuation of CRs set to expire Aug. 14 and another set for Aug. 31.

No Republicans voted against the budget on Thursday, and 35 Democrats came out against it, with nine of the original 33 who joined the House in passing its original budget plan sticking with the majority party.

Four Republicans and one Democrat were absent for the vote.

Leaders in the House and Senate have mostly been working behind closed doors to find middle ground between the Senate’s much smaller budget and the House’s budget, which provided more funding for corporate incentives.

Budget represents 3 percent increase over 2014-15 FY

The Senate’s $21.47 billion plan offered a 2 percent increase over last year in spending, and it funneled money to the state savings coffers, while the House’s $700 million larger spending plan, at $22.2 billion, would have increased spending 5 percent.

The final $21.74 billion spending plan represents a 3 percent increase in spending.

Both spending plans included raises for starting teacher salaries to $35,000, fulfilling an earlier promise to work to attract more teachers to the state, which was retained in the final budget.

The Senate budget came closest to the governor’s proposal, landing about $50 million under McCrory’s plan.

The House plan overshot McCrory’s proposal by $630 million.

The final compromise also gives state employees and teachers a $750 bonus, and gives all sworn state highway patrol officers a 3 percent raise.

In addition to the pay raises, the budget fully funds teacher assistants and the state driver education program, while increasing funding for textbook and digital learning resources.

Increased funding also went to the state Opportunity Scholarship program, which will get an additional $14 million over the next two years, and the state community colleges will get $7.5 million for equipment for its career-track courses, though community college tuition fees are increasing by $4 as well.

The budget also eliminates the annual transfer of funds from the Highway Fund to the General Fund and adds funding, for a total of $705 million.

The annual transfer of $216 million was eliminated in the budget.

The budget also adds in $70 million for port modernization.

Second major tax overhaul

Included in the budget are many tax changes, making it the second major tax overhaul in the last two years following the tax overhaul of 2013.

In 2017, the state personal income tax rate will fall from 5.75 percent to 5.499 percent.

Also, the state standard deductions will increase by $500 for married taxpayers, filing jointly, to $15,500.

Deductions would also increase by $400 for heads of household to $12,400, and single and married filling separately will increase $250 to $7,750.

The budget also includes unlimited deductions for medical expenses and charitable contributions.

Senate President Pro Tem Phil Berger (R-Rockingham) said the tax changes in the budget would result in an overall tax cut of $384 million through mid-2017.

He called the budget a conservative, fiscally responsible document that represents a “net tax cut for the people of North Carolina.”

Many observers agree the tax changes are moving the state to a more consumption-based system, as evidenced by the decreasing income tax rate and the expansion of the tax base.

“The tax reforms advance North Carolina further down the road to a consumption-based tax system by lowering income tax rates and broadening the sales tax base,” said Brian Balfour, economist and director of policy for the Civitas Institute. “On net, the tax changes are projected to result in roughly $400 million worth of tax savings over the next two years. That is a significant plus for North Carolina families and our economy.”

Under the budget many repair, installation and service industries – such as vehicle and appliance repair – will be taxed.

Veterinary and advertising services are not included in the expanded tax base, a proposal that was floated earlier.

Set to adjourn by Sept. 30

House Speaker Tim Moore (R-Cleveland) announced after the final vote that the House would have a no-vote session on Monday, would take votes on Tuesday and will plan to adjourn by Sept. 30.

http://nccapitolconnection.com/2015/09/18/breaking-house-passes-budget-in-midnight-session/