Gov. Pat McCrory set a restrained course for North Carolina on Thursday in a budget proposal for the next fiscal year that offers modest pay increases for some employees and emphasizes austerity.
The document runs almost 300 pages. Its explanation of “new or significantly expanded” programs takes up less than half a page.
McCrory explained his approach at a news conference in Raleigh, saying it “emphasizes priorities to keep our economy improving.”
That means no tax increases, he said, though his plan would put a halt to an expected drop in the state’s gas tax. It means more incentive money to recruit jobs to the state. And he would ask voters to approve more than $2 billion in borrowing for roads projects and to rehabilitate blighted state buildings.
“The budget is still very tight,” McCrory said. “But we are investing in areas that will have the biggest impact.”
McCrory’s proposed budget is his effort to shape state government for the second half of his term, just as he gears up for a re-election bid in 2016. The budget plan covers spending through June 2017, though much of the focus is on the 12 months that will begin July 1.
His plan is sprinkled with new ideas and proposals, including $4 million to design and build a new state Division of Motor Vehicles headquarters on Poole Road in Raleigh.
But its emphasis is on the small-bore workings of government. McCrory would require major agencies to trim their own budgets in the 1 to 2 percent range, including the university system.
He would hire engineers to study possibly unsafe dams across the state, for example, and would spend $500,000 for test drilling to see how abundant natural gas might be. In his own Department of Administration, he spelled out savings of $400,000 by reworking janitorial contracts.
His budget director, Lee Roberts, said the budget protects the state’s top bond rating, thanks in part to reserves of close to $700 million. The budget would spend about 2.1 percent more next year overall, an increase that would be lower than the forecast percentage increases for inflation plus the state’s population.
“This is a budget that is conservative and disciplined,” Roberts said. “It does not raise taxes. I’ll say that again: It does not raise taxes.”
It now goes to lawmakers, who will begin writing their own budgets in a process that should conclude by the end of June.
Senate leader Phil Berger and House Speaker Tim Moore issued statements thanking the governor for his effort, which they said had many good ideas.
“The Senate looks forward to reviewing the governor’s plan in greater detail and finding common ground as we work through the appropriations process,” Berger said.
Groups critical of the McCrory administration found plenty to criticize, suggesting McCrory is missing a chance to invest more in the state’s needs.
Alexandra Forter Sirota of the N.C. Budget & Tax Center said the governor used “budget tricks” to hide the state’s inability to keep up with needs.
“The ‘tough choices’ Gov. McCrory says he made were self-inflicted,” she said in a statement. “They come from tax cuts that primarily benefit the wealthy and profitable corporations, meaning there is too little left to invest in education and other building blocks of a strong economy.”
Democratic Sen. Floyd McKissick of Durham said he wanted to see across-the-board raises for all state employees, including teachers.
More on education
McCrory’s administration emphasized its spending on education, which takes up more than half of the $21.5 billion plan.
Roberts said more than $1 billion will have been spent on increased teacher pay during McCrory’s term in office if the budget is adopted – “That’s the stat to remember,” Roberts said.
Overall, education funding would be increased by $235 million, or 2.8 percent, from the current year. That includes funding to address enrollment growth, which will require 1,400 additional teachers.
The University of North Carolina system would be asked to find cuts amounting to 1.2 percent of its overall budget, or about $26 million. Roberts said that is manageable, and he presented charts showing North Carolina spends more on higher education than any other state.
“We think there are ways to find those efficiencies and savings that have nothing to do with the quality of the classroom experience,” he said.
While Roberts insisted that the budget wouldn’t raise taxes, McCrory’s transportation plan incorporates legislation passed by the Senate in February to set the gas tax at 35 cents per gallon for the next two years – higher than it would be under current law.
State government economists have projected that under current law the gas tax, now 37.5 cents, will fall to an average 30.4 cents for fiscal year 2015-16, which starts July 1, and 31.3 cents in fiscal year 2016-17. That’s because of a statutory formula pegging the tax rate to oil prices, which have fallen sharply in the past six months.
The Senate-approved bill would change the formula and push the tax higher, to a minimum 35 cents, allowing the state Department of Transportation to collect a projected $475 million in additional gas taxes during those two years. McCrory’s budget reflects those additional tax collections.
Prospects for passage
McCrory added that once income tax reports are filed this spring, the state will have a clearer picture of its finances and, if the outlook improves, more money might be spent on other ideas.
The governor said his staff has been working with legislative leaders. The General Assembly would be able to build on his budget proposal, he said. He said 90 percent of what he sought in past budgets has been implemented.
The legislature will begin digging into the governor’s proposal next week, with formal presentations and the beginnings of debate.