The driving force behind the Republican-written $21.25 billion budget the Senate approved around 12:30 a.m. Friday was to substantially increase teacher pay by moving money around in whatever creative ways were necessary to make that happen.
The price tag on that 7 percent average raise is $282 million.
It comes from cuts to health and welfare programs and other state spending, covering ongoing expenses on a short-term basis with one-time funding, and shifting teachers’ longevity pay into their salary schedule.
The budget also relies more heavily on lottery proceeds, increasing funding for teachers and teacher assistants by $34 million from that source of money. Budget-writers also dipped into reserves and used federal grants to replace the funding that had been in place.
Whether building a teacher pay raise on that financial structure is a good idea or not is a matter of sharply different opinions. Casting doubt on the plan is the recent report from the General Assembly’s fiscal staff that taxes cut last year will amount to a shortfall of about $700 million this year, and a total of $5.3 billion over five years – $880 million more than projected.
One-time funding accounts for $50 million in education spending, $89 million in health and human services, and $152 million in the entire budget.
“The knowledge that there is a higher cost to the tax plan passed last year is not reflected in this budget,” said Alexandra Sirota of the N.C. Budget and Tax Center, a group generally aligned against GOP policies, “which calls into question whether this budget is really sustainable, not in the long term but even over this fiscal year.”
She said the budget could put the governor in the position of having to notify state agencies early next year – when further tax cuts take effect – that they will have to start making cuts, because money to support this budget has to come from somewhere.
“They’re not only cutting, they’re raiding every possible fund,” she said. “That one-time money won’t ever be back there.”
Gov. Pat McCrory told reporters at an event in Charlotte on Thursday morning that protecting a reserve fund for building repair was important to him, along with “reasonable” teacher pay raises and protecting current Medicaid eligibility. He said he had been working closely with legislative leaders and thought the budget would meet his concerns.
“As I examine it, many of those criteria are being met,” McCrory said. “They’ve been listening to the executive branch.”
He said that his one disappointment was the omission of a provision regulating large commercial dog breeders. Puppy mill reform is a favorite cause of his wife, Ann.
McCrory said he hadn’t fully reviewed the budget and wouldn’t know if it was acceptable until later in the day. He hadn’t issued any further statements by Thursday night.
Longevity pay an issue
The budget passed 33-10. The final vote was taken after midnight Friday because Senate rules require separate votes on two different days.
Republicans defend the budget choices as necessary to recover from what they contend were years of overspending and debt by Democratic governors and legislators, while clearing the way for teacher pay. Senate Leader Phil Berger said on the Senate floor Thursday that he didn’t like using that much nonrecurring money for education spending, but he said Democrats spent far more than this budget does.
“The additional money that has been dedicated in this budget to compensation increases is historic,” Berger said. “Is it enough? No, we wanted more than that.”
The N.C. Association of Educators portrayed the longevity pay shift as a loss of a benefit and characterized the 7 percent average pay raise – amounting to an average of $3,300 a year – as a “fallacy.”
“It is wrong for the General Assembly to take the percentage represented by longevity, add it to an additional new percentage increase, and try to pass it off as a total salary increase,” the teachers association said in a statement.
The group also said it wasn’t fair that other state employees will continue to receive longevity pay as a separate paid benefit.
NCAE Vice President Mark Jewell said it was a “regressive” salary schedule that stalls out for the most-experienced teachers and takes away their incentive to stay in the classroom. He noted teacher pay has been frozen since 2008.
“It would be better if they did nothing, because what this does is hurt everybody,” said Kevin Shanahan, 53, an Enloe High School teacher in Raleigh. “When we started our careers, longevity pay was part of our deal. As it turns out, we’ve spent almost a third of our career frozen, which makes retirement planning very difficult. It’s very hard to stay in the profession.”
Hospitals would be hit
Some of the cost-cutting hits the state’s hospitals. Sen. Floyd McKissick, a Durham Democrat, said large urban hospitals would pay more for treating Medicaid patients because of increased assessments.
The N.C. Hospital Association issued a statement saying the budget disproportionately targets hospitals for Medicaid cuts and will force them to rework their spending at midyear, which would lead to a loss of services and jobs. The association said the more than $45 million in Medicaid cuts amounts to a 15 percent reduction of more than $200 million including last year’s cuts.
Programs under the state Department of Health and Human Services were also cut or paid for with nonrecurring funding, including $34 million shifted from the general fund to federal grants for needy children and families.
The budget also authorizes the use of certain bonds that can be issued without public approval to build a regional crime lab in the mountains, and to renovate the Albemarle Building in downtown Raleigh and the Department of Public Safety’s Samarkand Training Facility near Eagle Springs – totaling up to $63 million.
Sen. Dan Blue, a Raleigh Democrat, questioned the wisdom of accumulating that debt, and also disregarding contributions to build up the state’s rainy day fund, which he called disciplined budgeting. He contended it could put the state’s triple-A bond rating in jeopardy.
Staff writers Jonathan Black and John Frank contributed.