Legislators Approve $18.9 Billion Budget

The House and Senate gave final approval to an $18.9 billion state budget on Thursday that provides more funding than ever before for education, gives teachers and state employees substantial pay raises, provides much-needed funding for health care, including mental health reform, provides for environmental protection, and offers tax relief to all North Carolinians.

Members of the House gave initial approval of the budget on Wednesday afternoon by a vote of 82-35, and final approval on Thursday, 82-31. The Senate approved the bill on Wednesday, 32-16, and on Thursday by a vote of 31-15. No Democrats voted against the budget in either chamber. Four Senate Republicans and 22 House Republicans voted for it on Wednesday, with similar numbers on Thursday.

Improving education continues to be our number one priority. Under the proposal, more than $10.8 billion will be provided for education. This total is more than $943 million above last year’s budget, and is in addition to $425 million in expected revenues from the lottery for early childhood education, reducing class size, school construction, and college scholarships.

The budget provides an 8% pay raise for our state’s valuable teachers and a 5.5% pay raise for state employees, which is more than the 5% originally proposed by the Senate and Governor Easley. We also provide full funding of the state’s low-wealth and disadvantaged student school funds, as well as doing away with the school system discretionary cuts forced by budget deficits since 2003 – this totals more than $110 million for our children and their schools. More than $163 million is provided to K-12 schools, universities, and community colleges to help educate the more than 27,000 new students expected this fall.

The budget includes a critical investment of targeted resources into health care, including mental health and community based services, emergency planning and management, public safety programs, and our courts. It provides $27.4 million in relief to all 100 counties to freeze the counties’ portion of Medicaid expenses at this year’s level.

We also dedicated $27 million to improve our court system by establishing numerous new positions across the state, including 90 new Assistant District Attorneys, 75 Deputy Clerks, 17 District Court Judges, and 6 new magistrates, including a new judge for Guilford County. And, we place over $560 million into savings accounts and repair and renovation of state facilities.

The budget provides close to $200 million in tax relief for all North Carolinians by cutting two “temporary” ½ cent taxes early that were initiated in 2001 at the height of the recession, which were set to expire next year. The budget reduces the state’s sales tax by a quarter of a penny on December 1, 2006 – just in time for the holidays – and will reduce the top income tax bracket for individuals and approximately 30,000 businesses from 8.25% to 8% starting January 1, 2007. House budget negotiators were also successful in convincing the Senate to go along with the House-sponsored tax credit for small businesses that provide health insurance to employees making less than $40,000 a year. Legislators also capped the state’s gas tax at 29.9 cents to ensure the tax does not increase further even if oil and gas companies continue to raise prices at the pump.

This budget has been produced in record speed and is balanced. It is the result of the most open budget process in recent years, and we stuck to the position of the House that the budget should not include any policy issues or special provisions.

The complete budget (Senate Bill 1741, proposed Conference Committee Substitute) can be found on the N.C. General Assembly’s website at: www.ncleg.net.