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Budget deal expected Monday

June 17th, 2017

— After two weeks of closed-door negotiations, House and Senate leaders predict they’ll have a final budget deal to unveil Monday.

On Friday, lead budget-writers for the two chambers were walking back and forth between the corner offices. House senior Appropriations chair Nelson Dollar, R-Wake, said Friday afternoon that the two sides were “on the way to conclusion,” and that they hoped to agree on all the major items by the end of the day.

However, there are usually a few smaller issues left on the table for the “corner offices” – the House Speaker and Senate President Pro Tem – to settle at the end. And legislative staff will need time to draft, proofread and print the final bill and accompanying documents.

In general, the two chambers aim to end up somewhere between the House and Senate positions on most items, although that hasn’t always been the case. The major areas of contention include:

Teacher Raises: Both plans would aim for an average of 9.5 percent over the two-year budget cycle. The Senate would get there a bit faster with an average raise of 3.7 percent in 2017-18, while the House’s proposal was a 3.3 percent average raise this year. The House budget offered better raises for teachers at and above 16 years, while the Senate’s plan did not.

State Employee Raises: The House budget offered an across the board raise of $1000 in 2017-18, while the Senate proposal was the higher of $750 or 1.5 percent.

State Retiree Pensions: The House proposal included a one-time bonus of 1.6 percent, but no year-over-year cost of living increase. The Senate’s budget included neither an increase nor a bonus.

Tax Cuts:

  • The Senate plan called for major tax cuts, including a large cut to the corporate income tax rate, a smaller cut to the individual rate and an increase in the standard deduction. However, under the Senate’s proposed changes to the tax code, single mortgage holders would see their mortgage tax deduction fall from $20,000 to $10,000, and changes to the franchise tax would leave some businesses paying more.
  • The House proposal was more modest, with a smaller increase in the standard deduction, and no cuts to the corporate or individual income tax rates. It made some minor adjustments to mill machinery and other business taxes, but left the mortgage deduction alone.

Both House and Senate plans spent the same amount, $22.9 billion, a spending target that was agreed to earlier in the year. However, sources close to the negotiations say the final deal is likely to end up spending slightly more – possibly as much as $23.1 billion.

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