Taxes, salaries, vacancy cuts make plain differences over rival North Carolina GOP budgets

Associated Press

22-05-2025

RALEIGH, N.C. (AP) — The North Carolina House's reveal of its state government budget proposal makes plain the differences on taxes, salaries and job cuts between Republicans who control both General Assembly chambers.
With strong bipartisan support, the House gave preliminary approval late Wednesday to its plan to spend $32.6 billion in the year beginning July 1 and $33.3 billion the next year — the same amounts Senate Republicans agreed to for their competing two-year budget approved last month.
The amounts reflect a more strained fiscal picture amid uncertainty over federal government spending, inflation and projections of flat or falling tax collections.
'We've had to tighten the belt a little bit more than we normally have,' Rep. Donny Lambeth, a top chairman of the House Appropriations Committee, told reporters.
But the chambers' paths to those figures show deep areas of disagreement as they pursue a compromise they hope new Democratic Gov. Josh Stein can accept — or build enough legislative support to withstand a Stein veto.
House more cautious on tax rate reductions
GOP leaders in both chambers agree a previously approved law reducing the current 4.25% individual income tax rate to 3.99% in 2026 should stay in place.
But the House, concerned about revenue shortfalls, doesn't want to go along with the Senate proposal to reduce that rate to 3.49% in 2027 and 2.99% in 2028.
The House also would make it harder to lower the rate below 3.99% by raising revenue thresholds contained in current law that state coffers must exceed before the rate automatically falls. The Senate tilts toward a more aggressive threshold, proposing a schedule that could reduce the rate one day to 1.99%.
Stein has warned that the current thresholds, if left intact, could bring 'self-inflicted fiscal pain' by curbing revenues. Senate Republicans have downplayed such fears, and outside conservative groups argue the House budget actually would raise taxes — legislative staff calculate $2 billion-plus more revenue annually compared to current law.
The national conservative group Club for Growth warned on X ahead of Wednesday's vote that anyone voting for the bill containing the 'tax increase in North Carolina should expect to be held accountable on election day, and kiss their political future goodbye.'
The threat didn't faze House Republicans, some of whom considered it a scare tactic as talks begin with Senate counterparts. House leaders also note the plan would lower income taxes further by increasing standard deductions and eliminating tax on the first $5,000 of a worker's tips.
'Nothing on the outside of this building is going to change my belief and this (GOP) caucus' belief that this budget is ... the more fiscally conservative between the two chambers,' House Speaker Destin Hall said during a break in Wednesday's debate.
Teacher salaries surge in House plan
The House plan would raise teacher pay well above the Senate proposal, with a focus on early-career instructors.
The House proposal would increase state-funded salaries of K-12 teachers by 8.7% on average over the next two years. The Senate's proposed raises are well under half of that percentage, but that doesn't include $3,000 bonuses the Senate also approved.
The House says its plan would vault compensation for first-year teachers to top levels in the Southeast. Stein's budget proposal released in March would raise teacher pay well over 10% on average.
House goes deep on cutting vacant jobs
House Republicans would direct state agencies, departments and institutions to eliminate nearly 3,000 vacant positions, while the Senate version directs that 850 vacancies be eliminated. The Office of State Human Resources notes there were more than 14,000 vacancies in state agencies as of last month.
About two-thirds of the House's cuts come from a directive for agencies to eliminate 20% of their vacant positions, with cost savings intended to beef up salaries to recruit and retain workers for critical hard-to-fill positions.
Negotiations could continue well into summer
After an expected final House vote Thursday, the budget bill will return to the Senate — a prelude to House-Senate negotiations on a unified plan to present to Stein.
The goal is to have an enacted budget by July 1, but meeting that deadline has been difficult in recent years as Republicans have battled each other and the Democratic governor. Given this week's discourse over taxes, GOP intraparty negotiations could extend deep into summer.
Legislative Republicans currently are one seat shy of a veto-proof majority, meaning Stein could wield some influence.
For now, Stein backs the House plan over the Senate. In a statement released during Wednesday's floor debate, he praised its proposals for teacher pay, cutting taxes for working families and reducing income tax rates 'only when the economy is growing.'
'The House's proposed budget isn't perfect,' said Stein, yet while also criticizing 'the Senate's fiscally irresponsible revenue scheme.'
Stein's words trickled down into Wednesday's vote. Following five hours of debate and dozens of amendments, 27 House Democrats joined all the Republicans present in voting 93-20 for the plan.