By Julie Havlak
Carolina Journal News Service
RALEIGH — On August 26, Democratic Gov. Roy Cooper proposed a $25 billion General Fund budget to expand Medicaid, increase unemployment benefits, give teachers higher bonuses, and cut funding to Opportunity Scholarships.
Republicans immediately blasted Cooper’s spending plan, calling it a risky “spend now, pray later” proposal. His budget proposal comes four months late, they said.
Cooper says his plan won’t require new taxes. But the state would take out almost $5 billion in new debt, only $1 billion of which won’t need taxpayer approval, says Joe Coletti, John Locke Foundation senior fellow.
“It’s the least serious of the governor’s budget proposals, and that’s saying something,” Coletti said. “It’s not sustainable.”
Among other things, Cooper’s budget proposal would expand Medicaid, increase unemployment benefits to $500 a week and double the maximum time to 24 weeks, and take out almost $1 billion in bonds for health care infrastructure. The plan would also place a $4.3 billion bond on the November 2021 ballot to borrow $2 billion for school construction, $800 million for water and sewer infrastructure, $500 million for UNC System facilities, $500 million for the community college system, and $500 million for affordable housing.
In the education area, the governor’s budget would take $85 million from the Opportunity Scholarship Program in a one-time budget cut while spending $360 million to give teachers and principals a $2,000 bonus, support staff a $1,000 bonus, and community college and university employees a $1,500 bonus. North Carolina’s public elementary and secondary schools would receive $132 million for other needs.
In response to the COVID-19 crisis, the plan would spend $175 million for health services, including testing, tracing, prevention, mental health support, and increasing access in marginalized communities. Related provisions would spend $49 million to develop a state stockpile of personal protective equipment, $50 million to expand access to broadband, $200 million to assist cash-strapped local governments, and $27.5 million for small business mortgage, rent, and utility support.
Cooper says his budget invests in North Carolina to help people get back on their feet. Republicans say his budget is unrealistic and unbalanced.
Legislative leaders say Cooper is wrong to rely on $457 million from the state’s unappropriated balance. After the state moved the deadline for income tax filing from April 15 to July 15, it collected more taxes than expected. The state’s budget staff warned the amount could be a false gain.
“When my small business’s accountant tells me some money on the balance sheet might disappear next month, I don’t run out and spend it,” Sen. Warren Daniel, R-Burke, said. “Gov. Cooper’s ‘spend now, pray later’ proposal could very well result in teacher layoffs next year. That’s exactly what happened to former Democratic Gov. Bev Perdue.”
After the Great Recession, tax collections plummeted. The Democratic-led General Assembly and then-Gov. Perdue had to balance the budget by raising taxes and furloughing teachers.
Cooper disagreed with lawmakers’ assessment of the estimated $457 million windfall. He argued his proposal is a balanced budget that won’t require future cuts.
Cooper called the state’s current unemployment compensation “meager, bottom-of-the-country benefits.” He argued for Medicaid expansion, but didn’t say the General Assembly would support it.
Republicans attacked Cooper’s plan, especially a move to axe funding for the Opportunity Scholarship program. Cooper says his budget cut won’t affect students who already have scholarships.
“It strips low-income children, many of whom are black, from the chance to choose the education that best suits their needs,” said Sen. Deanna Ballard, R-Watauga. “Under the governor’s ‘equity’ plan, only the wealthy can attend private school.”
This is the first time a governor failed to present a budget update before the beginning of the fiscal year since North Carolina began using biennial budgets, said Coletti.
The governor normally sends a budget to the General Assembly by May during even-numbered years, according to the Office of State Budget and Management. This gives the legislature time to revise, negotiate, and pass the annual update before the new fiscal year begins on July 1.
“The governor is supposed to present his budget to the legislature before the fiscal year starts — because they’re supposed to pass a budget before the fiscal year starts,” Coletti said.
Cooper blamed the delay on Congress, saying he was waiting for additional relief money to come to North Carolina.
“We all thought Congress was going to act,” Charlie Perusse, the governor’s budget director, told Carolina Journal. “We’ve been waiting patiently for the last couple months. … We have about $500 million in General Fund money, slightly less than $1 billion in coronavirus relief money, and we’re on the clock to spend it.”
North Carolina usually passes a budget that lasts two fiscal years and edits the budget in even-numbered years. But the budget stalemate and the pandemic threw a wrench in that process.
North Carolina is operating on the budget from 2018 and a series of mini-budgets. Last year’s budget sank after Cooper vetoed the 2019-20 budget over Medicaid expansion. Republican legislators passed the budget out of the House with a surprise veto override, but the budget remained stalled in the Senate.
Cooper has vetoed three budgets sent to him by the Republican-led General Assembly. Republicans overrode the first two vetoes, but they lost their veto-proof supermajorities in the November 2018 election.
North Carolinians should prepare for another budget fight between the governor and lawmakers, said Coletti.
“They’re not going to agree,” Coletti said. “Cooper wouldn’t allow teacher raises this year because he thought that was more helpful than agreeing to the lower Republican raise.”