NC governor reveals what he wants to do with $6.2B surplus

RALEIGH, N.C. — Gov. Roy Cooper proposed Wednesday that North Carolina government spend or earmark much of a projected $6.2 billion surplus to address further a host of needs like building construction, education inequities, affordable housing and worker retention.

The Democratic governor unveiled his recommended adjustments to the second year of a two-year budget lawmakers approved and he signed last fall. They also include higher pay for state employees and teachers beyond what the enacted budget already directs.

“Despite a difficult few years, North Carolina families and communities are marching ahead with the resilience that has always defined us,” Cooper told reporters. “The budget that I’m presenting today will build on our success and strengthen those areas that need reinforcement.”

The budget proposal came two days after the General Assembly and Cooper’s administration announced the state would exceed previous revenue projections for the current fiscal year by $4.2 billion, or 15%. That news also upped projections for the year starting July 1 by nearly $2 billion.

Cooper handles the overcollections by increasing second-year spending by $2.3 billion, or 8.5%, to $29.3 billion. But there’s also another $2.4 billion going to a host of itemized “investments” he places in reserves for things like infrastructure, economic development and workforce training that does not count in the $29.3 billion.

The remaining $1.5 billion is unspent, but appropriating the rest is likely to breed skepticism among Republican legislators who will review his ideas before passing their own adjustments. The legislative session begins next Wednesday.

“While the governor’s budget proposal includes several shared priorities, we are wary of excessively increasing spending in the face of potential economic downturns,” House Speaker Tim Moore said in a written statement.

Cooper’s proposal contains neither additional tax cuts nor more money for state’s rainy day fund. He pointed out that the fund is already on track to reach $4.25 billion once the new fiscal year begins July 1 and that income tax cuts are already contained in the current budget.

While calling his proposal “a smart, fiscally sound budget.” Cooper also added: “I think that it’s clear that we want to invest more than (Republicans) do.” Any final legislative budget would be presented to the governor, who could let it become law or veto it.

Senate leader Phil Berger’s office declined comment Wednesday on Cooper’s proposal, a spokesperson said.

Moore said Wednesday he was hopeful a bipartisan agreement could be reached with the governor. Compared to last year, when lawmakers worked for months crafting a two-year plan because no comprehensive budget was in place, Republicans have sounded less willing to stay in Raleigh this summer since the current budget would continue if no agreement is reached with Cooper.

His proposal includes $687 million more for K-12 and University of North Carolina system construction projects and repairs; $102 million to purchase and improve potential sites to lure large companies to the state; and $165 million for affordable housing, including first-time homebuyer down payment assistance to low- and middle-income people.

The governor also wants to spend an additional $526 million to cover the next year of a public education spending remedial plan approved by a judge to meet standards cited in the long-standing “Leandro” litigation. The state Supreme Court could soon rule whether the courts can force lawmakers to fund the plan.

On pay raises, a 2.5% increase for most state employees set to begin in July would grow in Cooper’s plan to 5%, while state law enforcement and health care workers would get a 7.5% increase. Teacher pay schedules would be adjusted to ensure instructors see a combined average 7.5% raise this year and next, instead of the current 5%. One-time bonuses of $1,500 to $3,000 also would be offered for workers and teachers.

State Budget Director Charlie Perusse said these and other compensation proposals are needed to address a state government job vacancy rate approaching 20%. The turnover rate last year among first-year state employees reached 36%, he added.

Cooper once again proposed expanding Medicaid to hundreds of thousands of additional low-income adults through the 2010 federal Affordable Care Act. While Republicans have opposed the idea for years, Berger said last year he’s now open to expansion. A special House-Senate study committee began meeting in the winter to consider expansion and other health care access improvements.

“I believe that we’re getting closer than ever to an agreement,” Cooper said. “I do appreciate that Republican leaders are taking this seriously.”

An impasse between Cooper and Republicans on Medicaid expansion was the chief reason why the state never had a comprehensive two-year budget approved in 2019.

Last year, the budget was enacted 4½ months late as Republicans finally won support from enough Democratic colleagues as spending provisions were adjusted. Cooper agreed to sign it, saying the good within the budget outweighed the bad. That budget ordered the creation of the Medicaid expansion committee.

(WATCH BELOW: CMS 2023 budget headed to Meck County Commissioners for approval)