• Earlier this week, the North Carolina House released its budget adjustments for fiscal year (FY) 2024-25
  • The House budget proposal focused on fully funding the demand for Opportunity Scholarships, increasing teacher and state employee pay, and providing child care subsidies
  • The recommended budget includes $31.7 billion in general fund appropriations and more than $70 billion in total expenditures

A government budget is not just a collection of tax revenues and expenditures for a fiscal year, it is a representation of the values and vision of the policymakers who create it.

On Monday evening, policymakers from the North Carolina House submitted their FY 2024-25 budget proposal. Their proposal prioritizes fully funding the expansion of the Opportunity Scholarship program, increases to state employee salaries, and funding the reported child care subsidy gap.

Much More Than the $1 Billion Surplus Funds Are Currently Available

In the weeks leading up to the House’s budget proposal, much of the discussion in the media centered around how to allocate a nearly $1 billion budget surplus. However, it is worth noting that a substantial amount of supplemental money is available to policymakers outside of the $1 billion surplus.

Specifically, there is a total of $2.25 billion in funds carrying over from this current budget year available for appropriations. In addition, another $3.7 billion is available in unreserved funds for which there are no current plans of allocation.

In total, that provides policymakers with more than $5.9 billion in additional funds beyond anticipated revenue for this coming year to work with.

It would be prudent for policymakers to utilize these funds to proactively address the nearly $40 billion the state faces in unfunded liabilities for its employee pension and retiree health benefits or to expedite the retirement of approximately $4.8 billion in general fund tax-supported debt. Other viable uses for the $5.9 billion include providing taxpayers a refund or leveraging the funds to facilitate future tax cuts that will promote economic growth in the state, such as eliminating the franchise tax.

This report features noteworthy elements of the budget; however, it is not all-encompassing. The complete 271-page budget proposal is located here.

Nearly $2 Billion in New Spending

The House proposed spending $31.7 billion in General Fund net appropriations for FY 2024-25, approximately a 6.5 percent increase from the current fiscal year, accounting for just under $2 billion in new spending year over year.

While spending growth in the House budget proposal is substantial, its magnitude is relatively minuscule compared to Governor Cooper’s proposal from April, which requested over $34.5 billion in General Fund net appropriations alone.

The House plan would mark a 50.5 percent increase since FY 2014-15, and a doubling of the state budget over the last two decades. Furthermore, when accounting for receipt-supported appropriations, which the federal government heavily funds, the House’s budget proposal exceeded $70.8 billion, nearly an 8 percent increase year-over-year from FY 2023-24 and a 50.4 percent increase in just five years (FY 2019-20).

The House also proposed allocating more than $3.1 billion in discretionary reserves, adding to the $13.5 billion set aside for discretionary reservations in FY 2023-23 and FY 2023-24.

Of the proposed $3.1 billion for FY 2024-25, $250 million is for the second round of funding for NCInnovation, completing the $500 million taxpayer commitment to this controversial program.

Another $550 million is set aside for the Regional Economic Development Reserve and $155.1 million for the Economic Development Project Reserve. It is worth noting, once in the reserves, these funds become receipts that policymakers can spend without impacting General Fund appropriations.

For example, the current proposal recommends transferring $150 million from the Economic Development Project Reserve for highway infrastructure at the Randolph County Toyota Factory Megasite, a project already showered with a government incentive deal potentially worth up to $79 million. This funding is not reflected in the General Fund spending total.

Salient components of the House budget proposal include:

School Vouchers and Child Care Subsidies

The House proposed fully funding the expansion of the Opportunity Scholarship to provide school vouchers universally. The proposition increases funding to the program by nearly $250 million. This increase would heighten the total money allocated to the program from $293.5 million to $541.5 million. However, at this point in the year, it is unlikely that many students will have adequate time to take advantage of the vouchers before the start of the 2024-25 school year. Unfortunately, due to the House’s tepid speed in approving these funds, many students will have to wait another year for the opportunity to attend the school of their choice.

Surrounded by debate, child care subsidies have been a contentious topic all spring. Proponents of the subsidies claim that it is necessary for the state to step up when temporary federal funding decreases this summer. Prior to COVID-19, the state received about $400 million in federal funding, however, this figure grew to $1.3 billion during the pandemic. Opponents of the subsidies point out that it was always known that the expansion in federal funding was temporary. In the House’s proposal, they allocated $135 million in child care stabilization grants in an attempt to minimize the so-called “child care cliff.”

State Employee Salaries

Teacher’s salaries are set to increase by 3 percent, but the House would like to enlarge that increase to an average of 4.4 percent. Starting teacher pay would increase from $41,000 to $44,000.

Furthermore, the House proposed a restoration of increased pay for teachers who have earned a Master’s degree. While earning a Master’s degree is laudable, research demonstrates that teachers with Master’s degrees are no more effective at increasing student achievement than those without.

Outside of teachers, the House has also called for an across-the-board salary increase of 1 percent for most state employees on top of the 3 percent raise that is already on the books. The greatest salary boost is for Department of Corrections employees, who are issued a 9 percent increase in salaries on top of the 3 percent increase already in place.

The House also proposed that retired state employees receive a one-time 2 percent cost-of-living increase in pension benefits.

Capital Spending

The House wants to increase funding for public school repairs and renovations from $50 million up to $100 million, with each county receiving $1 million. The proposal also requests allocations for several capital expenditure projects, including the following:

  • Over $48 million for repairs and renovations to state-owned facilities located at multiple public universities
  • $5 million for improvements to the Raleigh State Farmers Market
  • $5 million for improvements to the Western NC Agricultural Center
  • $4 million for renovations to the State Fair Lunch Facility
  • $3.85 million for expanding the Caswell Shooting Range, a Yanceyville range open to the public and run by the state Wildlife Resources Commission

Pork Spending & Other

  • Increase the funding for state-owned trails by $1 million, bringing the total for FY 2024-25 to $13.5 million
  • Provide UNC-Chapel Hill $8 million to establish a College of Applied Science and Technology, featuring a degree program in engineering and another $17.5 million for the “advanced planning” of a new STEM building on campus. This is despite the fact that multiple state and private universities across North Carolina already have engineering programs
  • Allocate $1.6 million for capital improvements and equipment at Rendezvous Mountain, a satellite annex of Stone Mountain park
  • Provide a $2 million grant to the NC Theatre
  • Provide a $2 million grant to the Carolina Ballet
  • Allocate $1.5 million to the NC Policy Collaboratory to establish the Office of Learning Research
  • Increase the cap on the Film and Entertainment Grant Fund from $7 million to $20 million per film