RALEIGH, N.C. — Gov. Pat McCrory and his top financial aide described the governor's $21 billion state budget proposal for the coming year Wednesday by highlighting what's absent in his spending plan about as much as what's included.
McCrory offered his adjustments to the second year of the two-year North Carolina budget approved by the General Assembly last summer and that he signed into law.
The Republican governor said what's still included is the signature piece of his plan he announced last week— raises for public school teachers and almost all state employees. Budget director Art Pope, meanwhile, gave his take on how those raises are feasible despite a $445 million revenue shortfall this year.
Prudent budget decisions, including more than $600 million in unspent funds from the current fiscal year, helped McCrory fill the hole and pay for $263 million in salary and benefit improvements, Pope said.
And what's absent from this spending plan is what Pope read as a "Top Ten" list of accounting measures no longer used to close shortfalls — including temporary tax increases and taking money from highways and local governments.
"We're changing the culture," Pope told reporters at a news conference. "We're doing transparent accounting."
Critics of the Republican budget and last year's tax overhaul said the proposal fell short because it lacks the money to make needed investments in education, health care and infrastructure. McCrory's plan also finds savings from the current budget to help cut costs that are sure to raise the ire of educators and hospitals.
The governor wants the University of North Carolina system to cut 2 percent from its budget, with some exceptions, or about $44 million. Such reductions have been asked of university leaders for years. He's also decided to keep funds for teacher assistants in grades K-3 at current-year levels for next fall, rather than expand funding to address enrollment increases.
"I believe that giving our current teachers and public school employees a pay increase is a higher priority than hiring additional assistants at this time," McCrory wrote in a letter to the budget adjustments he wants starting July 1.
State employees and teachers have received one pay raise since 2008.
The governor also wants to increase the special assessment hospitals pay to drawn down larger Medicaid payments for the state and hospitals from the federal government. The change, while resulting in only $15 million more for the state, comes as hospitals are struggling with increased costs for Medicaid patients.
"Our community hospitals cannot continue to offset state underpayments for Medicaid and fulfill our role as the health care safety net and our mission to care for any North Carolinian, all day, every day," North Carolina Hospital Association Executive Vice President Hugh Tilson said in a release.
McCrory wants to give teachers with at least eight years of experience raises ranging from 2 to 4.3 percent. McCrory and legislative leaders already agree they'll raise the minimum salary for early-career teachers this year to $33,000. Most state employees would see $1,000 more — $809 of which would go to higher salaries, with the rest going to their pension balances, Pope said.
House Speaker Thom Tillis and Senate leader Phil Berger, R-Rockingham, were generally positive about the proposal, which would raise spending by 1.7 percent compared to this year's budget but keeps spending flat compared to the current second-year plan already in law.
"We think it's great progress, and we think it's something we can build on," said Tillis, R-Mecklenburg.
But Senate Minority Leader Dan Blue, D-Wake, said McCrory is "playing shell games with the money the state has left hoping voters will forget about the giveaways," Blue said.
It's the Senate's turn to create the first version of the budget adjustment bill, followed by the House. Then they will compromise on a plan to send to the governor for his signature, hopefully before the new fiscal year begins.