- Associated Press - Tuesday, June 16, 2015

RALEIGH, N.C. (AP) - The two-year North Carolina government budget proposed by Senate Republicans is one of the heftiest in recent memory, a 500-page measure chock full of fundamental policy changes that contrasts with GOP declarations the proposal is fiscally lean.

The full Senate Appropriations Committee voted Tuesday for a spending proposal that would spend $21.5 billion next year, a less than 2 percent increase compared to the current year.

The Senate budget “protects the state’s long term fiscal health,” said Sen. Harry Brown, R-Onslow.

Republicans incorporate into the plan a dramatic overhaul of Medicaid, a phase-out of regulating where hospitals and surgical centers can set up shop and an endorsement of online games and increased advertising by the state lottery. Big tax changes are inside. And potentially thousands of teacher assistants statewide could be gone in a funding shift to hire 3,300 more licensed teachers in early grades.

Senate GOP leaders planned the first of two required floor votes Wednesday.

Here’s a look at the budget’s most significant policy and fiscal proposals:

STATE LOTTERY: The Senate wants to boost lottery advertising by 50 percent to generate $31.5 million each of the next two years. Advertising spending has been an amount equal to 1 percent of total revenues since the lottery’s creation in 2005.

The lottery also counts on $15.5 million through mid-2017 for what are called “e-instant” games, online games that mimic instant scratch-off tickets bought at stores, and potentially other lottery offerings.

Lottery commission members already have authority to approve online games. Brown said fellow Senate Republicans were OK with the online component.

John Rustin with the North Carolina Family Policy Council said the continued expansion of gambling “will inevitably exacerbate gambling addiction and its destructive effects on the citizens and families of North Carolina.”

PAY INCREASES: Not all teachers and rank-and-file state employees would get pay raises in the Senate plan, compared to at least 2 percent for nearly all state employees and most teachers in the House plan.

There would be no across-the-board raises for all state workers, agreeing instead with Gov. Pat McCrory’s budget proposal to set aside money in a pool for his administration to target increases in hard-to-staff and high-demand jobs. But the Senate gives McCrory much less for that pool than what he requested.

Teacher pay would grow by 4 percent on average, with higher minimum salaries for early-career teachers at $35,000. While teachers with at least 25 years wouldn’t see their base pay grow from the current $50,000, these teachers also would get $1,000 bonuses, like they did last year, according to Brown.

TAX CHANGES: The Senate Finance Committee met later Tuesday to approve the tax portions of the budget, which were unveiled last week. The measure reduces further the individual income tax rate from 5.75 percent to 5.5 percent, lowers the business franchise tax by one-third and increases the value of standard deductions.

Items subject to the sales tax would be expanded to include pet care services, installations and automobile repairs. Sales tax distributions would be reworked to benefit smaller counties, and nearly all counties would be able to raise their sales taxes by a half-cent.

WHAT MCCRORY THINKS: McCrory, who would be asked to sign the final House-Senate compromise budget into law, said Tuesday after a public appearance in Raleigh he supported some provisions in the Senate bill on salaries and rainy-day reserves.

He also likes the creation of two state Cabinet-level agencies for veterans’ affairs and for information technology and the shift of state parks and aquariums to the Department of Cultural Resources. But he doesn’t like the reorganization of Medicaid and said it could be unconstitutional.

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Associated Press writer John Moritz contributed to this report.

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