- Associated Press - Thursday, June 30, 2016

RALEIGH, N.C. (AP) - The final agreement on adjustments to the state budget for the new fiscal year received initial House approval Thursday, a $22.3 billion proposal highlighted by pay raises, tax breaks and reserves for the next economic downturn.

Many House Democrats joined Republicans, who penned the measure, in voting 92-23 for it. With the Senate already approving the compromise earlier this week, the legislation now needs just one more positive vote Friday in the House before it heads to the desk of Gov. Pat McCrory. The governor has expressed no public opposition to what’s inside.

The plan, which covers the new fiscal year starting Friday, spends less than 3 percent above what legislators directed to be spent in the first year. A two-year budget is already in place. The bill only adjusts the second year of that plan.

House Republican leaders say the budget gives average teacher pay raises of 4.7 percent, and will raise this fall the average salary when local supplements are added to above $50,000.

The average percentage is more than what House Republicans offered in its original budget proposal, but they won on a key negotiating point by giving rank-and-file state employees a 1.5 percent raise, along with a bonus equal to an additional 0.5 percent. There’s also an additional $80 million to be distributed to agencies for merit-based bonuses.

“If you value teachers, vote for this budget,” said Rep. Nelson Dollar, R-Wake, senior co-chairman of the House Appropriations Committee. “If you value state employees who work hard for the citizens of this state every day, vote for this budget.”

Standard deductions also will rise by $1,000 to $2,000 through next year, so more income by individual tax filers who don’t itemized on their state returns will be subject to no taxes. Republicans say it will disproportionately benefit low- and middle-income residents. As many as 75,000 filers won’t owe income taxes any more, according to a previous legislative study of the idea.

“This was tax relief for the middle class,” said Rep. John Szoka, R-Cumberland, a finance negotiator.

The measure sets aside $474 million more in the state’s rainy day reserve fund, bring its total to a record of nearly $1.6 billion. A small revenue surplus, money unspent by government agencies and more than $318 million in Medicaid savings appears to put Republicans in their best position fiscally taking over the legislature in 2011.

“We have made investments that are long overdue,” said Rep. Josh Dobson, R-McDowell, while discussing increased funding for mental health, child welfare oversight and Medicaid patients with disabilities. There was also more money for a firefighting plane and a new aircraft for the State Bureau of Investigation.

The Democratic critics of the budget considered some of the spending as pork. They said there were $74 million in earmarks inside, including money for dozens of nonprofits, for municipal revitalization grants and other projects.

“We appear to have succumbed to some bad habits,” said House Minority Leader Larry Hall, D-Durham.

Some Democrats also blasted the budget for spending $35 million for taxpayer-funded scholarships for K-12 students in low-income families to attend private or religious schools. The bill contains a Senate provision directing that money increase annually by $10 million through the late 2020s, which many argue takes money from the public schools. And while retirees would get a 1.6 percent bonus, it wouldn’t be permanent.

“We’ve done a good job but we haven’t done as much as we can,” said Rep. Larry Bell, D-Sampson.

The package also would lower tuition at three University of North Carolina campuses to $500 per semester for in-state students and $2,500 for out-of-state students. The initiative, which begins in fall 2018 at UNC-Pembroke, Western Carolina University and Elizabeth City State University, is designed to promote enrollment and help students avoid excessive college debt.

The near passage of the budget comes as leaders of both chambers try to pass other legislation and work out other differences before they adjourn. The Senate unveiled a resolution late Thursday to shut down the two-year session on Friday, but it’s unclear if one or both chambers will go home at that time.

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