Why hasn't NC approved raises for teachers and state employees? GOP stalemate over taxes

Public school teachers and other state employees will likely need to wait another month for North Carolina lawmakers to approve new raises.

Leaders in the North Carolina General Assembly say they’re still at an impasse over a plan to fully fund state government over the fiscal year, which started last month. There’s been little progress on negotiations and none are expected until next month, state Rep. Donny Lambeth, R-Forsyth, told WRAL on Wednesday.

Lawmakers earlier this month approved stopgap funding for some state agencies and certain higher-education needs, but they’ve yet to adopt a plan that would fully fund government operations or provide raises to state employees. Until a deal is reached, the state is operating under the funding levels approved under the 2023-24 budget.

Tax rates are the main issue holding up negotiations, said Lambeth, a senior chairman of the House Appropriations Committee. The personal income tax rates are scheduled to be 4.25% this year and 3.99% in 2026. The chambers have disagreed on how to plan for tax cuts in 2027 and beyond.

State economists have warned budget writers that declining revenues could leave North Carolina without enough money to pay for the state’s growing needs. The Senate’s initial proposal called for reducing the personal income tax rate 3.49% in 2027, while the House proposed a less aggressive plan.

Legislative leaders also disagree over the size of raises for state employees and funding for a new $3 billion children’s hospital, scheduled to break ground in Apex in 2027. Little progress has been made, Lambeth said, because of the dispute over tax rates.

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“First the finance differences must be resolved before we can talk about how much availability we have to work with,” Lambeth said, adding that he doesn’t expect progress until next month.

Senate leader Phil Berger pushed back on allegations that his chamber is holding up negotiations and accusations from Democrats that Republicans haven’t done anything to help North Carolinians’ wallets. Senate Republicans have introduced proposals this year to cut taxes, lower healthcare costs and support continued Hurricane Helene recovery needs, said Lauren Horsch, a spokeswoman for Berger.

“The Senate has provided the House with multiple budget proposals, including keeping the current tax package — as approved by both the House and Senate in 2023 — in order to move budget discussions forward,” Horsch said in a statement, adding: “Senate budget writers remain open to negotiating a comprehensive budget bill.”

Democrats have criticized Republicans for a lack of urgency. State Rep. Robert Reives, the House minority leader, on Wednesday accused Republicans of caring more about “culture war” bills than helping North Carolinians with inflation or rising food costs.

With the help of some Democrats, Republican legislators last month enacted new laws cracking down on immigration, loosening gun laws, and changing a formal definition of gender to exclude transgender people.

“If it's a culture war bill, they have us back in this building ready to rock and roll,” Reives said.

“Not one of those bills puts more money in your pocket,” he added. “Not one of those bills brings your prices down, not one of those bills gets your health care costs under control, not one of those bills makes your life better.”

A spokesperson for the House Republican Caucus accused the Democrats of fear mongering, saying in a statement that House Republicans “will not rush the budget process at the expense of our state employees, teachers, and other needs of the state.”

Under the House proposal, most state workers would get at least a 2.5% raise over the next two years. Many would be in line for even higher raises, depending on how much money their department freed up by eliminating open positions. That 2.5% minimum raise is twice what the Senate is proposing for most state workers, although the Senate would give substantially higher raises to law enforcement officers.

The House GOP statement comes a day after Rep, Mike Schietzelt, R-Wake, said his colleagues were working to secure as big of raises as possible for state employees.

“I'm not going to try and short circuit the [negotiation] process, because we want to be able to get as much for these folks as we can,” Schietzelt said. “We want to advocate for these folks, but we have to let the process play out.”