Following closed-door process, House budget prioritizes wealthy and corporate interests above the needs of NC communities

[Note: Here are links where you can access the budget bill and the committee report. You can also see how members of the NC House of Representatives voted for this budget.] 

Yesterday, the NC House passed its proposed budget for FY 2024-2025. Continuing the legislature’s secretive budget practices of recent years, House leaders released the budget on Monday evening and voted to approve it Thursday. This rushed, closed-door process allowed no opportunity for most lawmakers — let alone regular North Carolinians — to meaningfully participate in deciding how the public’s tax dollars are spent. 

The kinds of revenue and spending decisions that result from this undemocratic process are, by now, unsurprising. The House budget maintains existing tax cuts for the wealthy and corporations alongside new spending targeted to wealthy families’ private school tuition costs. The budget also continues to neglect the systems and infrastructure — child care, public education, state employees, election administration, and more — that we need for our communities to achieve well-being and for our economy to thrive. 

Here are 4 things every North Carolinian should know about the House’s budget proposal: 

1. The failure to pause tax cuts for corporations and the wealthy means that NC will lose more than $13 billion in annual revenue by 2031. 

The House proposal included no changes to current law regarding tax policies. This means that North Carolina will continue its march towards zero income tax. Beginning in 2030 corporations will pay zero income tax in North Carolina, and the personal income tax rate will steadily decline to 2.49 percent in 2029, disproportionately benefiting the wealthy few. Altogether, these cuts will eventually cost our state more than $13 billion in public money each year — an amount equal to more than 40 percent of the House’s proposed budget. The failure to pause these cuts is already resulting in an inability to keep up with the needs of a growing and changing state and will further reduce our capacity to build a strong economic foundation over time.

2. As a share of the state’s economy, the $31.7 billion House budget falls far short of what we spent on older generations of North Carolinians. 

Over the last 50 years, the size of the state budget has clocked in at about 5.8 percent of North Carolina’s economy, on average.  This level of spending — sustained over decades — made investments in public education, child care, and health that laid the groundwork for an enviable workforce and a resilient state economy. With a total spending level of $31.7 billion, the House’s approved budget represents just 4.7 percent of the state’s economy.  

This difference may seem small, but it amounts to billions of dollars that are not flowing to local communities and public institutions whose needs have been repeatedly ignored by legislative leadership. If the House had proposed a budget at the historically typical level of 5.8 percent of the state’s economy, an additional $7.4 billion would be on its way to public school teachers, retired and current state employees, child-care workers and providers, and so many more.  

Instead, state employees — a sector with an average statewide vacancy rate of 23 percent — will receive an additional raise of only 1 percent. Meanwhile, retired state employees will get a one-time “bonus” of 2 percent that fails to take seriously increases in the cost of living, and the salary for a first-year teacher in North Carolina will rise to just $44,000 — well below what it takes to make ends meet in most NC counties. Far from a cause for celebration, the small increases touted by House leadership only underscore the artificial scarcity that a decade of tax cuts for the rich has created.  

3. The House budget uses federal money for meager, one-time funding for child care, but makes a sustained commitment to fully fund private school vouchers for wealthy families. 

North Carolina’s child care providers and the families who depend upon them are in a moment of crisis. Federal pandemic-era funding has been keeping the system afloat through compensation grants for early childhood educators, but these funds will expire in less than two weeks on June 30th. Nearly one-third of all child care programs in the state will be at risk of closing, since parents can’t afford to pay higher rates and providers running on tiny profit margins can’t boost wages on their own, while educators facing a pay cut have little incentive to stay in their incredibly challenging jobs. If the state won’t step in to fill the gap, nearly 92,000 child care slots could disappear.   

Child care workers, providers, advocates, and parents organized to meet this moment: they held a lobby day at the General Assembly, participated in a phone blitz that called House Speaker Moore’s office every 3 minutes for 40 business hours straight, and repeatedly made clear how important funding stabilization grants is. The House budget, however, allocates just $135 million for one year of “reduced grants” — far under the $200 million agency staff say is needed at a minimum, and less than half of the $300 million advocates have demanded.   

Crucially, the $135 million comes not from our state’s shared resources, but entirely from federal funding. 80 percent of this is flexible COVID relief funds, while the remainder comes from federal childcare funds that could otherwise be used in the subsidy program that helps families with low incomes pay for childcare. By comparison, the House was able to find over $150 million in state taxpayer dollars (plus nearly $100 million from the State Lottery Fund) to eliminate the 2024-2025 waitlist for vouchers that subsidize the cost of private school tuition for families of any income level, including at private schools that do not accept or accommodate all children. Furthermore, the House budget adds $215 million in recurring funds to the Opportunity Scholarship Grant Fund Reserve to “help avoid future waitlists for the program.” This means a commitment every year to pay private school tuition for rich families rather than get early childhood educators the pay that will help keep them in their jobs.   

4. The House budget continues to make use of reserves in non-transparent ways, to the benefit of special interests and the detriment of regular North Carolinians.  

The House budget puts $4.6 billion in taxpayer money into 11 different reserve funds. While $1.5 billion of these reserves is statutorily required for the State Capital and Infrastructure Fund, the remaining $3.1 billion is entirely discretionary. Compared to the enacted budget, the House adds funds to some reserves (e.g. two economic development reserves and the Retiree Supplement Reserve) while subtracting from others (e.g. the Housing Reserve and the Medicaid Contingency Reserve), continuing a pattern of making major decisions regarding state spending via reserves rather than via more transparent and traditional General Fund appropriations. The House budget also maintains a scheduled reservation of $250 million for the NC Innovation Reserve, a controversial fund with powerful corporate backing that was zeroed out and shifted to child care in the Governor’s recommended budget earlier this year. Furthermore, the House continues to add funds to the state’s already-robust Rainy Day Fund, whereas the Governor removed additional contributions to this fund in favor of investing in current needs. 

In short, the House had resources available to fund requests large and small — ranging from the $300 million to stabilize child care to $178 thousand for the State Board of Elections to hire two campaign finance specialists — but they simply chose not to. If House leaders felt true urgency in building up savings, they would pause the scheduled elimination of the corporate income tax, not hoard the limited resources we do have at the expense of North Carolina’s babies, toddlers, and working parents. 

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Facing seemingly irreconcilable differences with the Senate (see note below), the House’s budget proposal is unlikely to become law. Nevertheless, the House budget’s process and its contents demonstrate the backwards priorities of legislative leadership. Notably, voting on the budget took place on Juneteenth, a holiday to celebrate liberation and the anniversary of the end of slavery in the US — a time when we should not have to worry about one more way all people — Black, white, and brown — are being kept out of the democratic process in North Carolina. 

In their everyday lives, North Carolinians have already begun to see the chaotic impacts of legislative leaders’ secretive budget process and chronic underfunding: school buses that never arrive, disappearing child-care slots as more centers are forced to close, and difficulty recruiting and retaining public school teachers and state employees. In continuing to prioritize tax cuts for the wealthy and corporations alongside spending targeted to wealthy families’ private school tuition costs, the House budget's contents suggest that the chaotic experiences of NC families will not stabilize soon.