While much of the media attention was surrounding the override of Governor Cooper's veto of Senate Bill 20 last week, on Thursday, North Carolina Senate members gave final approval to the chamber's version of the 2023 Appropriations Act, which lays out spending for the next two fiscal years.

By a vote of 36:13, with seven Democrats joining Republicans in support of the spending plan, the Senate vote gives General Assembly leaders just six weeks to hash out a final conference report before the beginning of the next fiscal year on July 1st. The House of Representatives voted to approve their own proposed budget in a bipartisan vote last month.

As in past years, we expect the members of the minority party who voted for the majority's spending plan to be named to the Conference Committee, which is charged with negotiating the final version of the state's two-year budget. It is worth noting that Governor Cooper's veto stamp holds less power over the budget process than it did in past budget cycles, as General Assembly Republicans recently gained a legislative supermajority with the much-publicized party switch by Rep. Tricia Cotham (R-Mecklenburg). 

Although very similar, the House and Senate budgets have some significant differences that will need to be settled in the Conference Committee. For state employee and community college compensation, the Senate budget provides an average 5% raise, compared to the 7.5% average contained in the House budget. For teachers and K-12 personnel, the Senate has proposed an average 4.5% raise, but that average is heavily weighted towards teachers in their early years of the new pay scale the Senate approved as well as part of their budget. In contrast, the House spending plan proposed an average 10% raise for teachers and additional funding for local school systems to incentivize hard-to-fill positions. Among the over 1,000 pages of budget documents, the following provisions are particularly notable.

The proposed Senate budget:

• Provides for the expansion of the Opportunity Scholarships school voucher program, eliminating income restrictions in favor of a "backpack funding" model.

• Eliminates vehicle emissions inspection requirements for all counties except Mecklenburg.

• Modifies the Community College System governance structure to provide for more appointments and confirmations by the General Assembly in lieu of the Governor and local boards, as proposed by Senate Bill 692.

• Speeds up scheduled personal income tax cuts, lowering the rate to 4.5% in 2024 and to 3.99% in 2025.

• Effectuates the realization of $125 million in cost savings to the State Health Plan by urban hospitals in counties with a population greater than 210,000 residents, as well as academic medical center teaching hospitals.

• Raises the Appellate Judge retirement age to 76, as well as the Superior Court and District Court retirement age to 72 years old.

• Eliminates the copay for reduced-price school lunches, providing that all children who qualify for free and reduced-priced lunches will receive a free lunch. Additionally, the Senate budget prohibits administrative penalties from being levied on a student for lunch debt.

• Expands 8% short-term car rental tax to include peer-to-peer or vehicle-sharing rentals.

• Imposes new taxes on ridesharing and other personal transportation services.

We expect the Conference Committee to deliberate for 2-4 weeks before producing a final budget document - or Conference Report -that we predict will become law in mid to late June. Leaders from both chambers aim to have the final budget in place before the start of the state's new fiscal year on July 1.