State House Approves $22 Billion Budget, Setting Up Clash with Senate Over Spending Levels

The North Carolina House of Representatives last week approved a $22 billion state budget for fiscal year 2016, which is expected to face significant pushback from the Senate for its 6 percent increase in spending. Among other things, the House budget:

  • Allocates $40 million per year for film industry grants for the next 2 years;
  • Reinstates a scaled-back Historic Preservation Tax Credit.  The tax credit would cap at $20 million for larger projects and $22,500 for single-family homes;
  • Raises teachers’ and state employees’ pay by two percent;
  • Increases Division of Motor Vehicles fees by 30 percent;
  • Reinstates Medical Expense deductions for ALL taxpayers;
  • Creates a pilot program that instructs educators to teach financial literacy in NC schools;
  • Funds the NC Housing Finance Agency;
  • Increases the funding for the Workforce Housing Loan Program to $20 million (from $10 million);

The Senate is expected to release its budget proposal in mid-June, which will likely contain lower spending levels that are more in line with the 2 – 3 percent increases sought by Governor Pat McCrory.

The Senate plan is also expected to scale back or eliminate many of the tax credits and deductions reinstated in the House plan, including the Historical Preservation Tax Credit and Medical Expense deduction. However, raises for starting teachers and other state employees, along with increased funding for the court system, are expected to remain a priority for both chambers.

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