NC Gov. Cooper signs state budget into law, will lift state of emergency

North Carolina Gov. Roy Cooper signed the state budget into law on Monday, citing investments in education and the workforce, as well as ongoing negotiations about Medicaid expansion. He also announced he will lift the state of emergency tied to the COVID-19 pandemic next month.

“Today, I signed the state budget (HB 103) that includes critical investments in education, economic development, transportation and the state workforce,” Cooper said in a news release.

“This budget does not include Medicaid Expansion, but the leadership in both the House and Senate now support it and both chambers have passed it. Negotiations are occurring now and we are closer than ever to agreement on Medicaid Expansion, therefore a veto of this budget would be counterproductive,” Cooper said.

In announcing lifting the state of emergency in place since the coronavirus pandemic reached North Carolina in March 2020, Cooper’s office said the budget includes changes to “ensure flexibility” for the Department of Health and Human Services. The emergency order will lift on Aug. 15.

The budget spends $27.9 billion. Written by the GOP-majority legislature, it’s an adjustment to the two-year spending plan signed into law by the Democratic governor in November. The process of writing the bill was brief and took place behind closed doors before Republicans presented it for up-or-down votes without any opportunity for amendments.

Both the House and Senate passed Medicaid expansion bills, but neither has become law. If the state does not expand Medicaid before the end of the year, it leaves $1.5 billion on the table. Whether or not to include it in the budget almost stalled out negotiations between the two chambers the week before the General Assembly passed the budget on July 1.

State employees were already getting a 2.5% raise in the fiscal year that began July 1. The recent budget bill adds another 1%, giving them a 3.5% total raise this year. Teachers would get a higher average raise of 4.2% during the same period. Retirees get a 4% bonus this year, an increase over the 3% planned from the 2021 budget.

There is a vacancy rate among state employees of 21%. When the budget bill was revealed in late June, Ardis Watkins, executive director of the State Employees Association of North Carolina, called the proposed raises “shameful,” and called on Cooper to veto it.

“Employers in North Carolina and all around the country are responding to their staff shortages by increasing pay and benefits in order to be competitive in the market,” she said. “The State of North Carolina has record staff vacancy rates but the legislature is choosing to hoard money rather than give state employees reason to stay.”

However, Republicans cited inflation and the potential for a recession on the horizon for not spending more, even as the state has a surplus of more than $6 billion.

Inflation a factor in budget

“Inflation is still wildly out of control, which is why it is imperative the state remains prudent in its spending decisions,” Senate leader Phil Berger, an Eden Republican, said in a statement when the budget passed. “These budget adjustments better prepare North Carolina for the economic turmoil that many expect to come,” he said.

In the House, Rep. Dean Arp, a Republican budget writer from Union County, referenced the 2009 Great Recession, and said that this year Republicans expanded the state’s savings reserve to $5 billion.

“Today, we have put our house in order,” Arp said during the House budget debate.

The budget puts $1 billion into a new fund, called the State Inflationary Reserve, as Republican budget writers wanted to have a way to pay for inflation-related cost increases for construction and infrastructure projects.

The budget also redirects 2% of state sales tax revenue to the N.C. Department of Transportation instead of the state’s general fund, The News & Observer previously reported.

Republican lawmakers floated the idea of more tax cuts while they deliberated in June, but decided not to give any sort of tax rebate, as Democrats called for, or speed up reductions in the income tax rate, as some Republicans wanted.

The budget passed the Senate 36-8 and the House 82-25, which are both veto-proof majorities. But the Democratic minority leaders of each chamber split their votes: Sen. Dan Blue voted no, and Rep. Robert Reives voted yes.

Reives said during the budget debate that he did not want them to leave Raleigh “without settling Medicaid.”

Reporters Will Doran and Lars Dolder contributed to this story.

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