Legislative Building in Raleigh, where the state budget is crafted
Legislative Building in Raleigh, Image courtesy of State Government Relations, UNC

By Rose Hoban

In dueling press conferences at the General Assembly building in Raleigh on Tuesday, lawmakers floated their proposals for how to allocate state dollars for the upcoming state fiscal year that starts July 1. 

Gov. Roy Cooper presented his $27.3 billion spending plan in late March. And usually by this time of the legislative work session, lawmakers in the Senate and the House of Representatives have presented their chambers’ budget proposals and have retreated behind closed doors to negotiate which line items in their budgets will prevail in the final state budget.  

As in so many things, this year is playing out differently at the legislature, but some things remain consistent: Senate Republicans presented a plan for cutting taxes, including a sunset of the corporate tax by 2028, with a firm “no” when it comes to the possibility of expanding Medicaid. 

“We’re in … still the effective, but beginning stages of Medicaid transformation and I think we should give that an opportunity to work,” said Senate Finance Committee Chair Paul Newton (R-Mt. Pleasant), who anchored the Republican’s press conference. 

Newton referred to a separate Medicaid policy of moving from a fee-for-service-based program to one where private insurance companies are paid a flat per-patient fee to deliver services to about 1.7 million of the state’s 2.4 million Medicaid beneficiaries. 

For their part, Senate Democrats have presented a plan to beef up broadband, add slots to both pre-K and to the Medicaid Innovations waiver that provides enhanced services to people with disabilities. 

And Democrats called on their legislative counterparts to expand Medicaid. 

“We can’t afford to wait any longer,” said Sen. Mike Woodard (D-Durham). “We’ve waited eight years around here for expansion. We’ve waited. We’ve talked about transformation for five years, transformation is on our doorstep, it’s time to go ahead and expand now.” 

Republicans’ plan

The Republicans’ opening gambit is a wide reduction in taxes for individuals and families, reducing the personal income tax rate from 5.25 percent down to 4.99 percent, and increasing the level at which a person pays no income taxes at all from $21,500 to $25,500. 

“We also propose increasing the child tax deduction across the board by $500,” Newton said during the press conference. “A family earning less than $40,000 per year would receive a $3,000 deduction per child, and the amount decreases higher up the income chain until it reaches zero for a family earning more than $140,000.”

Newton argued that for families of four earning less than $38,000, their state taxes would be reduced by about half. According to a tax calculator published by the state Department of Revenue, a family with two adults and two dependent children earning that amount would see about $340 come out of their current state tax tab of $683. 

The same family earning the state median income of $54,000 would see, on average, a 21 percent, or $314 tax cut from their current state tax burden of about $1,500. And a family earning $218,000, which is four times the median income, would see about a $700 reduction, or 6.9 percent, in state taxes. 

Newton said this cut would trim state revenues by about a billion dollars a year and argued that the plan would mostly benefit lower income families. He argued that their plan to phase out the corporate tax, which currently is the lowest in the Southeast, by 2028 would reduce state revenues only by about a half a billion annually. 

While health care is not a large part of the Republican’s tax cut package, there are some aspects of the plan that could affect health. The plan would make it easier to deduct out of pocket medical expenses for people who have a lot of them. 

Currently, in order to deduct copays, coinsurance and other out of pocket health care expenses, a person needs to spend more than $10,000. Under the Republican plan, that floor would be lowered to $7,500 per year in spending. 

All told, that would lower state revenues by about $23 million per year.  

One other small provision included in the tax plan is an increase in excise taxes paid by online sellers of cigars. However, the plan does not contemplate changing the tax rate on cigarettes. At $.45 per pack, North Carolina has the third-lowest cigarette tax rate in the U.S.

Democrats talk budget

In the afternoon, Democrats took to the same podium to talk up their plan to invest some of North Carolina’s state surplus in infrastructure and education, with no talk of tax cuts. 

Sen. Gladys Robinson (D-Greensboro) ticked off a number of Cooper’s budget priorities, which include programs to connect people with housing, transportation and food assistance. Their plan also included rental assistance and initiatives to create housing for people with disabilities. 

Cooper’s budget plan also would increase the number of Medicaid Innovations Waiver slots by 520, taking only a nibble at the 15,000, ten year waiting list for services for people with disabilities. 

But the big priority for Democrats was to increase access to health care through expanding the Medicaid program, a policy that was made possible by the Affordable Care Act. According to the Kaiser Family Foundation, the state’s current uninsured rate stands at about 12.9 percent, several percentage points higher than the national average of 10.4 percent. 

“Based on the American Rescue Plan, we would receive an additional $1.7 billion dollars in federal funds to support this expansion without the state covering any cost share up to six years,” Robinson said. “There is no excuse in our minds and there should not be any excuse in the minds of our colleagues in terms of it’s time to move forward.”

A recent report from the Commonwealth Fund found that expansion would create about 83,000 jobs in North Carolina, with 43,300 of those jobs in health care. The analysis predicted that expansion would reduce the number of uninsured people by about 379,000, with several hundred thousand others moving from private insurance onto the Medicaid rolls. All told, the state’s Medicaid enrollment would increase by more than 600,000 people. 

The Commonwealth Study, which was produced by economists from George Washington University, estimated that enacting the policy would generate some $5.9 billion in annual federal spending in the state and result in about $141 million in additional tax revenue, at a cost of $628 million per year. 

When asked about the Republicans’ idea of waiting to see how the transformation of Medicaid to managed care would proceed before pushing for expansion, Senate Minority Leader Dan Blue (D-Raleigh) said Democrats have been waiting for eight years already.

“We can save rural hospitals and we could increase the ability to do telemedicine and various other things,” he said. “And then you look at this year, when the national government has put so many sweeteners and know that they are paying us to expand Medicaid paid the full cost in the early years.”

Blue said he hoped his Republican senate colleagues would be willing to reach across the aisle to compromise and create a budget that Democrats could vote for. 

“We’re hoping that we have a budget that does not have so many poison pills, and we can’t swallow it. And I don’t know what those poison pills might be,” Blue said. “I’m certainly hoping that we don’t get any of those big surprises that we haven’t been alerted to up to this point.”

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Rose Hoban is the founder and editor of NC Health News, as well as being the state government reporter. Hoban has been a registered nurse since 1992, but transitioned to journalism after earning degrees...