North Carolina's Budget Law: When Does It Take Effect?

On September 22, 2023, North Carolina Governor Roy Cooper announced that he would let the state budget bill become law without his signature, allowing for the expansion of Medicaid coverage to 600,000 low-income adults. This decision came after months of delays and negotiations, with the Republican-controlled General Assembly passing the $30 billion budget with a vote of 26-17. While Governor Cooper criticized the budget for shortchanging schools and prioritizing power grabs, he prioritized the need to provide health insurance to those in need, stating that he would not allow people crying for help to wait any longer. The budget includes an average 7% raise for state employees and teachers, as well as tax cuts and private school voucher expansions.

The governor's options

The governor has three options when it comes to the state budget bill:

• Sign the bill: By signing the bill, the governor indicates their approval and the bill becomes law. This option was not favoured by Governor Roy Cooper in 2023 when the North Carolina state budget bill was on his desk. Cooper, a Democrat, had several issues with the budget bill, which was created by the Republican-controlled General Assembly.
• Veto the bill: The governor can veto, or block, the bill. However, if the legislature has a supermajority, they can override the veto and the bill will become law anyway. In 2023, the Republicans had a supermajority in both the House and the Senate, so Cooper's veto would have likely been overridden.
• Do nothing: The governor can choose not to sign or veto the bill within 10 days of receiving it. If this happens, the bill will automatically become law without the governor's signature. This was the option chosen by Cooper in 2023. While he had issues with the bill, his main priority was to expand Medicaid to cover 600,000 low-income adults, and this budget allowed for that expansion. Cooper also said that he would pursue legal action against several provisions in the bill that he disagreed with.

Medicaid expansion

In North Carolina, a bill becomes law if the governor chooses not to sign or veto it within 10 days of receiving it from the General Assembly.

On September 22, 2023, North Carolina Governor Roy Cooper announced that he would allow the state's new $30 billion budget to become law without his signature. The budget includes Medicaid expansion, a long-sought goal for Cooper and other Democrats.

Expanding Medicaid has been a top priority for Governor Cooper since he took office. Since 2017, he has worked within the confines of state law to begin the expansion of Medicaid, even when Republican legislators sued him in federal court to stop the process. Without Medicaid expansion, North Carolina has missed out on an estimated $500+ million per month in additional federal funding.

The expansion of Medicaid will give health insurance to hundreds of thousands of the state's working poor. Adults who earn too much to qualify for traditional Medicaid but too little to receive even heavily subsidized private insurance would benefit from the expansion.

Governor Cooper's health secretary suggested that Medicaid coverage could be carried out as soon as December 2023 if the legislature completes the last step for Medicaid.

Legislative approval

In North Carolina, the governor can choose to sign or veto a budget bill sent to them by the General Assembly. If the governor chooses neither to sign nor veto the bill within 10 days of receiving it, the bill will become law without the governor's signature. This is what happened in September 2023 when Democratic Governor Roy Cooper allowed a $30 billion budget bill to become law without his signature. The bill was backed by the Republican-controlled General Assembly and included Medicaid expansion, a long-sought goal for Cooper and other Democrats.

The legislative process for budget approval in North Carolina begins with state agencies submitting budget needs to the Office of State Budget and Management (OSBM). OSBM and the Governor's Office then review budget proposals. The governor recommends a budget based on information provided by state agencies, the governor's priorities, and the revenue forecast. The General Assembly deliberates and passes a budget in an appropriations act. The governor then has the power to sign or veto the appropriations act. If the governor signs the act, it becomes law. If the governor vetoes the act, the legislature may try to override the veto. If the override is successful, the appropriations act becomes law without the governor's signature. If the legislature does not override the veto, the state will operate under a continuing resolution until a new appropriations act is passed and signed into law.

In the case of the 2023 North Carolina state budget, the Republican-controlled General Assembly passed a budget bill that included Medicaid expansion, among other provisions. Governor Cooper chose not to veto the bill, allowing it to become law without his signature. This decision was made primarily to allow for the expansion of Medicaid, which would provide health insurance to hundreds of thousands of low-income adults in the state. However, Governor Cooper criticized other aspects of the budget, including cuts to education funding, power grabs by the legislature, and violations of the state constitution.

Tax cuts

In North Carolina, the governor has the power to allow a state budget bill to become law without their signature. This is what happened in September 2023 when Gov. Roy Cooper allowed a $30 billion budget to pass without his signature, citing the inclusion of Medicaid expansion as his reason for doing so. The budget bill included accelerated individual income tax cuts, changes to the corporate franchise tax, a new ride-sharing tax, new and modified sales and use tax exemptions, and an extension to file a pass-through entity tax election for tax year 2022.

The personal income tax cuts in the 2023-2025 budget continue the project started in 2013 to eliminate income taxes in North Carolina. The budget moves up already scheduled personal income tax reductions and adds further cuts that will take effect if certain revenue thresholds are met in the previous year. These cuts are estimated to cost the state $13 billion. If the thresholds are met, the personal income tax rate would fall to 2.49% starting in 2029.

The budget bill also included a reduction in the corporate franchise tax for C corporations, which will be imposed at a rate of $500 for the first $1 million of the tax base and $1.50 per $1,000 of the base exceeding $1 million. This continues North Carolina's recent history of cutting corporate taxes.

The budget legislation also made several modifications to the sales and use tax, including extending exemptions for certain retail sales and fuel and creating a new exemption for certain breast pumps and collection and storage supplies.

In addition to the tax cuts and modifications, the budget bill also included a new excise tax on for-hire ground transportation services such as Uber and Lyft. The tax is imposed on the gross receipts from each service at a rate of 1.5% for exclusive rides and 1% for shared rides.

Teacher raises

In North Carolina, the state budget becomes law if the governor does not sign or veto it within 10 days of receiving it from the General Assembly.

The North Carolina state budget includes raises for teachers and other state employees. The budget, which totals over $30 billion, was passed by the General Assembly on September 22, 2023, after months of debate among Republican leaders.

The budget increases pay by an average of about 7% for teachers over the next two years. Early career teachers will receive larger raises than veteran teachers, with increases ranging from 3.6% to 10.8% based on experience. Teachers with national board certifications, degrees, and other licenses will receive additional bonuses. There is also a ""small county and low-wealth" signing bonus for teachers, with the state matching up to $1,000 in local funds.

However, some have criticised the budget for not doing enough for teacher raises. Teacher advocates and state employees have criticised the budget for not keeping up with inflation. Rep. Renee Price, a Democrat, said the budget "disrespects current and retired state workers" and that larger raises should be provided.

The budget also expands private school vouchers, which will now be available to wealthy families for the first time in almost a decade. This has been criticised by Democrats, who say that more money should have been spent on teacher raises instead.

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