- North Carolina's personal income tax rate has dropped in 2026.

Pretty good for our wallet, right?

What about the state budget?

And teachers walk out to protest education funding.

This is State Lines.

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♪ - Welcome to State Lines.

I'm Kelly McCullen, joining me today to kick off a year of panel discussions and analysis, Skye David of New Frame Incorporated and the Do Politics Better podcast, which is a hit podcast.

So if you want to be on that belt line, check out Skye and her partner, Brian.

Jeff Moore of the John Locke Foundation is here.

Jeff, always good to see you.

- Glad to be here.

- Former North Carolina Senator Mike Woodard of Durham County and a lot of other things now.

Good to have you on, Mike.

WUNC radio's Colin Campbell in his customary comfortable seat for representing the Capitol Press Corp.

Not really, but my old stomping grounds.

- Yeah, the basement of the legislative building.

- It's where the fame and fortunes are made and lost.

Well, North Carolina's personal income tax rate, talk about fortunes, dropped from 4.25% down to 3.99% on January 1st.

A little tick down.

The state budget laws passed a few years ago ensured that tax cut would happen, but you might know the future rate cuts they're debating right now are tied to state tax collection goals.

Holding our budget up, House Republicans want goals met for revenue before state tax cuts take effect in the future.

Hedge against a budget deficit.

Senate leaders want those taxes further reduced.

They say it spurs the economy and boosts revenue.

Governor Stein wants a rate freeze.

He's worried about a budget deficit, which he's calling a fiscal cliff.

So we use our vocabulary Skye to paint rosy or unrosy pictures.

It's just a quarter, what, 0.26 of a percent?

How does it matter?

- Well, for this year, it probably doesn't matter all that much in your taxes, but over the last 10 to 12 years, it's mattered a lot.

I think they've gone down almost a full 2%.

So whether that you see that in your taxes or not remains to be seen.

But if the state gets to $33 billion in revenue collection this year, it's going to go down even more next year.

And that's something that I don't think has been talked about a lot, that while this budget stalemate is happening, essentially the Senate's winning because they will continue the tax triggers unless something changes.

- It's a reason not to negotiate.

- Yeah.

Jeff, the economy is out there and everyone at Destin Hall, the Speaker of the House, you know, it's rickety, you know, we don't know if we're going to make the revenue goals.

We don't know what the economy is going to do.

And Phil Berger comes on this set over the holidays.

He says, 15 year winning streak.

We cut taxes.

This state grows.

- Yeah.

This time is different.

It's not usually a winning phrase because you usually run into a reality where this time is in fact not different than the other time.

So over the last 15 years or so, you've had lots of predictions for revenue shortfalls.

You see the House being more sensitive to it this time around.

And then for 15 years running, you have seen that kind of warning not really come to fruition.

So I think it may be prudent on the House side to look at what may be on the precipice economically.

And if you're going to have revenue shortfalls and they want to prepare for that, the Senate is going to run full steam ahead because they have the operational experience for the last 15 years showing them that surpluses are more likely than deficits.

- Mike, as a former Democratic Senator, I've seen your caucus get up there and they clutch those pearls about revenue and you're cutting taxes, you're going to cut us into a deficit.

Hasn't happened yet.

Berger doesn't think it will happen.

And so what do you root for in this case?

If you give the Republicans what they want, taxes will go down because the state will grow.

But to prove the point of Governor Stein, we have to have a fiscal cliff.

I wouldn't like that position, I don't think.

- Well, this is all you're predicting.

We're trying to pull out an economic crystal ball to see what the future is going to look like and that's always a hard thing to predict.

I think that was a Yogi Berra-ism, the future's a hard thing to predict.

So you're always predicting.

The good news is that our economy continues to grow, we continue to attract jobs and everybody's lining up to take credit for that.

So we have not suffered some of the predictions yet, but there are still folks who are very concerned about that and I think we've got to pay attention to it and that's why at least on my team, the triggers scare us a little bit because we see holes in there.

And I think Speaker Hall has raised that, he raised it in this very seat with you a few weeks back.

So we've got to pay very careful attention.

- Colin, what's the conservative play?

Believe in conservative economic policy of low tax stimulation through business activity or is it conservative to put guardrails on a state budget to prevent tax cuts and make the economy prove itself?

- I mean I think that's the challenge for Republicans in this and the line we're hearing from Speaker Hall, and it makes sense, right?

Inflation means those trigger numbers, those billion dollar figures at which the tax rate's going down, that money doesn't go nearly as far as it went five or ten years ago and so he feels like those numbers need to be adjusted as a result.

So it's not necessarily going back on the idea of continuing to push towards lower taxes, it's sort of slowing the process to make sure that the state has the money that it needs to pay teachers and do all the other things that state government does.

And so I think that seems to be the tension that we're seeing between Senate Republicans and House Republicans over this.

But it is interesting to see Governor Stein and the House Republicans are kind of on the same page with this, but the reason we don't have a budget and the reason these tax cuts aren't going anywhere for the time being is that Senate Leader Phil Berger is sticking to his guns on this one.

- All right, State Auditor Dave Boliek is out with the report this week.

He says North Carolina has over $1 billion in vacant job salaries.

Boliek's team was focusing on state jobs that had been vacant for at least six months.

They counted 5,900 jobs as long-term vacant.

Between simply the Department of Health and Human Services and the State Department of Corrections, Governor Stein's administration's fired back a bit saying the report is misleading as there is a reason some jobs are being held open for flexibility purposes and federally funded jobs should never have been counted.

Auditor Boliek promises Collin that state agencies can come to him, offer to get a time period of which to reply to defend why they're holding so many jobs open.

Is hiring frozen and the jobs open and now they're being blamed for the open jobs or are state agencies really sitting on cash because they will not hire and they'll squeeze their existing staff?

- I think that's the challenge and that's why there needs to be a lot of nuance in these numbers coming out of the state auditor's offices.

You have some jobs where they really need to fill them, they're really trying to fill them but the salary is just not competitive enough with state employees not getting raises that they can't fill those positions.

On the other hand, you have some positions where they're not trying to fill them.

It's been vacant for several years and it's maybe a position that the state agency doesn't actually need or it's not a huge priority and so trying to sift through that is going to be interesting.

What I do see is sort of the big picture out of this report on vacant jobs is it seems like it's a potential roadmap to budget cuts and trying to find places where the state can save money in part because of the fiscal challenges that we just discussed a few minutes ago.

- Mike, what do you make of lapsed salaries?

People do expect those jobs to be filled, people that want services.

We've looked at what happened to DMV, they hired 65 new staff or somewhere in that number 63.

They probably still need more offices and people.

How should we as regular folks out there take this report?

- Well in other state government news this week, water is wet.

We've talked about lapsed salaries for years.

It is a practice that's common in all levels of government.

It's common in the private sector that these lapsed salaries are used to save money, to backfill other functions of a department.

And so I think the news item for me of this story is that Treasurer Boliek has put together this dashboard and is encouraging budgeteers, appropriators to use it as a tool.

And that I applaud.

And I think the governor correctly raised the flag that said, "Wait a minute, you've got to look at these, the different pots of money that make up the state budget and pay for these salaries."

In commerce, I think there were a couple hundred positions actually that are on the books but aren't funded until they're needed, and we needed some of those back in the pandemic to help with-- - And then it's federal money, so it's not really a potential saving for the state.

- And it's all federal money, so it's not as if this is a gotcha moment where we just found a billion dollars all of a sudden.

We're using that money to do a lot of different things.

And I think to some extent reward some of our cabinet members, council of state members, budget directors who are saving budget dollars in salaries, in some of these lapsed salaries.

But here the auditor's offering a tool for budget folks to use, and I think the governor's just saying, "Make sure that this dashboard accurately reflects what the dollars and the job numbers are."

- Jeff, what do you think of Auditor Boliek stepping away from the analysis and saying, "No, it's a billion dollars, we're a little over, and it's just the jobs."

I'm not interpreting, I'm giving you the facts.

Lawmakers, go to work, read it how you will.

- Yeah, well, a billion dollars is a nice headline, and it makes a big splash.

But he was careful to say that he wasn't suggesting that this billion dollars in lapsed salaries is just all of this on the chopping block, that it shouldn't be suggested that he wanted to just cut all of these positions, that this is an opportunity.

You make the big splash in the headlines to actually get the conversation going, to offer the dashboard to appropriators to actually make these decisions, and get into the nuanced details of, are these jobs that we should hold over, or is there an issue with transparency in funding different things if you are holding positions because you rely on some of those things for operational expenses, is that really how we should be operating in the government?

So I think this is, the purpose of the DAVE Act was actually to point out things just like this, so I think they're following through there, bringing it to the legislature so hopefully they can make some careful decisions, yeah.

- Skye, there's a way government works and politics work behind the scenes, and then there's the way everyone who is not involved in it thinks it should work, and there can be some difference of opinion on that.

Is this what that case is with vacant jobs, or is the state being slow or lazy or sloppy with how and if it's hiring certain positions?

- Well, to everyone's point about the dashboard, they had some pie charts on there, and they asked state agencies to say in their own words, why is it that you aren't filling these positions?

And so a lot of them are, hey, we are not able to fill it because of the job pay, pay is number one, but other things were we needed to save that money and use it for different things that we have because of inflation or because of whatever.

So they had in their own words why they couldn't fill those jobs, so I think there's a little bit of everything happening.

- I do see some budget movement on the Department of Corrections, that's a known, if you read any news over time, people don't wanna be prison guards right now for a variety of reasons.

Do you think, is that separate from this, or for this DAVE report?

- I think that's been a goal, I mean, we've had those deadly attacks at some of the state prisons a few years back, and so that's been a goal for legislators for a long time now to try to get those salaries competitive enough where you fill all those positions and you don't have a safety problem where there's too few people working inside a prison.

- And side-stepping, he wants the budget writers and lawmakers who are elected to handle this from their own district, so that's an interesting ask of local leaders, come together as a body.

- That's right, that's right.

And I think what Auditor Boliek did correctly is shine the light on a lot of these jobs that are just hard to fill.

And I've learned in my 20 years of elected service how many technical jobs there are.

State government is not just a bunch of paper pushers sitting around with their pencils.

There are very technical jobs, there are engineers, there are scientists, there are health professionals.

And these jobs have been very hard to fill for quite a while now, it's the nature of our economy now, and it's really been a challenge to fill many of these technical, scientific, very specific jobs because of, we gotta keep salaries competitive.

- We have Dave Boliek with the Dave Act and the Dave Dashboard, now we've got Doge, we're in North Carolina's House of Representatives, has its own Doge-like committee.

Heard testimony from critics of Buncombe County's diversity, equity, and inclusion programs from earlier this decade.

They also called Raleigh leaders to come in person to discuss DEI rumors about the city of Raleigh.

Lawmakers focused on a 2021 Buncombe racial equity plan as well as an Asheville city-funded internship program that allegedly or actually excluded white and Asian applicants, yet was using state funding and public facilities, I think the county courthouse.

Raleigh leaders were brought in to ask about a hidden video suggesting Raleigh still quietly runs some DEI efforts, but Mayor Janet Cowell said she didn't know about the video until lawmakers told her about it, that her city's focused on economic development.

Jeff, I'll go to you on that.

It's a couple things to talk about I find very interesting is lawmakers still looking back to that era of 2020, 2019, 2022, good headlines there, got our attention.

Then you got the citizen journalists now who are doing some work out there investigating whether they're official journalists or not, and they're exposing things and they're getting criticized as well as lauded too.

Lots happening right now in our society.

- Yeah, yeah, and the citizen journalist is a role that becomes more and more popular, especially as filming things and visiting places and asking questions becomes easier with all the technology that we have, so you can shine lights on things.

And sometimes it's appreciated and laudable, and sometimes there's a lot to complain about with the nature of what they're doing.

These things, like you said, it's not 2022 anymore, so this would have been more front page in those years, and it's interesting to me how many lifetimes I felt like I've lived since 2022.

But in reality, that's just a few years ago.

So the idea that there are vestiges of a lot of DEI programming in these counties, and after this law has come down, that they're gonna run at loggerheads and you're gonna actually have what we always expected, which is Buncombe County, Wake County, Durham County, you might have these kind of conflicts with that new law coming into place, and with DOGE and their focus and needing something to do, being that they're not passing budgets these days, you would actually call them before you and air this out.

But I don't think it's gonna have the political life that it had previously, just because we're in a completely different world, even though we're just four years removed from the height of all that.

- It's a great week to call a committee meeting to oversee something, to bring it up, because there's not much happening.

There's no bill, there's no law, there's no scandal, per se, not in North Carolina.

Skye, what do you make of these committees meeting?

They have made some outrageously entertaining clips online.

I think Fox News picked up Representative Brendan Jones for his committee.

Does it feed on itself?

It makes you feel good when you get seen like that?

- It is something that leads you to the question, okay, but now what?

We're going to expose X, Y, and Z, but now what?

Are we going to change something about it, or are we gonna go to the next committee where we expose something new that's viral?

And so that's my question, what comes after the committee meeting?

- What happens?

- That's the interesting thing, is I was sort of waiting, particularly with the Raleigh presentation to hear a lot of heated questions or statements made by Republican lawmakers about what Raleigh did or didn't do that was exposed in this video, and they didn't really have any questions.

They seemed almost satisfied with the answers, which essentially was, hey, you got a video of someone in February who is still using the term DEI, we made changes in response to the President's executive order to change the language, restructure the program so we were in compliance, and now we're in compliance.

So it does sort of seem like a, is there anything else to do other than say good job on following the order over the course of the last year?

- Mike, I wanna ask you, everyone's elected in that legislature from a particular county.

I noticed some of the more rural, very rural conservative counties are the ones most outraged by Buncombe County doing Buncombe County.

How does that work in conversation in the state house?

Asheville's doing to do what Asheville's going to do, and if you're in Onslow County or Pender or Duplin or Columbus County, it is a different society, a different way of political thought.

- Yeah, I mean, because ultimately that legislator's sitting in that, I like to call the Watergate hearing room, and we redid the auditorium and turned it into the hearing room where all these oversight committees are.

- Trying to be Congress, basically.

- I love sitting, I'd always go sit at the top layer of the dais just so I'd get the best camera angle.

But you're playing to the home crowd.

And I don't think a legislator from Columbus County, voters in Buncombe County don't care what he or she thinks, and in fact, if they're throwing books around, as one legislator did prominently a few weeks back, you almost cheer that what you're doing in Orange County is good thing.

So here we got Buncombe County.

I've always been, let Buncombe County do what Buncombe County wants, let Columbus County do what Columbus County wants.

Ultimately what you get, to Skye's point, what happens after all of these hearings?

And for the most part, it has been very little.

And so what you end up with is a lot of click bait, and you get great clips for your social media and for your re-election campaign.

- Jeff, I have to follow up on what's being said.

So the issue here is local municipalities skirting a state law or skirting federal changes to regulations where funding is tied to ending DEI.

It's one thing to disagree with a politician.

I thought the investigation, the oversight is to expose that people are breaking the law by not doing what was voted in.

Is that an accurate assessment?

- I think so, and I think to your point, you're doing this for your home audiences, for sure.

If you're coming from a rural community that really finds a lot of problems with these sort of issues, then they expect you to actually follow through with it.

And like we said earlier too, 2022, that we're in a different world now, it's not that long ago.

And so the people that are electing you to the offices actually expect you to follow through on a lot of these things.

So these hearings are just making good on a lot of that.

The next steps are up in the air, as you all mentioned.

But I think to some degree, they're really fulfilling their promises to actually focus on these things.

- And then, Skye, these are hearings to expose laws passed, are they being followed by local municipalities?

And then Speaker Hall's promising at least oversight committee hearings to investigate investigations into possibly changing local property tax laws.

Is there enough room to do all these high level, I won't say inflammatory, but hot topics before the legislature starts warming up its engine to come back for spring?

- Well, there's room to do whatever the Speaker feels is a priority.

And if he is making these types of hearings and the property tax issue a priority, there's room for that.

And you just have to decide that something else is not a priority.

And so if it's his priority, it's gonna happen.

- So the boss is the boss, Mike, that's what I'm hearing no matter what.

- The property tax question is an interesting one though, because the clock is running.

I mean, late April, we'll be here for session now.

And I'm glad the Speaker's opening up this conversation.

I think it's a good one, having been a local elected official and understanding property tax.

But I hope we won't rush headlong into this and we'll make sure that the local elected officials and their various associations are part of that conversation.

- We'll get to that in later shows and later weeks.

But it's still, one week is down and it was invested in Buncombe and Raleigh DEI allegations.

One week is gone, we're down to what, 11 weeks, something like that?

- That's right.

- For 15 weeks.

All right, I saw this report in the Carolina Public Press, Mike.

Reports about 50 public schools were affected this week by a teacher walkout, happened Wednesday.

Protest organizers said they expected 650 to 750 teachers to call out.

They say most were using their personal and sick leave, they did it the right way.

They wanted the state budget passed, among a lot of other issues with education policy.

They got the media's attention, Mike, anybody else's.

- Substitute teacher call-ins, hirings, from what I can see, Wake County, it was a normal day.

- Yeah.

- Usually teachers, when they protest, they protest, you get the attention.

So what happened?

Air out of the balloon, bad timing?

- Yeah, I mean, coming at the end of a holiday, first week back after school, it just felt to me as if the timing wasn't really good here.

You only saw it in 50 of our 117 local school districts.

And so it didn't feel like it really moved the needle or brought any further conversation or moving us toward a budget.

We've already talked about a couple of issues that are keeping a budget from getting done and may continue to keep a budget from getting done.

I don't think this one moved the needle very much.

And I certainly understand the call for better teacher pay and for all of our state employees to get better pay, and they need a budget to do that.

But this one fell a little flat to me.

When those legislatures show up in April, it's time for the state employees to rally and come down to Jones Street.

- Collin, those teachers, they did a decent job with the press release.

They had teachers, some, show up and had a lot of media attention.

I was watching to see how did they record it, how did they film it.

And it was diehard teachers.

They mean well, they gave a lot of quotes.

But I don't wanna judge the quality of that.

But when you're discussing education with revenue triggers in a state budget, is anything gonna get around the tax debate, whether it's education and teacher funding or what?

- I mean, I think it's all tied in together, right?

I mean, the fact that we are not at a point where we're making teacher salary increases at the level that the House or the governor wants, that's tied directly into the tax cut triggers because the revenue is just not there to bring starting teacher pay to $50,000 a year if you continue to reduce taxes.

It's really hard to make those numbers jibe.

And so for teachers to get out there, and even if it wasn't as big an event as we've seen in teacher protests in the past, to sort of remind folks that that's the core of this discussion is it's not just this sort of esoterical, they didn't do their job, they didn't pass the budget.

It has to have real effects on how many teachers you get, how many positions are filled, do you get great teachers in the classroom or do they go find something else to do with their careers?

- When you choose whether or not to cover a protest, there's one every day during the legislative session, how do you gauge what's important to be covered, what don't you have time for?

- It tends to, for us, it's oftentimes the size.

You can see lots of protests that are like five people and that's just five angry people with signs.

It's not necessarily a news event.

If you get hundreds of people or thousands of people out there, that feels like a really big thing.

I will say for our colleagues in the TV business, sometimes it's a slow news day and if there's a three-person protest, that's some video you can go out and get and therefore that becomes a news story even though it might not be on a day where there's a lot happening.

- Skye, about teachers groups and you're into talking to lawmakers and everyone tries to influence people down there.

It seems teachers are just all in on the Democratic Party leadership and Republicans sometimes can seem to be the enemy.

We're 15 years into Republican majorities and super majorities.

Could teachers pivot and make friends across the aisle with the people who actually pass a budget?

- I think they could and I think an organization that's done really well with that is the state employees.

The state employees, I think you would think of them as Democratic strongholds but they really kind of worked their way into Republican leadership and they stuck with people that stood up for them.

- And I also think it's interesting that in Speaker Hall's op-ed in December, he kind of tipped his hat to the teachers and said, "Hey, I'm standing with you.

I think you should get raises.

Stand with the House budget.

We're fighting for you."

- But I've seen it timing again.

If the Speaker's Republican, he wants a 5% raise, it's not enough, it's seven.

If it's a Democratic governor wanting a 5% raise, it's all cool.

Am I wrong?

- No, I don't think so.

I think that that's been the kind of nature of this for the last 10 years or so but you have an opportunity to actually get a lot of teachers into that Republican side of things to get in their ear and have more influence.

You have the NCAE representing, I think, less than 20% of teachers across the state.

So there you have 80% of teachers across the state that have an opportunity to organize and get in the ears of Republican lawmakers to actually get some raises.

'Cause this time, it's not just a raise that's too little, it's just that there's no raise at all because we don't have a budget.

So it probably didn't make as big of a splash as they wanted but like you all mentioned, if they did this later in the spring when they're back in town, it may do so.

- That's the show.

Thank you so much.

Kicking off the panel year, we'll have all of you on very, very soon.

Thank you for watching.

Email your thoughts, statelines@pbsnc.org.

Good to see you.

We'll see you soon.

♪ - Across North Carolina, strong communities begin at home.

The North Carolina Realtors represent more than 55,000 professionals statewide focused on expanding housing attainability for all.

- Quality Public Television is made possible through the financial contributions of viewers like you, who invite you to join them in supporting PBSNC.