- Coming up on State Lines, a one-on-one conversation with North Carolina Senate President Pro Tem Phil Berger.

Next.

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[upbeat music] ♪ - Hello and welcome to State Lines.

I'm Kelly McCullen.

Joining for an exclusive half-hour interview, Senate President Pro Tem Phil Berger.

Mr.

Berger, thanks for being on State Lines as we guide our way towards 2026.

- Thank you, Kelly.

- Good to have you.

I've got a lot of questions here.

We need to get down to business.

Every couple of years, the governor gets his chance for the State of the State.

What is your idea of the State of the State as we leave one year behind and look ahead towards a short session?

- The state of North Carolina is in really good shape.

We, from a fiscal standpoint, have robust reserves.

We have revenue that continues to grow.

We're the third fastest growing state in the nation in real terms.

Only two states are growing faster than us.

And North Carolina has an economy that continues to expand.

So the state of North Carolina is very positive at this time.

- All the folks we have around this table on our weekly panel, we get into the policy and the process and the personalities of all of what you and others do down in Raleigh.

But the big change was, Roy Cooper gives up the governor's mansion and here comes Josh Stein.

How are they different?

How has that change in leadership affected how you've conducted policy and all the procedure?

- Yeah, so I don't know that it's changed how we've conducted policy.

I do think that there's a difference between Josh Stein and Roy Cooper on a personal basis.

I don't think philosophically they're that much different, but on a personal basis, Josh seems to be more engaging, more one-on-one with legislators, more in the vein of wanting to talk, willing to talk.

But I think there remain differences from a philosophical standpoint between him and the majority of the legislature.

- Has the heat toned down out of the executive branch?

I know back in the Cooper years, there'd be some pretty hardcore battles in the media, if nowhere else, and on Twitter, if nowhere else.

Is it a different vibe and way of doing business?

- A little bit, but I don't know that the outcomes are that much different.

We had a number of measures that he vetoed, a number of measures that we overrode his vetoes.

So there are issues that we have disagreement on.

The good news for North Carolina is there are issues that we are in agreement on, and a lot of that has to do with the things that have resulted in a good bit of positive news on the economic development front.

- I want to ask you, what is voter sentiment right now?

I mean, you can speak for Republican voters, as you're a Republican.

What do you think people are feeling if they're a Democrat and if they're a Republican?

- I think folks are concerned about the economy.

I think folks are worried about the after effects of the inflation that we've seen.

I think when folks go to the grocery store and are trying to make sure that they are buying food for their family, they see the price of eggs up, they see the price of bread up, they see the price of milk up.

They do see it leveling off to a certain extent.

The effects of the Biden inflation, however, are still with us.

- Let me ask you about inflation.

How much of the inflation issue, and it is an issue whether congressional Republicans like it or not, how much of it is a state problem, and what can you do about it at the state level?

- You know, there are some things at the state level that we can work on, things like tax rates.

We can reduce the taxes on North Carolinians.

That helps to a certain extent.

But the national economy is just a huge driver of what happens, at least as far as inflation, prices, those sorts of things are concerned.

- I do want to ask you about revenue because new reports out from Dave Bullock, sales tax revenue up 400 million, corporate income taxes up, personal income taxes, collections are up, rates have been dropping.

Some people say, watch out, that may not be a good thing.

What do you say about that?

Or some people say, hey, it's more money for the state to do more important things.

What do you say about that?

- I think the fact that we're seeing our economy growing means that those additional revenues are likely to accrue to the state government.

And I think what that means is that it's time for us to reduce the tax rate so that we don't see growth in government that outpaces both inflation and population.

We've gotten stumbled on State Lines in the past with our panel.

We just assume everyone knows what a revenue trigger is, whether it's good or whether it's bad.

The House, from what we understand, is they like the idea that if the state collects so much money and hits a goal, tax rates can go down.

Our understanding is the Senate says that's an old policy, but a new idea would be remove the triggers.

Can you clarify this for folks sitting around the kitchen table?

- So, well, let's start with what a trigger is.

Basically, the way we've designed triggers within our tax code, if the state revenue reaches a certain amount in a certain year, then that amount being seen to be adequate to fund state government, we will reduce taxes.

And we've got a schedule for those reductions.

Actually, the schedule goes all the way down to 2.49% as far as the individual income tax rate is concerned.

And so one of the differences that we currently have with the House is the Senate has taken a position that we would like to see those triggers eliminated.

And let's just have a schedule that in the next year the rate will go down.

The year after that, the rate will go down again.

We've done that in the past.

We agreed, however, with the House in order to get those reductions in place to condition the rate, the cuts, the tax cuts, on the state receiving a certain amount of revenue.

And so we've agreed to do that, and we are satisfied to continue that.

The House, however, has taken the position that they want to raise the amount of revenue that would need to come in before taxpayers get a cut.

And we've disagreed with that.

We consider that to be tantamount to a tax increase.

- How far apart is that gap philosophically?

And as you sit at the table or on the phone, is there any way to bridge it, or should we just set aside budget talk to at least a short session, if not the 2027 long session when a new budget bill can be drawn?

- I think comprehensive budget talk is not going to result in a comprehensive budget until maybe the short session.

We'll see when we get back in April whether or not it does.

The Senate is really determined to -- we've promised people a tax cut, that that tax cut ought to take place.

- What do you make about this idea of a fiscal cliff?

The words politicians use are always dramatic.

Cliffs implies you're going to fall off a cliff and splash on the ground.

However, people are saying the cuts and the revenue is going to come down from tax cuts, the economy is going to slow down, we could see a deficit in about 12 to 18 months.

Are you buying that rhetoric?

I'm hearing it from some Republicans now.

- We've seen those predictions in the past.

Every time that we have had a tax reduction slated, the Democrats have said we're going to hit a fiscal cliff, we're not going to have enough money to fund state government.

The difference now is you're starting to hear some Republicans in the House basically parroting that Democratic line, saying it's not proven to be true in the past and it will not prove to be true this time.

Our fiscal folks are really good at analyzing trends.

They're pretty good at predicting revenue.

But their ability to predict, sort of like the weatherman, the weatherman is pretty good at telling you what the weather is going to be today.

But if you ask him what the weather is going to be next week, they're off more often than they're right.

And so the same with some of these revenue projections and the projection or prediction of a fiscal cliff, you're talking about something that it's not next week, next month, even next year, it's two and three years out, and their ability to accurately predict that far out is not very good.

And over the past 15 years, their predictions have always been off on one side.

In other words, they've predicted less revenue than we have actually collected.

And as long as the state continues to grow, as long as our economy continues to grow, it's my belief that those predictions again will be proven to be wrong.

- What is the appropriate -- philosophically, from your position, what is the appropriate state income tax rate for families or people and for corporations?

- I think whatever it is today, tomorrow it ought to be less.

- And still fund the state government.

- Absolutely.

- Let's move on to Medicaid.

This is another one that's been on top of mind, and any DHHS or Department of Health and Human Services policies get very deep and weedy very quickly.

There's a $319 million state funding shortfall, the Stein administration says.

Do you believe the state Medicaid system is underfunded with state dollars by $319 million?

- I do not.

- Where do you think it sits?

- So it's, again, a prediction.

It's my belief that if we were to give the Stein administration $319 million, they would spend every penny of it.

I do not think that the Stein administration, I do not think that the department, has over the past years or at the present time, affected the kinds of administrative savings that could take place and should take place in the current time frame.

I'll give you one example.

We actually funded $600 million towards what has been referred to as the Medicaid rebates.

The Stein administration immediately took $100 million of that $600 million and dedicated it to further funding the bureaucracy at DHHS.

It's my belief that the prioritization should be to funding health care.

Prioritization should be making sure that the doctors and the hospitals get paid and that we should be seeing ways to reduce the bureaucracy at Medicaid as opposed to further expanding it.

- How bureaucratic do you think the Medicaid system is in North Carolina?

I know that may be a loaded question to ask a conservative, but is it grossly overstaffed or is it staffed at a level that efficiency could glean some savings without gutting the office?

- I think the changes that we've made over the past 15 years in how Medicaid is funded should have resulted in significant reductions in personnel as far as the state level positions.

Basically what we do is we contract with insurance companies to pay the doctors and the hospitals on a per capita basis.

At one time we actually needed folks in the state government to write those checks to the hospitals and to the doctors.

When we went to a per capita system that we've gone to now, we should have seen significant savings in the bureaucracy and we have not seen those.

- Do you think the state, the DHHS bureaucracy if you will, could they find $319 million if they say they need it?

Could they find the savings within the administrative state?

- I don't have the exact percentages, but that amount of money represents the low single digits as a percentage of the total Medicaid funded budget.

Most folks think that there's somewhere between 5 and 10 percent of, you can call it waste, you can call it whatever you want to call it, but cushion I guess is one way you could put it.

There are a number of positions that are unfilled, that the funding is still there.

I just think they may not be able to save $300 million, but they certainly could save more than what we've seen a history of savings up to this point.

Republican leaders have said wait until spring is a better time to handle the Medicaid state funding issue, the rebase issue if you will.

It can be handled then as the burn rate has been calculated.

Are you sticking to that plan?

Do you think you could get a deal with the House on Medicaid if next spring you've seen good faith effort in reducing overhead?

- We'll just have to wait and see.

I just would call on the Stein administration to begin a process of looking at that burn rate, looking at the administrative expense, and finding savings between now and April.

- Back to the personalities of this, do you start that discussion with Governor Stein's team, or do you look over to your House counterpart?

Because everything we're seeing, deals have been tough to come by when it comes to serious money in legislation.

- I think everybody knows what the various positions are.

It's just a matter of whether or not at the administrative level they're going to actually take action.

- What do you think of the congressional Republicans reducing upcoming Medicaid funding at the federal level, which would then trigger the reversion of Medicaid in North Carolina back to what its traditional position was with who it serves and how much it's funded?

I remember a decade ago, you and back then Tom Apodaca, you didn't trust that the feds would ever keep their word to fund Medicaid at 90% of the expanded level.

You're right, and it was Republicans that did it.

Did you expect that?

- So I don't know that there was a lot of expectation of exactly what was done at the federal level.

The reality is that for the expansion population, they did not change the 90%.

What they did is they are going to require work to be a component of eligibility, and we actually had that written in our legislation.

The big change that they've made that will impact North Carolina on the expansion is the reduction in the maximum amount that hospitals and providers can get reimbursed for taxes that are imposed.

The situation was we could tax the hospitals for the 10% that is the state funding portion of the expansion population, and the hospitals could then get reimbursed for that tax from federal government.

So there's a step down that's going to take place, hasn't taken place yet, that's going to take place in terms of the eligibility for federal reimbursement of those taxes.

And we'll have to look at that, but there's a pretty good runway that will enable us to, I think, find ways to address those issues.

- Do you expect your congressional delegation, the ones you consider allies at least, to listen to you at the state level as they start crafting policy looking at 2027-28?

- Yeah, I do, but I don't know that there's additional work that they would need to do in that particular space.

I think it's clear what the policy is with reference to reimbursement for those state-level taxes, and we're just going to have to figure out how we navigate through that.

- I have to ask you about this children's hospital.

We read about it in the paper that funding for Medicaid or even a budget at times, it seemed to be there was this attached proposed children's hospital in Apex, North Carolina, that you support, or at least that's what we've read and been told.

The other side has withheld that carrot from you as part of a deal.

Why is that hospital important to you, and why is it such an important carrot when it comes to passing different laws?

- Well, there are two things that are important as far as that particular issue is concerned.

One is the need that exists in North Carolina for a standalone, world-class children's hospital.

Today we have a number of children who need specialized care that is not available to them in North Carolina's existing children's hospitals.

And so the folks at Duke Hospital, Duke Health, and UNC have agreed to work together to build a world-class children's hospital so that children in North Carolina don't end up having to go to Philadelphia or to Atlanta or to Cincinnati or to Columbus or any of the number of large standalone children's hospitals that are out there.

I support that.

I think the people of the state support us having that.

I think it would be a great thing for the state.

So that's one piece of it.

The other piece, though, is this.

In 2023, there was an agreement negotiated between House negotiators and Senate negotiators that a certain amount of the ARPA money that was coming to the state would be set aside to go towards the children's hospital.

ARPA is what?

The America Rescue Plan.

It's some of the COVID money.

But some of that money would go towards the children's hospital, not to pay for the whole hospital.

Much of the money that will be needed to build that hospital will come from donations and philanthropy.

But there was a certain amount that was set aside to go, some of it to the children's hospital, and some of it to something called NC CARES, which is a rural health care initiative in North Carolina.

That was agreed.

The ARPA money was not going to be received until 2025.

And so what has happened is the House has reneged on that agreement.

They have refused to release the ARPA money that came in 2025.

And so that's kind of the second piece of that.

And it's very difficult for us to feel comfortable trying to work out agreements when an agreement that had previously been made, signed off on by every House negotiator on the 2023 budget at that time, most of those folks are still in the legislature.

- I was going to say, over on the House, the new boss is not the same as the old one.

You have a new house speaker over there, and from what we can see, it certainly changed the game on you.

Did you expect them to move off of certain positions you thought were hard and true?

- My recollection is he was a conferee on that budget and signed off on it at that time.

- We'll ask him about that.

So I do want to ask you about, let me ask you this about the hospital.

It's what, $600 million or so is an amount of money.

Why can't Duke and Carolina find that money and raise it?

They have huge endowments, they make a lot of money, they treat a lot of folks and have, you know, it's not exactly an open market for medicine.

Why can't they just self-fund it and regulators get out of the way and let them build it?

- So the total cost for the hospital is not $600 million.

It's going to be several billion dollars to build a hospital like that.

And the folks at Duke, the folks at Carolina, they are going to raise a significant amount of money.

And it's my belief that the state should be a participant in that but not the main funder.

- Move to public education.

No Leandro ruling this week as we are in the mid-December time frame.

So the school advocates are out there saying we're 50th in funding.

And then on the school choice side, they're just as loud and vociferous.

What's the state of education in North Carolina right now?

Opportunity scholarships, these charters, they're growing.

Public ed declines in enrollment but they want more funding saying that would reverse their fortune.

- The vast majority of students in North Carolina continue to go to our traditional public schools.

And our traditional public schools do a great job for the most part.

But traditional public schools are not necessarily the best fit for all students.

And so philosophically we have felt very strongly that we need to empower parents.

We've been saying for years that parents won't get involved, that one of the problems that we have is parental failure to get involved in their kids' education.

So we have tried and I think we've been fairly successful in giving parents more of a say in what happens to their individual child's educational progress and educational achievement.

So the opportunity scholarship program, the charter school program, homeschoolers, all of those efforts give parents more of a say.

Most parents will opt to keep their child in the traditional public schools and we will continue to provide support for the traditional public schools.

- When it comes to policy on public schools, I know a lot of the traditional public schools, I guess is what we call it, they'll say, "Well, we've got regulations and rules on us.

We have to accept all children.

Private schools can be selective on special needs classes, for instance, or English as a second language."

Have you ever looked at, I'm going to say deregulating public schools, but what can you do to put them on a level so they can go head to head with charters and private schools so we can see what works best?

- So the traditional public schools have been, many of them have been somewhat innovative as far as dealing with some of those particular issues with magnet schools, with giving students the ability to transfer within districts, with a number of things.

I think we'll continue to see some dynamism as far as the traditional public schools.

And I think all of our schools, whether they're traditional public, whether they're charter public, whether they are opportunity scholarship, private schools, I think meeting the needs of their customers is something that is and should continue to be a priority.

- Do you ever see a time when private schools would face the testing standards so that they can get public grades just like a public school campus, or is the market going to sort all that?

- Yeah, I think the market will help sort that out.

In many respects, the most important grade that a private school can get is making sure that the parents are satisfied that their child is getting the educational attention that the child needs in order for that child, that individual child, to grow and flourish.

- I want to move through a few topics really, really quickly here.

We're down to under three minutes.

Gun legislation, I follow the online social buzz.

A lot of folks wanted that constitutional carry.

It is the ultimate, so close yet so far away, piece of legislation.

Why don't Republicans push that bill all the way through, even if Josh Stein threatens to veto it?

- You'll have to ask the folks in the House because the Senate has passed the bill.

We've overridden the veto, and the measure is sitting in the House.

Two years ago, the House had a bill that would have done that, but it never advanced out of committee in the House, so you'll have to ask them.

- Fair enough.

Redistricting, what made Don Davis' district there that first U.S.

congressional district so appetizing to redistrict?

You had other options in this state to draw out Democrats.

- Political decision, the determination was made that for political reasons, Donald Trump carried North Carolina on multiple occasions.

He was just elected with the support of a majority of people in North Carolina to be president again.

It's our belief that he deserves to have a Congress that would be supportive of the policies that he ran on, and to the extent that we had the ability to modify the district lines to make it more possible that an additional Republican could get elected, we wanted to go ahead and do that.

- This final minute Hurricane Helene, is the story written yet on how well that recovery has gone and is looking back 10 years, back to when Cooper was governor, is that fair game for this upcoming election?

- I think Cooper's handling of disasters is definitely fair game.

The success or the problems with recovery is something that you really don't have a good feel for until after the fact.

We're addressing a lot of the infrastructure needs, but the pace is something that I'm sure most folks would like to see it move along quicker.

- Well, I appreciate you sit down with us about once a year for a half hour.

I thank you so much for that, Senator Phil Berger, Senate President Pro Tempore of North Carolina.

Thank you, sir.

- Thank you, Kelly.

- All right, folks, thank you for watching us.

As always, you're our most important consideration.

Email your thoughts and opinions to the email address, statelines@pbsnc.org.

We'd love to hear from you.

I'm Kelly McCullen.

Thank you so much for watching.

♪ - Quality public television is made possible through the financial contributions of viewers like you who invite you to join them in supporting PBSNC.