- [Narrator] The State House approves its new budget bill in a very bipartisan fashion, and the state health plan makes its first moves to fill a half billion dollar deficit.

This is "State Lines."

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[uplifting theme music] ♪ - Hello again.

Welcome back to "State Lines."

I'm Kelly McCullen.

Joining me today, Brooke Medina of the State Policy Network.

Hello, Brooke.

- Hello.

- [Kelly] We have a debut to your right, Representative Allison Dahle of Wake County.

As always, we always welcome first-timers on the show.

- Thank you.

- [Kelly] And you got a great panel here joining you.

Senator Amy Galey of Alamance and Randolph Counties.

Good to have you here, Senator.

- Thank you for having me.

- [Kelly] And our dear friend and regular participant on "State Lines," Dawn Vaughan of the News and Observer.

Always great to see you.

- Glad to be here.

- And I'm glad you're on this show because you were so excited about this week.

You know, it was budget week, where the House of Representatives in North Carolina approved its budget bill late this week.

It was a 93 to 20 vote that saw over two dozen Democrats support the budget bill, so the Senate will receive this bill if it hasn't already.

It's guaranteed not to accept the terms, and that means House and Senate negotiators will enter conference in hopes of reaching a budget compromise.

Dawn, I could write a long script and explain all the good and bad things in this budget, depending on who you are out there reading it, but you can explain it better than I.

What's up with this bill?

- Well, we're not at the end of the state budget process yet, but this was really significant, significant because of the Democrats that voted for it, which we'll talk more about later, but also how far apart the House and Senate are right now on taxes is really gonna be this year's big negotiating issue, and Senate Leader Phil Berger and House Speaker Dustin Hall, they're just, they're not moving to the middle yet, but we're still pretty early.

The lawmakers are all off this coming week, so they'll have their, you know, vacation time, and then come back and start these conversations about finding some sort of middle ground, but, really, tax policy seems to be the biggest issue between House Republicans and Senate Republicans.

- Well, you have a senator sitting next to you who's climbing the ranks in the GOP caucus.

What do you make of this house budget?

Because, after all, once they pass their version, the Senate bill fades into the sunset.

- I agree with Dawn that it is significant.

It's a significant budget, but in the wrong ways, in my opinion.

So, we think of the budgets being goal posts at the end of a football field.

Each chamber stake out its position.

Hopefully, it's policy-driven.

The House's goalpost, not only is it not in the end zone, it's not in the stadium.

It's not even parking lot.

It is so far out that those of us in the Senate are left to wonder, what is the policy driving this?

For example, we talk all the time about workforce development.

I know Representative Dahle has been involved in those conversations too.

How do we get people to go into skilled trades and carpentry and other important things?

And an important part of that is the community college system.

They can't get instructors to go to teach in those fields because they can make more money elsewhere.

So the community college has worked very hard, come up with a funding model that would address that.

That funding model is funded in the Senate budget.

It's not addressed in the House budget.

They don't do anything for workforce development.

Not only that, but they wanna raise university tuition for in-state students.

That's crazy.

One of the things we're so proud of in North Carolina is the affordability of our state university system.

They wanna cut $130 million from the state university system.

And then use tuition increases to backfill part of that.

The Board of Governors has not asked for that.

President Hans has not asked for that.

It's just very concerning and confusing.

Where does this policy come from?

What is the policy that is guiding these kind of suggestions?

- Representative Dahle, no one's gonna accuse you of being a Republican for sure, but listen to the rhetoric coming out of the Senate budget writers about a House budget bill written mostly by Republicans.

What do you make of this?

The dynamic seems certainly different in 2025.

- Oh yeah, and you know, I voted for the budget.

Was it a budget I would write?

Absolutely not.

Do I agree with Senator Galey on some points?

Absolutely.

I would like more workforce development.

Nothing's perfect when it comes out the first time.

And we were trying to set the tone of a starting point, I think.

I of course was not in the room.

I would love to weasel my way in the room, but I of course was not in the room.

But I feel like if we start it, yes, we have a better chance negotiating and adding and subtracting some things.

Because in the end, we have to come together.

- Brooke, no one's going to accuse the House and Senate anymore of collaborating and colluding behind closed doors on a unified budget that doesn't get hardy debate.

Remember, we heard that over the last few years.

Okay, so how different really is the House budget from the Senate budget as you see it from 10,000 feet?

- Yeah, so I think there's a lot to recommend on both budgets.

The House in particular, it's laudable that they have endeavored to get rid of NC Innovation funding and remove that and put that back and allocate it elsewhere.

That was a boondoggle from the very start.

And so NC Innovation funding going back to the taxpayers where there are other allocations that are definitely needed is a good step.

However, the Senate also does that as well, but in a different way, and not to the same degree.

But a lot of things that I would recommend and recommend about the Senate budget is the pullback of CON laws, CON laws.

That's an archaic healthcare certificate of need that is encumbering our healthcare market.

So that's really good.

Getting rid of 20% of state's unfilled jobs and then getting rid of interim carbon emission targets, I think those are very laudable things that we find in the Senate budget.

So I think just depends on where you're sitting at as to which one's the best.

- You've gone national with your work.

How does the House budget at least compare to other budgets that you've been seeing around America?

Is this a uniquely North Carolina conservative budget or Republican budget, or is there a trend across America at the legislative level for some of these issues?

- Well, I think a lot of state legislatures across the country are looking at what's happening in Congress, because what they're going to have to brace for is Medicaid reform going to happen at the federal level, SNAP benefit reforms and changes there that are all going to place pressure on state budgets across the country.

So I would say Democrat controlled state legislatures and Republican ones, they're all looking at is there an impending state budget crisis that might be triggered by Congress?

And if so, how do we make sure that our states are prepared for it?

- Let me pivot this conversation slightly where North Carolina Senate and House Republican leaders, that they've been long working ever since Republicans have been in power and I've been covering the legislature, get those personal income tax rates down, get those corporate tax rates down through 14 years of budget writing slowly but surely.

The House has gone along with supporting economic growth triggers, however, where as the state's economy grows, those tax rates will drop based off those triggers.

It appears, Senator Galey, 2025's budget negotiation will center on whether those triggers stay in place, or your team, the Senate Republicans go ahead and lock in gains faster than normal to get the economy going under the theory, lower state taxes, boost business.

- All right, so there's two underlying issues with bringing up the triggers.

Number one is these triggers were negotiated and agreed to in the 2023 budget.

It is not right for the House to want to reopen that and renegotiate things.

Things were agreed to in the past on the premise of having those triggers.

And I feel confident that the Senate is not going to change the triggers that were agreed to by the House in the past.

Another example of this similar thing is the funding for the Children's hospital.

We agreed on funding the Children's Hospital in 2023, and that Children's Hospital needs to be funded and the House needs to follow through with the promises that they made in the past.

NC Innovation, that is something that, you know, I think it's appropriate the Senate tip to hand in its budget that we're willing to reconsider NC Innovation.

So for the house to respond with sort of a counter offer onto that, on that thing that's appropriate.

But for the triggers, and for the children's hospital, that is not an appropriate thing to open discussion about that.

Now, aside from that, the triggers themselves, we need to remember that when we tax people, we're taking away money that they have earned.

They have gone out, they have worked, they have labored, they have earned that money.

And the state is saying, "We're gonna take a piece of that."

That is bad policy.

Good tax policy is low taxes because it encourages investment, it encourages work, it encourages innovation and appropriate risk taking.

So that is the reason that low taxes are good.

Not just because we like to have just, you know, fun to hand out money to people.

No, it's their money to start with and we need to recognize that, we don't need gimmicks like tax free holidays.

We need serious well thought out tax policy that rewards people for working and for investing.

- Representative Dalah.

There you have it.

The triggers versus the non triggers.

Just go ahead and cut taxes.

I heard leader Reeds house democratic leader mentioned that he's of the opinion we're in a deficit situation in terms of revenues.

- Right?

- I haven't really seen that anywhere, but I'm not diving into revenue forecast, at least not yet.

- Right.

- Your take on the triggers versus just tax cuts or this whole issue in general, let the Republican fight.

- The whole issue in general of us working together is that we're not working together.

We're not talking and discussing.

And one of the things, it's just so hard 'cause the triggers are not, I don't know that the triggers are a great thing, but if we agreed on a certain trigger, then we need to stick with that.

Just like the sports betting that's in the house budget, we agreed in 2023 to give the majority of that money to HBCUs and now we've added in other universities that still receive funding.

However, now with the, you know, so we've got a lot of things that we agreed to before that there are parts of where I felt really cheated on that budget.

I still voted yes, and I voted yes last biennium, and I was the only Democrat that voted yes.

Again, because if you start it, yes, we're in a better position to negotiate and I think that's what I'd like to see us do.

I don't have the answers if I had tax answers, but I think one of the bigger, more important things is the educational system so that people understand taxes and they understand what is a tax free, a tax free weekend.

I have to agree somewhat.

A tax free weekend is not a freebie and it does cost the state money.

However, people don't understand that.

They understand that their bill at Walmart or Target or wherever they go shopping is smaller.

And that's what we're trying to get.

People need to understand, people need to understand that taxes pay for roads so that you can keep your tires for longer.

And we're not doing a good job of explaining what those taxes go for.

- Brooke, how do you balance good tax policy that's good for the state and funding it versus the voters out there?

'Cause parents are gonna love that tax-free holiday if it stays.

And obviously it looks like that will be a negotiating point.

But back to the House-Senate dynamic with the Republicans, can't a lot of this be avoided if people are talking all the way through this process, just quietly in the hallways?

'Cause this could be a very public budget debate.

- Well, something that I have observed in politics is there is the outward facing what the public sees, the sort of showmanship of it all, and then there are those things that happen just very collegially that don't necessarily make the headlines.

And I think that's really where it happens.

There there are friendships between senators and representatives.

And so I think just having that sort of posture that everyone has good intentions, even if they vehemently disagree on certain points, I think that's still held, that's what I've observed with the general assembly.

- One thing with the sales tax holiday is that Senate Leader Berger does not wanna bring that back.

Speaker Moore didn't either, but Speaker Moore is not the speaker now, Destin Hall is.

And that's another thing when Senate Leader Berger was talking to reporters yesterday about, so the individual income tax rate reduction to 3.99% is happening next year no matter what.

Everyone agrees with that.

It's these future triggers and it's the House looking at revenue and disagreeing with the Senate, both Republicans as far as, "Do we think there's enough?

Should we adjust this looking down the road?"

But again, with the sales tax holiday, Hall and Republican leaders and budget writers are looking at having that again.

It's been gone for a long time.

The entire time my child's been in school, we didn't have it.

So parents do notice that if there is something, other states have it and yours doesn't.

And it's a minor relief, people can think that there's gimmicks if it's a tax rebate or something, a couple hundred dollars here and there, but for working people, a couple hundred dollars is a lot of money.

- But now, when you start carving out weekends, holidays, exemptions for property taxes for veterans, I remember Republicans saying, "If we can get rid of that, everyone's tax rate gets very, very low."

- That's right.

- Is that still at play?

- Absolutely.

- Is that still a philosophy?

- Absolutely, we want everyone's tax rates to be low and not pick winners and losers, for lack of a better term, in the tax system.

I wanna make one really important point that after five years under the Senate plan, we will have saved North Carolinians $6 billion.

Yes, $6 billion in tax revenue.

The House plan would raise taxes by $8 billion in five years, so-- - The rates don't go up in this, I know Senator Paul was arguing it's a tax increase, but they're not raising taxes.

- The rates don't go up, but because we don't change the triggers, that is the net effect of, the House plan with how they wanna approach the triggers has a net effect of raising the amount of taxes paid by North Carolinians by six billion, excuse me, $8 billion.

And I think that Republicans around the state need to understand that and recognize it.

- I wanna throw this out to the table, and not necessarily you, Senator Galey, it's your caucus.

But why should Representative Destin Hall, the House speaker, in this new general assembly, every two years is a brand-new one, why do they owe Senator Berger and any Senate Republican budget negotiator a promise from 2023 under a different leadership?

- I'd say they owe the taxpayers good-faith conversation, that's what needs to be at the fore, and I do believe, again, depending on where you're standing, the numbers you're looking at, help govern that, but going back, even just to the tax free school holiday, for example, or school supply purchases, we need to factor in like the cost of actually implementing certain little, like tax free holidays and things like that.

And so again, like at the end of the day, what really needs to be in sharper focus is, how do the taxpayers benefit, and which budget actually is to their greatest benefit?

- I think Berger, with the, you know, what do they owe, it's different people, of course, you know, Speaker Hall was rule's chair a couple years ago, but he's speaker now.

And this also goes to, I remember with the casino battle last time, one of the reasons that Senate leader Berger was unhappy with how things panned out is because he was told that things were gonna go one way, and then negotiations with the House changed.

So I think from his perspective, he's seeing the same thing again, But again, that's different, different people, new session, new lawmakers.

- This far apart budget, Dawn, just off the top of your head, the way it's so different from the Senate budget, is this a power flex from a new House speaker showing that he's going to be a House speaker and he's gonna be powerful?

Or is this just a new group of budget writers gathering, and maybe they haven't done it the way Tim Moore did it for all those years?

- Well, representative Donnie Lambeth and Representative Dean Arp are two of the top budget chairs, they're still the top budget chairs.

Representative Jason Saine, who, you know, has been on the show, he left, and two others replaced him.

So it's a lot of the same people at play, but the leadership has shifted a little bit, the majority leader in the house now is Brendan Jones, so we don't know what his influence on this is.

Also, it's a different era, the Trump era, people are looking at money and what the government is spending differently.

And again, the economy is in a different place than it was a couple years ago.

- And we must pay attention to that large democratic, or bipartisan majority, I should start first, they supported the House bill, Representative Dahle, most of your House Democratic colleagues voted yes, 93 to 20.

I think we're sort of thinking this could be one of these razor close budgets, maybe Josh Stein's veto holds, maybe it doesn't.

We can take that off the table, 'cause if there's 23 or 27 options for Democrats out there, you're gonna flip one of them and get a veto override even if he tries it, I would imagine, so.

- I'm gonna hope not.

I'm gonna hope that if there is a veto in play, that we as Democrats stick together.

Because, as Democrats, our voice is squelched in the House and in the Senate, because we're in the minority.

And the Democrats out there watching TV need to know that we're gonna stick together and we're gonna provide their democratic values and their democratic votes, and we're not gonna go, willy waggy, [chuckles] I don't know what other word to use.

So one of the things that happens is, we have to show some unity in this budget.

We discussed how some of us wanted to vote so that we would be a yes, and some of us wanted to vote as a no.

And we do have somewhat of a definition between some really far left and some middle left.

So, I mean, this was not a political play, this was, how do you wanna look at the budget?

Do you want some of the things we've been working for?

Yes.

Do you want some of this other stuff?

No, not really, let's hope it disappears when it goes back to the Senate.

- I never thought house Democrats, Senator Galey, would look at the Senate budget bill and think that may be better than what we're turning out in the House.

- No, I didn't say that.

- You didn't say that.

[Rep. Dahle chuckles] I didn't say you said it.

- Oh, whew.

- I'm saying, but, worker training.

- Oh yeah.

- Not cutting community colleges, or not reducing the university system.

No, don't put words, we're all on microphone, your words coming outta your own mouth.

But yes, it does seem as though... - Well, I think that's because there's principle and policy behind the Senate budget, and I heard someone very smart say that a budget should be made up of different provisions in different areas that are united by sort of a unifying theme or a common theme.

I don't see that in the House budget.

I see it, maybe I shouldn't say this, like a Frankenbudget where you have different weird parts stuck together into something that is not really a cohesive whole.

I think that that is the primary thing.

But going back to the Democrats voting for the House budget, probably I think that was one of the most interesting things that happened this week, is that Governor Stein apparently went to the House Caucus of the Democrat.

You were there maybe?

So if he went, if he did go, that's what was reported.

Well, he is showing himself to be a really crafty and devious politician to be able to take this budget issue and drive a wedge, hopefully from his perspective, between the Republicans in the House and the Senate.

That is a level of mastery of skills that we never saw from Roy Cooper who always managed to step on his foot when he got to that kind of situation.

So I think Josh Stein is really showing himself to be somebody who thinks strategically on a different level.

- He's been spending a lot of time talking to Democrats and Republicans, and none of the Democrats want to confirm that he was in the building, but he was.

- All right, let's move along really quickly here.

Hurricane Helene funding, Senate budget writers have chosen to include funding for recovery as part of the budget.

House leaders say, "No, we're gonna separate Helene funding, make it a separate bill from general government operations."

Helene recovery bills have easily passed all session.

State investment in recovery could top 1.8 billion total if the new House bill is accepted as part of the negotiation.

So representative Dahle, Helene, House wants to separate that sentences, roll it together because it is state operations.

I'm not gonna question that.

Is there a point when Helene Recovery could become partisan, could become a little bit more tense, more difficult to pass?

Because we're getting up there near $2 billion in state money, not federal money.

And we don't print money in North Carolina.

- That's true.

And we don't know if we're gonna get any federal money.

And the word down keeps on saying, "No, you're not gonna have it even though we promised it."

So I think we're in a quandary as to what is gonna happen next.

And I think it's really important that, I mean, there was a mess up when Florence happened.

I was not in office, I really have no idea.

But we really have to dig down and make sure we're helping those people.

I mean, nobody chose to be a victim of Helene, and so we have to do something, and maybe it's not, yeah, I just don't, I mean.

- Brooke, the House.

I had some House folks say they don't want any cuts in the state government's budget being blamed on Helene recovery.

And that's why there's a big emphasis on separating it, not such a concern in the Senate that it seems, or just a different way of doing business, accurate?

- Yeah, I think that they're just both mindful of optics, or the House seems to be more mindful of the optics and does want to splice that out and exhibit that they have clear investment in that in a way that maybe could be lost in translation when we're talking about Senate budget proposals.

But either way, to Representative Dahle's Point, we have to get this right.

Hurricanes Matthew and Florence, the recovery efforts through NCORR were a disaster.

And so the hope is that Grow NC, that new Hurricane recovery program through Governor Stein's office is able to have the accountability that's necessary and gets it done for Western North Carolinians.

- Whether or not federal funding comes through.

Hopefully federal funding does come through, but even if not, it's good to see both chambers really heavily invested in Helene Recovery.

- And let me just say one thing.

The Hurricane Helene Relief Bill was proposed by both parties.

They worked very hard together, and the Democrats in the mountains and the Republicans in the mountains came together and worked together on this.

And I wonder, I would surmise that those guys didn't want any of budget, any extraneous budget policies or anything getting in there and muddying that up.

- Senator Galey on that was just a different business model.

Not, not judging one way of writing a budget or not.

It's all gotta be negotiated.

But Helene Recovery staying right there, lots of money still going out west.

- Yeah, I don't wanna, I don't think anybody wants to see the manner in which the relief is delivered to the folks out there become some kind of football.

You know, nobody wants that.

And sometimes I start to feel like if the Senate go leads first and says, okay, we wanna do A, then it feels like the House says, okay, well we have to do B, because we can't just agree with the Senate and the way that they wanna do things, which is really disappointing.

But one thing that's super important about the differences between the House and the Senate budget proposals is that the Senate's budget sets aside $1.14 billion to the rainy day fund, which the House does not do.

We have another hurricane that's gonna come, we're gonna have more natural disasters in North Carolina, whether it's in the East, the West, or the Piedmont.

And we have to get ready for that.

And it's prudent and it's wise to set aside money to replenish the rainy day fund.

We need to do that.

- Dawn, last word to you and just mixing in the FEMA request, Josh Stein offers some recommendations.

Chuck Edwards has done it, North Carolina.

So it seems like North Carolina is at the table for how to do emergency management better in the future.

- I think everybody wants a good outcome.

And if Helene ends up being separate so it can accomplish it faster, then that might be, you know, if that ends up being the best outcome for the state, because of the federal level, the money may not come.

Senator Ralph Hise said, you know, we have to be prepared to fend for ourselves.

And it looks like there's some of truth in that for the state.

- Alright, well thank you so much.

That's the show.

We have wiped it out for one half hour for one week.

Brooke, Representative, Senator, Dawn, always great to have you come back again, please.

- More than happy to.

- The folks would love to have you.

We love you even more joining us each and every week.

Email your thoughts and opinions at statelines@pbsnc.org.

I'm Kelly McCullen.

I'll see you next time.

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