LEGISLATIVE NEWSLETTER

July 25, 2013

LEGISLATURE 309 LEGISLATIVE OFFICE BLDG. 300 N. SALISBURY STREET RALEIGH, NC 27603 (919)733-5850 neal.hunt@ncleg.net 15TH SENATE DISTRICT 2600 FAIRVIEW ROAD RALEIGH, NC 27608 (919)781-3464 info@nealhunt.com

North Carolina Senate and House members have both agreed on two compromises: tax reform and the state budget. After many weeks of deliberation, we have passed two historic pieces of legislation that will take North Carolina off the highway to economic stagnation and instead on to the pathway to prosperity. TAX RELIEF FOR NORTH CAROLINA FAMILIES AND BUSINESSES As Ive mentioned in previous newsletters, North Carolina has been in dire need of tax reform. Before both chambers passed and Gov. McCrory signed House Bill 998, North Carolina had the highest tax rates in the Southeast and one of the worst business climates and unemployment rates in the country. High taxes remained North Carolinas greatest roadblock to economic recovery and prosperity. Now that tax reform has become law, North Carolina will move from the 44th to the 17th best tax climate in the nation putting us on the road to economic recovery. The final tax reform package: Puts over a billion dollars back into the pockets of North Carolinas hardworking families and encourages job growth by providing needed tax relief to job-creating businesses; Reduces the state personal income tax rate from the current maximum of 7.75 percent to a flat 5.8 percent in 2014 and 5.75 percent in 2015; Reduces the corporate income tax from 6.9 to 5.0 percent by 2015. If the state meets revenue targets, it will then go down to 4.0 percent in 2016 and 3.0 percent in 2017; Caps the state gas tax at 37.5 cents/gallon; Eliminates North Carolinas estate tax; Protects Social Security benefits from state taxes; Many of you have seen the New York Times editorial blasting North Carolina Republicans for the actions we are making to improve our state. My friend Sen. Tom Apodaca described our situation best during tax reform debate on the Senate floor, It doesnt matter if North Carolina is in the New York Timeswhat matters is if the state is in the Wall Street Journal. The day following the final

passage of tax reform in the General Assembly, the Wall Street Journal published an editorial praising our bold efforts. I highly anticipate that North Carolina will see an influx in job creation due to our new business-friendly climate. A BALANCED AND FISCALLY RESPONSIBLE STATE BUDGET As a Senate Appropriations co-chair, I served on the conference committee as we worked to settle the differences between the Senate and House budgets. The process of crafting our state budget was far from easy. However, Im confident that we have established a $20.6 billion budget that is balanced and fiscally responsible. This budget continues to invest heavily in North Carolinas core priorities of education, transportation, and public safety, while growing the states economy and making state government more efficient. Despite having to overcome unexpected costs in Medicaid and new federal mandates, we invested in the long-term fiscal health of our state by investing in critical infrastructure improvements and shoring up reserves and rainy day funds. To quickly review, the budget: Creates a funding reserve for need-based financial aid in order to provide universities with certainty about financial aid available in future school years; Provides an additional $1.5 billion in additional state dollars to fund Medicaid; Provides $4.6 million for group homes to aid the states mentally ill and developmentally disabled; Allocates $12.4 million in lottery funds for an additional 2,500 Pre-K slots; Funds the replacement of IT systems critical to DMV customer service improvements; Continues our efforts to remove politics from transportation decision-making by mandating a data-driven prioritization process that includes local input to select future transportation investments; Establishes a new Rural Economic Development Division within the Department of Commerce to focus on improving rural services and stimulating economic growth in rural areas; Restores 69 trooper positions within the State Highway Patrol; and Fully funds the state retirement system and state health plan; I have received numerous emails and phone calls concerning the education budget (particularly K-12 funding), so let me take this opportunity to explain that portion of the state budget. First of all, the budget fully funds enrollment growth in K-12 education, community colleges, and the UNC system. Total education spending of almost $12 billion represents about 56 percent of the state budget (up from 55 percent last year). K-12 spending increased about $200 million from last year. Overall education spending is increased about $400 million. The education budget adds $23.6 million to continue funding the Excellent Public Schools Act, which will increase accountability, improve graduation rates, and strengthen student literacy. The budget also replaces tenure with contracts that are renewed based on job performance, as in nearly every other profession. The Opportunity Scholarship Act is a pilot program for low income families. Many children in low income families attend low-performing schools and they do not have the opportunity that wealthier families have to change their situation. We absolutely want to make sure that all students have an opportunity to succeed! We are targeting our states limited resources for teacher assistants to put them where studies show they have a positive impact on student performance, i.e. kindergarten and first grade classrooms. However, local education authorities (LEAs) and superintendents will have the flexibility to direct funds to second and third grade if they prefer.

I know that our state has some of the finest teachers in the nation and we should recognize and reward those teachers with a pay for excellence system. The budget includes $10.2 million to fund annual pay raises for the most effective teachers and $1 million this fiscal year to study the best way to measure teacher effectiveness. Keep in mind that in the 2011-2012 Session (the first time Republicans had ever held the majority in both chambers of the General Assembly), teachers and state employees received their first raise in five years. States have different ways of funding teacher salaries and North Carolina teacher compensation is competitive nationwide. This budget stands in sharp contrast to the failed attempts of previous leaders to tax, spend, and borrow their way to prosperity. However, we continue to hear the usual rhetoric of the left as they continue attempts to deny tax relief for working families, reject meaningful improvements to public education, and impede Republican efforts of attracting new jobs and controlling spending. In 2011, the new Republican majority inherited a $2.5 billion budget shortfall to deal with right away. By no stretch of the imagination did we enjoy having to deal with the lefts piles of mistakes, but our new state budget and tax reform package go a long way to putting our state on the path to prosperity and economic recovery. As always, it is a pleasure to serve you in the North Carolina Senate. If you have any questions or concerns, please dont hesitate to contact me. Sincerely,

Neal Hunt Connect with Senator Neal Hunt

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