Gov. Pat McCrory announced Wednesday his plan to provide pay increases for all teachers and state employees, in addition to a number of education reforms that would play out beyond 2016.
“It’s the heart of teacher appreciation week,” said McCrory at a presentation of his plan at North Carolina A&T State University in Greensboro. “If we are going to fulfill our potential, we can’t just appreciate our teachers for just one week…but for generations to come.”
McCrory proposed an across-the-board pay increase of two percent, on average, for all teachers in addition to a flat $1,000 pay raise for state employees for the 2014-15 budget cycle.
The Governor’s plan, the full details of which should be revealed next week when he submits his budget to the legislature, also includes boosting beginning teacher pay to $35,000 by 2015, increased funds for early childhood education and textbooks, and a variety of pay-for-performance incentives that would be implemented by 2018. The state’s teacher salary schedule would also be re-envisioned.
The question of how the Governor will propose to pay for the plan, which rings up to roughly $312 million for just one year, looms large at a time when the state faces a large deficit this year and a projected deficit next year thanks to a tax plan that fails to bring in sufficient revenue for what the state currently spends.
McCrory’s plan for teacher pay
Gov. Pat McCrory’s initial teacher pay plan, revealed in February , would provide significant salary boosts for beginning teachers. In 2014, teachers would earn at least $33,000, and then get another increase in 2015 to arrive at a base pay of $35,000. The salary increases, endorsed by leaders of the House and Senate, would cost the state roughly $200 million over a two year period.
The latest plan  includes paying beginning teachers more while also bringing the rest of the state’s teachers into the fold by providing them with a two percent pay increase on average. The across-the-board pay raise would cost the state an additional $90+ million next year alone, according to estimates by the North Carolina Justice Center’s Budget and Tax Center.
North Carolina’s teachers have received only one pay raise since 2008 – a small one of 1.2 percent in 2010. The state has a salary schedule in place for educators, which includes annual step increases for all – but that schedule has been frozen since 2008. Teachers who began their careers in North Carolina six years ago are still stuck at or very close to the bottom of the pay scale — $30,800.
Professional Pay Schedule ” that consists of six levels of base pay, with the goal of allowing teachers to earn more at an earlier point in their careers.
Many education stakeholders have been lobbying for across-the-board pay raises for all teachers  at a time when more and more teachers are leaving North Carolina for significant pay raises in places like Virginia, South Carolina or Tennessee.
Wake County Public Schools revealed last month that their mid-year teacher turnover rate was 40 percent higher than last year’s, and many more teachers than last year said they were leaving to teach in another state.
While many support any kind of increase to teacher pay, some said a two percent increase was not enough.
“It simply does not do enough to address the teacher pay crisis in North Carolina,” said Rep. Larry Hall (D-Durham). “North Carolina needs a bold plan that includes significant pay raises for our teachers and puts North Carolina on a path to reaching the national average.”
Going beyond teacher pay
“We can do these short term raises for state employees and teachers, but if we don’t have a long term plan we won’t have teachers who will commit to education for a lifetime,” said McCrory as he laid out the myriad education reforms that come along with his budget proposal for next year.
McCrory’s ‘career pathways’ portion of his plan comprises a series of goals that would provide rewards for teachers who do more to improve student outcomes.
Through this system, teachers who are leaders and mentor other teachers could be paid higher. Teachers who work in hard-to-staff schools, teach high need subjects like math or chemistry, and pursue ‘other opportunities for improvement’ could also earn raises beyond what would be offered with the new professional salary schedule.
The Governor has put aside $9 million in next year’s budget for a pilot program that allows eight school districts to implement career pathways, or what he calls a ‘pay for performance system.’ Like the professional pay schedule, the implementation of the program should be completed statewide by 2018.
McCrory also discussed reinstating advanced degree supplemental pay, which was eliminated by the legislature last year. The salary supplement is worth 10 percent of base pay, but this time around it would be reintroduced only for those who hold degrees in the field in which they teach. A teacher with a general education master’s degree, for example, wouldn’t receive a pay bump if she teaches physics.
Acknowledging that the deep cuts that have been made to the textbook budget are not good for students, the Governor pledged to double the current textbook budget to $43 million. In 2009, however, the textbook budget was roughly $110 million – the next year it was slashed to just $2.6 million .
Early childhood education will receive $3.6 million with the Governor’s proposal, enough for around 700 pre-K slots, which are reserved for low-income children to get a head start on their education. Past years’ cuts in funding have left the pre-K program with significant waiting lists that are in the tens of thousands.
Newly separated veterans could receive in-state tuition benefits at UNC system schools as well.
A sustainable funding plan?
The preliminary estimates of what McCrory’s teacher pay plan will cost next year alone bring up a price tag of approximately near $312 million, according to an analysis made by the North Carolina Justice Center’s Budget and Tax Center.
Explanation of Method for Calculating Cost of the Plan: This estimate is calculated from data available from the Money Report for the FY 2013-15 State Budget combined with the Governor’s statement of additional investment amounts for early education and the Career Pathways Pilot. The master pay figure assumes all teachers w/ master’s degrees in any subjects receive the bump, which is broader than the apparent proposal from the Governor. The 2% pay raise for teacher pay is calculated by taking 2% of the salary for teachers, instructional support and principals in K-12 only. The flat $1,000 pay increase for state employees is calculated by multiplying $1,000 by the number of full-time state personnel which excludes university personnel. This estimate does not include the cost of extending the $1,000 pay increase for state employees to personnel and faculty at the university.
Funding McCrory’s plan, even in the short-term, would be a complex endeavor — especially at a time when the state is facing a $445 million shortfall in tax revenue and a Medicaid hole of at least $130 million for the current fiscal year.
Next year’s budget projections include deficits as well – a $191 million revenue shortfall and a $192 million Medicaid hole, according to Alexandra Sirota, director of the Budget and Tax Center.
All of these deficits will make it much harder to fund new spending when a tax plan, passed by the General Assembly last year, provides significant tax cuts that bring in millions of fewer dollars than necessary to accommodate current spending levels.
While it’s possible that the Governor and state lawmakers could come up with a short-term funding solution for teacher pay, a much bigger problem looms large – how to sustain these changes in the long-term. Most of the expenses are, or should be, recurring.
“The Governor has suggested in the past that there is $600 million available for this investment. However, there are no sustainable revenue sources available given what we know about revenue collections now and in the future,” said Sirota. “This suggests that there would need to be cuts to other areas of the budget to make these investments, a move that would not allow the state to achieve its goals.”
According to Sabra Faires, a former assistant secretary for Tax Administration at the N.C. Department of Revenue, the structural deficit that North Carolina faces exists thanks to a tax plan that lawmakers passed last year, which reduces expected revenues to levels below expected expenses.
At the same time, lawmakers have failed to adjust the state’s budget to accommodate the tax plan, which means the state should look forward to deficits as high as $500 million in both 2015-16 and 2016-17, projected Faires.
Gov. McCrory indicated yesterday that spending for teacher raises would take priority above all other new spending or tax cuts in 2016.
A more prudent way forward, says Sirota, is to reassess the tax plan and raise the appropriate level of revenues necessary for meeting the state’s needs.
“There could be $300 million available [in 2015] if the proposed rate reductions to the personal income tax and corporate income tax don’t go into effect as scheduled,” said Sirota.
Delaying the $300 million tax cut is a solution also endorsed by the North Carolina Association of Educators.
“[Delaying the tax cut] would provide at least a 5 percent raise for teachers,” said Mark Jewell, NCAE Vice President. “In addition, the Legislature could reconsider some of the tax cuts they passed last year that have blown a nearly half-billion dollar hole in the State’s budget.”
Next week, Gov. McCrory will submit his budget to the legislature for consideration during the short legislative session, which begins Wednesday, May 14. If no changes are made to the current tax structure, he will have to cut other areas of spending to pay for his plan.
Education reporter Lindsay Wagner can be reached at 919-861-1460 or [email protected]