- [Kelly] Governor Stein confirms an expected budget surplus, but says future years may not be so rosy.

And House leaders say they're tracking how early Helene recovery funds are being spent before releasing more cash.

This is State Lines.

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[resolute music] ♪ - Welcome to State Lines.

I'm Kelly McCullen.

Joining me today, a great panel.

They walked uphill five miles in the snow to be on State Lines.

WUNC Capitol Bureau Chief, Colin Campbell.

Chatham and Durham County Democratic Senator, Natalie Murdock, joins us.

Thank you for being here.

- Thank you.

- Senator Benton Sawrey of Johnston County, the Republican is here.

And Republican political consultant, Chris Sinclair, debuts on State Lines all the way from the bright lights of Charlotte, North Carolina.

Thank you, sir.

Thanks for being on.

- Thank you.

- We have five topics I hope to get through to all of you with, and we'll see if we get there, it depends on the conversation.

Let's start with the top story.

Governor Josh Stein and legislative budget analysts confirmed expectations that our state, North Carolina, will run a budget surplus this year.

State revenues appear to be running about 1-1/2% above expectations, which equates to about $544 million in surplus.

Conservatives would call it over collection, Colin.

Governor Stein says planned state income tax reductions in future years threatened to create a budget deficit by financially starving our state.

Republicans say, Colin, they've reduced taxes and spurred economic growth, and as such, we have more state revenues.

Take that football and run.

- Yeah, so this is interesting.

I think the biggest surprise in these revenue projections was looking a couple of years out, 2026, 27, they're looking at, potentially, an $800 million deficit, which the economists project is based on income tax rates that'll be going into effect over the next couple of years.

We talked to Senate leader Phil Berger about that this week to see if he has any concerns about it.

He says he's not worried, that ultimately, the growth in jobs, growth in population of the state will make those numbers sort of disappear or change over time.

But certainly, a lot of people have concerns that we could be headed to what the governor calls a fiscal cliff, where essentially the state is spending more than it takes in.

And then what do you do from there?

Do you do budget cuts?

Do you, you know, cancel tax cuts?

Do you find other sources of revenue?

There's a lot that's going to be discussed if those predictions come to pass.

But again, we're not quite there yet.

- Senator, sorry, I'll pass it over to you.

Fiscal cliff from Josh Stein, Republicans say, "Oh, it's our policies keep growing the state."

So what's your take.

- Wash, rinse, repeat.

We've heard this every year since 2013 with threats of fiscal cliffs and budget deficits.

Look, we have defied every expectation for over a decade at this point.

We have generated $12 billion in state revenue surpluses since that period of time.

We're running ahead of this current budget cycle, in spite of the fact we had a major disaster in Western North Carolina that shut down that economy for several months.

You know, we have cut North Carolina's personal income tax rate from 7.75% when the Republicans took over after the 2010 election to 3.99% this year.

Our fiscal outlook is bright.

We're one of the most successful states in the nation, and it's because tax reduction and regulatory reform works.

- Senator Murdock, what's the Senate Democrat take on this?

Josh Stein standing there, he says, "Yes, the budget does have a surplus, but storm clouds are looming."

I have heard that before out of Governor Cooper and it didn't happen.

So, when does it happen?

- Yeah, I am definitely with our governor, my former boss, on this one.

The fiscal cliff definitely is coming.

I think that the fiscal cliff honestly would have come sooner.

I think a lot of it was masked by the infusion of federal dollars we received during COVID, especially huge, huge programs like Child Care that allows people, helps them to work.

All of those surplus, that infusion of federal dollars really helped us to keep afloat.

And I think we are on a very concerning path, aggressively cutting corporate income tax and personal income tax when we had a solid and actually lowest in the southeast corporate income tax at 2.5%.

I think we should have just left it right where it was.

So I think the combination of those two cuts, and then this year we'll be writing a huge check as we should for Hurricane Helene recovery.

So definitely concerned about our path to 2030 and beyond as a result of those aggressive and I would say reckless tax cuts.

- So I mean, I'll note, so the federal dollars that my colleague is referring to are not considering any this recurring revenue versus non-recurring revenue that that was spin out as separate below the line spending.

We're talking about recurring revenues and recurring obligations in the state, and that's where we're continuing to see surplus is controlled spending and things of that nature.

We are in a great position with respect to Hurricane Helene and what's going on in western North Carolina because of smart budget decisions over the past decade and a half, we've been able to set aside billions of dollars in reserves in order to account for this.

We're in a great spot.

We're gonna continue to be in a great spot.

I'm encouraged to hear my colleagues say that she supported some of our tax cuts to get us down to some of these low rates, and we're gonna continue to do so over the next several years and find ways to put more money back in North Carolina's pockets.

- I also wanna add the tax cuts.

We'll have to make very, very difficult decisions as a result of that.

I'm glad you mentioned our ability to continue to function as a state, I don't think we'll be able to do that.

I think cuts to education, which fuel our economy of making sure we have people that can fill all these great jobs.

That's why employers are coming here because of our strong education programs, and we won't be able to continue to fund that with these tax cuts.

- Ah, so I disagree I mean, we're continuing to increase our funding every single year.

These tax cuts are tied to revenue triggers where revenue is going up.

You know, we, we generate a significant amount from sales tax.

Incomes are increasing, jobs are increasing.

Again, tax reduction in regulatory reform work with respect to growing the economy and growing jobs in North Carolina every single year.

We have increased the education funding in North Carolina, which is not something that could be said at the end of the Democrat's tenure in North Carolina.

We are continuing to make investments in North Carolina in childcare, in education, in workforce development, in our infrastructure, including agencies like the Division of Motor Vehicles, which we'll talk about here in a little bit I'm sure.

- It'd be difficult to keep that up with these tax cuts that continue to move forward.

- But you're challenging them to prove it.

Keep cutting taxes.

They keep making money at.

- Well, even with the current forecast, we still know that we still will be right at being a little overspent based off of just, just what we know is coming.

I mean, we know that at some point the other shoe has to drop and it definitely is with a combination of both cuts going on at the same time and zero in out corporate income taxes.

So we know by 2030 the corporate tax will completely be zeroed out.

So my concern is when we look at the fiscal projections, when we know the lowering of the taxes will continue, that is the fiscal cliff that we are referring to.

- Chris words matter and Josh Stein was partisan.

He had to admit the Republican budget has a half billion dollar surplus.

That's not chump change.

And then here's the word cliff.

We had it for childcare.

Cliff's, the new hot word now for disaster looming.

- Yeah and it's gonna be a matter of the boy who cried wolf, I think, at the end of the day.

And is the cliff really there?

I agree.

You know, you've got the triggers in place.

The Republicans have, since they came into power, they have had a a really good track record in terms of this issue and the proof's in the pudding and families have more money in their pocketbook.

The balance sheet of the state of North Carolina is unbelievable, is the envy of a lot of different states around the country.

And so the strategy is working and you don't wanna break it just to break it because you might go off that cliff, you keep going.

And I think the smartest thing that the Republicans did when they adopted the tax cuts and looked at this, was those, you know, the triggers.

You know, if we reach a certain point, we're gonna pause.

That's smart.

But to say now we gotta do something, I think it's premature.

- To either of you senators, how do we separate good, sound policy from the Republican budget-writings perspective from, we've been in a really long bull market that's showing signs of maybe giving back some economic gains or slowing down as we head to '25, '26 and beyond.

- Yeah, in regard to the triggers, I think that my colleagues know that we have financial issues.

I think that's why gaming continues to come up.

I think that they know that at some point there will be gaps in our budget that have to be filled.

It simply is not sustainable and I think it was actually, I could be wrong, colleagues in the House that added those guardrails.

I think that some of my colleagues wanted to be a little bit more aggressive, particularly with those personal income tax cuts, so it's good that they're there, but I don't know why we can't revisit it every two years instead of saying we're already gonna have a path to continue to have cuts when we know our state is really dependent on personal income taxes.

- So this has been going on since 2011, candidly.

We've seen, you know, bull economies.

We've seen, you know, recessions.

We've seen great economies.

We've seen expanded job markets and we continue to defy expectations and produce in North Carolina.

It's a combination of tax cuts.

It's a combination of controlled spending.

You know, not getting out in front of our skis and making sure that we can take care of our obligations in the state.

- And that folks is how you have a partisan discussion in a very civil way and I learned a lot from that.

I appreciate it.

That's a great kickoff to this segment, but let's shift to the auditor, Dave Boliek.

He promised on the campaign trail he would audit the Division of Motor Vehicles.

Senator, sorry.

DMV leaders have been notified of a planned and comprehensive view of their financials and operations.

Auditor Boliek promises to publish a multi-volume report of his findings that he'll give to you to read and he'll offer solutions to legislators as a result.

Governor Stein is in the loop and DMV officials, Senator, sorry, probably for the first time in recorded history publicly say they look forward to their audit.

They can't say anything else, but he's keeping a campaign promise, but, also, there was some campaign rhetoric and debate about an auditor calling the shot before he is elected that he's picking on the DMV.

Your take?

- I don't think he's picking on it.

It's the single largest constituent complaint that I get on a weekly basis.

I mean, DMV in North Carolina is not working and the answer, oftentimes we hear, is more money.

Okay, well, let's talk about more money.

Since 2019, the state has appropriated an additional $50 million to DMV.

It was 154 million in 2019.

It's over $200 million today.

We've given more money.

We've invested in programmatic changes, in modernization programs and they've dragged their feet.

At some point, it's not more money.

It's management.

It's process.

It's an executive function where the Governor's office and Division of Motor Vehicles has simply failed, so I'm excited to see what this audit generates.

I want to see the recommended changes so that we can take a hard look at it and I'm glad that we have Auditor Boliek in place, who's gonna follow through on his campaign promise.

- Senator, what's the feedback on the Democratic side?

What do you hear from your folks in Durham County about DMV services because all politics, ultimately is local?

- Yeah, you know, and I'm one of those consumers and users of the DMV services, as well, and so I think, probably in most states, folks would definitely say there are changes they want from their DMV.

It's just, you know, the people that enjoy their experiences typically don't take the time to say, "I had a great experience at the DMV today", but we do welcome the opportunity for an audit.

We're all about openness and transparency in government.

How can we streamline?

How can we be more efficient?

How can we have more online services?

And yes, my colleague mentioned some of the funding, but I still think that when you have an overall look at the services that the DMV is providing, there still could be a need for not only additional funding, but it's hard to be competitive in this job market where if wages aren't keeping at pace with other jobs that folks can take, and just looking at overall ability to maintain your staff.

Those are greater issues that we need to look at as legislators in addition to just the funding, and we welcome the conversation and the audit and have no doubt that the Stein administration will do everything they can to make sure that the experience of the DMV improves.

- Colin, this is a big day-to-day issue for a lot of people.

I was in the line at the grocery store and there was a woman I did not know say how she spent two eight-hour days sitting in a DMV office.

Doesn't know who I am.

I'm not, you know...

I'm on TV, but nobody knows who I am.

But I heard that and it was an organic conversation with the cashier.

There's something to the operation of DMV, I mean, factually.

- Yeah, and this is one of the few touch points that a lot of people have on a regular basis with state government, with a state agency, is your driver's license is up for expiration.

They gotta take your picture and you gotta jump through the hoops.

You gotta go down there.

So there's a DMV office next door to my Food Lion.

Always a line outside of people looking miserable in the heat that they're stuck there for hours and having to wait.

And some people are driving, you know, partway across the state to try to find an appointment.

Some of it's just the state is growing.

The DMV infrastructure maybe hasn't grown in collaboration with that.

But are there other places where the agency has got the wrong priorities, is spending the wrong money?

I think some of this audit process will come out with that.

But at the end of the day, this is going to be a popular issue, to try to figure out how to fix DMVs so it's not a huge pain in the butt to go get your license renewed.

- Oh, and do wanna quickly add, there are some innovative approaches.

Thank you for mentioning lines.

Making sure people know about the ability to go online to set appointments.

So there are other things that we can do to kind of really reduce those wait times at your local DMV offices.

- The DMV is a nightmare and anybody that's gone through the process of renewing their license, hello, in the last several months, it is a bear.

And to your point about the online, good luck, 'cause it's hard to find in a reasonable amount of time.

It's hard to find a location to get an appointment to.

If you miss a 90-day window... You have 90 days.

If you're outside that 90-day window, forget about online.

I didn't know that.

I had to go and stand in line for four hours and wait.

I get up to the desk to renew my license and at the end of the day, it took about 10 minutes, but the process to get there is really broken, and the online, which you'd think would be a good solution, is also broken in my opinion.

And a lot of people getting their kid's driver's license or having to go do a driving test, that is a process where, you know, there are people that have to go, you know, an hour to find someplace that has a reasonable amount of time.

So I think there's good ideas, but the implementation of that is just as bad as standing in line.

I will say this, and I'll end on this note.

I am encouraged by the license that the state has...

The new ones.

If anybody has had the new license, nobody's copying that thing.

The only downside is if you go through TSA, it takes about two minutes longer to get through because they can't figure out all the little things that are in it.

So kudos to whoever did that.

- Any word on when you might receive that report from Dave Boliek?

- No word yet, but I mean, I'll say... And this is a question I think to some of our executive branch partners.

We hear about these innovative new approaches and ideas.

Why have we let it get to this point where the system is so broken that we have to have that conversation before we start looking for solutions?

They should have been looking at this for the past six, eight years or so.

It's a failure at the top of the ticket.

- And it's bipartisan.

And if you remember, McCrory ran on this.

He was a big, big proponent of this.

- Yeah.

- He sure did.

- You know, so it's both Dems and R's that have talked about this, but it's been more talk than solutions in my opinion.

So it's not D or R. It is bipartisan.

- It is interesting.

Why didn't DMV, this issue, become more important in legislative and Council of State races?

Outside of the Auditor's race, which historically is a very sleepy race.

- Yeah, I think it's a challenge because it's something that, y'know, not that many agencies have a control over.

There's not necessarily an easy fix for it.

So I think some politicians are sort of wary of, "if I campaign on 'I'm gonna fix DMV' and then I don't, that's gonna come back to bite me."

Because, as y'all mentioned, it's been an issue for a very long time and still not been fixed.

- Speaking of tracking how money's spent, House Legislators, the Senate too, they're maintaining their work on Hurricane Helene efforts as recovery programs are getting settled in to at least a temporary bureaucracy.

There's discussion about how fast to release funding.

Governor Stein has requested fast release of cash to directly support businesses in larger amounts than Republicans have so far approved.

GOP leaders have proposed just a longer timeframe to release essentially the same amount of funding.

House Majority Leader John Bell says Western North Carolina recovery should not resemble the ongoing Eastern North Carolina recovery efforts.

They want to track the money to see how well it's being spent.

- What we want to avoid by just throwing a whole bunch of money out there is to be very strategic in how we do it.

We've already put a number of funds out there.

I think the total at this bill will be somewhere around 3.4, I mean, excuse me, $1.3, $1.4 billion that's been allocated from the General Assembly.

You're gonna see more funds come through, but we want to be sure that we put what I call "lead on target".

We want to make sure that the dollars are going to the people in need.

We must not, and cannot and will not, have another disastrous program like we saw in the last administration under Governor Cooper's watch with NCORR, which I believe now is up to about $217 million in the hole, and we cannot afford that.

So we want to make sure that we appropriate funds properly, include everybody's input, both House, Senate, Council, State Members, and Executive Branch, but doing it in a manner so that way we meet the needed of people in the state.

- Senator Murdoch, the House says slow it down.

I think some of the spending, they want to see how well it's being spent within the next 30 days of being approved or ratified, however the system works.

Your take on that?

No one's debating the cost, no one's debating the funding needs, so that's a bipartisan or nonpartisan issue.

Now it's about speed and flow of cash.

- Yeah, I mean, I think that there definitely is a way that we can track the spending and still get this to the folks that need it most.

I mean, I think we need to begin with saying, y'know, our hearts go out to everyone in Western North Carolina.

I lived out there for five years, so just with heartbroken by the devastation.

And want to add we've never had a storm like this in the history of our state.

I mean, if this were Louisiana, it would be our Katrina.

And so I don't think we should slow down.

I think that we need to get the money to those that needed the most.

We know how slowly the federal government works.

And I would add with Donald Trump saying that he wants to get rid of FEMA, I'm concerned about the delivery of federal funding because if there's some new system and some new process, we don't know how long that's gonna take.

So it really should be about getting the money to those that needed the most, families, businesses, our farmers.

We also don't have a permanent farm bill right now, so getting that relief to our farmers that some of them don't even have soil.

They're literally starting from zero.

The Christmas trees and apples, all those things that help the Western North Carolina economy keep going, we need to do everything we can to get that relief to them while being good fiscal agents and making sure we have internal auditing measures in place to make sure that we're tracking all these dollars and giving regular updates to the General Assembly.

They should definitely be held accountable for how this money is being spent.

- Senator, sorry, this is an interesting... Helene recovery has kind of upended some pillars of philosophy politically.

The Democratic Governor wants direct cash.

That sounds like a conservative play, rather than running it through a bureaucracy.

The Senate is saying, "hey, just run it through a system a bit to make sure we don't duplicate spending where the Feds will cover it and make sure there's not grift and fraud and abuse for the Helene recovery funds that do go out."

So what do you take?

- So, I think the tracker of NCORR and what's happened in Eastern North Carolina following the series of storms that we've had were, you know.

- It's 2025, and there's still communities being rebuilt.

I mean, there are, there are dozens of families without homes.

I mean, they're coming to us and asking us for 217 or 279 million.

We're not actually sure, we're still waiting for clarification from the governor's office on that.

Because we don't want to be having that same conversation.

There are other states around us that have been focused on the same issue.

They've looked at other ideas.

I think we need to make sure that the money is deployed quickly, effectively, and in a way that's responsible to the taxpayers in the state of North Carolina because of the breadth, and the amount that we're expected to contribute to this.

And also, every time that we make a commitment post-storm to businesses, or farmers, or families, with respect to the next storm, we're also looking, you know, what did we do last time?

So that we can treat everybody on the same footing that we did in Eastern North Carolina versus Western North Carolina.

We need to find a system that works too in North Carolina.

So we're not dealing with storms eight years after they happened, dealing with families still in hotel rooms.

- Chris, Helene still gets all the attention.

There are people waiting eight now going on nine years relief in Eastern North Carolina.

All I'm seeing politically are stump speeches about how we shouldn't do it the way we treated Eastern North Carolina.

Is anybody doing anything for Eastern North Carolina besides waiting, and using it to justify a more streamlined Helene response in the mountains?

- Well, I think representative Bell's right, and I think the governor's right, we should be able to get this money in the hands of businesses, and families, and farmers.

Western North Carolina.

Yes, it is devastated.

It's, and then not to downplay anything in Eastern North Carolina.

We can do both.

We can, we can have the speed, and we can have the accuracy.

And we just need to turn to these other states that have these horrible storms like Florida.

You look down in Florida, what they've been able to do to get the money in the hands of people quickly, and to not have waste, fraud and abuse, and grift, and all of the things that happen and can happen.

They've got it down.

So if I'm Stine, I'm picking up the phone, and calling the governor down in Florida, you know, put the partisanship aside, because this should not be partisan, and saying, "How do we do this?"

'Cause it's an opportunity in my mind for the elected officials in the executive branch, and legislature to come together to figure out what are the bigger picture items that we can do now.

How can we put a system in place where contractors are approved, and so on and so forth?

How do we use AI technology to ensure that the money is getting quickly?

Why are we sending paper checks if we're still doing that?

Shouldn't we be doing ACH through AI and so on and so forth?

The technology's there, it's the will of everybody working together.

And this is an opportunity to kind of get it right, put the system in place.

'Cause we all sitting around the table can agree this is not the last storm that this state has seen.

So this is an opportunity to get it right in my opinion.

- Colin, how does the public, or how does media and policy makers, how do you keep the focus on Helene recovery in a responsible way without getting fatigued reading article after article?

It never will seemingly end.

Because people in the east, they're not touched by this storm.

And it's easy to say that's old news.

It's not old news.

It's everyday news.

Right?

- Yeah.

And I think that the challenge is always sort of focus on what are the impacts on the ground level?

What are people in these communities actually seeing as far as the recovery there?

'Cause there's all these political arguments of do you spend this dollar amount, do you spend this dollar amount?

Do you fund this program or this program?

But ultimately, at the end of the day, what's gonna get the small businesses in the mountains back up and running?

What's gonna get people back in their homes?

And I think this storm has interest to people across the state because a lot of these communities or places, people go on vacation.

I know I'd take trips to the mountains every summer, and go to some of these small towns that are hit hard.

And so you feel this connection, even if this is not a part of the state that you live in.

But the key is to focus on the people, not so much.

I mean, you still have to cover the political arguments, but continue to zero down on what actually is gonna help people.

And are those dollars actually going to get there anytime soon?

Or is this a program that's gonna take six months to get going?

- We'll be right here.

You'll be there every day with it on the radio station.

State treasurer Brad Briner's made some rounds publicly to discuss the financial health of the state health plan.

The health plan covers nearly 700,000 state employees and their family members.

It's currently running a half billion dollar deficit, Chris, that will...

It will rise to over a billion dollars in just two years or so.

The treasurer's proposing raising premiums on active employees to cover the shortfall.

Workers have not had a premium increase in a decade.

Briner's plan carries other cost saving proposals, but everyone looks at employee premiums.

Disclosure, I'm part of the state health plan.

If they do it, I'll pay more.

Just want the folks to know.

How about you?

- Yeah, also part of the state health plan.

- There you go, we're gonna be transparent here.

Your take on this issue.

Brad Briner tackled it day one.

I give him credit.

- Yeah, and I think his predecessor also talked about it.

And this is not something that has just popped up.

This has been going on for quite some time.

The deficit's been building up and up and up, and no one's had the real courage to look at it hard.

I think that everybody's gotta come to the table on this.

The providers, the hospitals, the insurance company that administers the plan.

All of that has to... Everyone has to come to the table and then state employees, sorry guys, are gonna have to come to the table.

If you look at the private sector, and I know we can't do the exact match to the private sector because part of the appeal of being a state employee is a great benefit package, whether it's the pension plan or healthcare, and that's great.

So you're adding about $20 a month according to the plan.

I think it is time, but I don't think we lay it on at the foot only of the state employees.

So I think you gotta come to the table with a little more cash.

If this were private sector, you absolutely would have to.

I don't think it's insurmountable amount of money... An insurmountable amount of money, sorry, but again, I don't think we put it all on your- - Let's go to the senator.

We got about a minute and a half.

- Give me a synopsis of this.

How are you feeling this Senate coming in?

A lot of your constituents would be affected.

- Sure.

No, I mean, Johnson County has a large population of state employees or retired state employees.

I mean, we're going to be directly impacted by this.

I agree with what Chris said though, about...

I mean, it's gonna be a large group of stakeholders and part of this is the cost of healthcare in North Carolina.

We are one of the most expensive states in the nation for healthcare, and we have to drive down that cost curve going forward.

- 20 seconds, Senator Murdoch, I gotta wrap.

- Yeah, I mean, back to the driving costs down.

Look forward to working with the Chair of Healthcare.

Senate Democrats have filed numerous bills that will work to drive the cost down of healthcare.

So it's bringing costs down, us giving more money to the plan, and then they definitely will be giving a look at premiums.

- Until next time, we're out of time.

Thank you folks for watching.

If you have any thoughts about what you've heard, email them to me at statelines@pbsnc.org.

We'll check every email.

We'll send them out to this crowd.

I'm Kelly McCullen.

Thanks for watching and I'll see you next time.

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