RALEIGH, N.C. (WNCN) – Following a new report showing the state is expected to take in about $6.2 billion more than anticipated in the current two-year budget, some Republican leaders in the General Assembly signaled support for additional pay raises for state workers, citing inflation.

The consensus revenue forecast released Monday by the legislature’s non-partisan fiscal research division and the Office of State Budget and Management showed revenue collections will be about $4.24 billion higher than originally expected in the current fiscal year and almost $2 billion higher the next year. 

Despite the nation’s inflation rate hitting 8.5 percent in March, a 40-year high, consumer spending outpaced that. Additionally, the report noted stronger than expected job gains. 

“Record-breaking stock market returns and corporate profits in 2021 were also unanticipated and generated significant revision to the forecast,” the researchers also said. 

What to do with the additional money will be one of the main questions the General Assembly will address when lawmakers return to Raleigh next week. 

In the budget that Republicans negotiated with Gov. Roy Cooper (D), they included pay raises of 5 percent for most state employees over two years as well as an average 5 percent raise for teachers in that two-year period. 

“We shouldn’t thump our chest on a 5 percent pay increase to teachers when you have inflation at eight-and-a-half percent,” said Rep. John Torbett (R-Gaston) during a legislative committee meeting Monday. “The 5 percent increase really is a negative by the time everything else comes out. So, we’re fully, extremely cognizant of all of that.”  

Rep. Jason Saine (R-Lincoln) said in an interview Tuesday that “a portion” of the increased revenue “will certainly go for” additional raises for state workers. He said legislative leaders were still in talks about specifics. 

“We’re all living in the Biden economy and the inflation that’s coming along with it. We understand that. We’re more than aware,” he said. 

Ardis Watkins, executive director of the State Employees Association of North Carolina, said state agencies are struggling to fill positions as salaries fall behind what the private sector is offering. 

“No question about it. State government has got to come through with some meaningful raises like most employers are right now,” she said. “State employee salaries have not been able to keep up with the market ever. Now, they’ve just lost more ground to private sector jobs. So, we can’t fill those jobs right now. There’s literally a 30 percent vacancy rate.” 

The news of the additional revenue also comes as a case is pending before the state Supreme Court related to funding for education. Last year, Superior Court Judge David Lee ordered the state to transfer about $1.7 billion to state agencies to fund two years of the so-called Leandro plan, which is aimed at improving education. Republicans in the legislature have appealed that decision, saying the judge’s order is unconstitutional. 

A different judge last month found the state underfunded the plan by about $785 million. 

Rep. Brandon Lofton (D-Mecklenburg) said state leaders should use some of the additional revenue to fully fund the plan.  

“My own son is trying to learn Spanish right now without a Spanish teacher in his classroom,” he said. “I think the first thing we have to consider is: are we meeting the needs of our state? Clearly, we are not.” 

The budget that passed last year also included tax cuts for individuals and businesses that are phased in over the next several years.  

When asked if Republicans will consider trying to cut taxes further or accelerate the timeline of those tax cuts, Rep. Saine said, “It might be something we talk about, but nothing for certain at this point.” 

The consensus revenue forecast also highlighted “significant headwinds” the state could face, including “an elevated risk of recession” brought on by conflict overseas and actions by the Fed to increase interest rates in an effort to combat inflation. 

“Despite this risk, the forecast for the upcoming fiscal year does not foresee a near-term recession,” the report states. 

Rep. Saine said, “It is top of mind for certain. We’re looking down the road just like everyone else as far as it can’t always last forever.”