Lawmakers stick to guns as budget clock ticks

RALEIGH, N.C. — Five days remain until a new fiscal year starts for state government, and lawmakers continue to haggle over a state budget with no agreement in sight.

House and Senate budget negotiators have been working for most of the past two weeks on a compromise two-year spending plan that would erase a projected $4.6 million deficit. Most cuts have been agreed to, but lawmakers remain far apart on how to raise extra revenue.

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Lawmakers still far apart on tax increases

Gov. Beverly Perdue in recent days has urged lawmakers to raise $1 billion to $1.5 billion in new taxes to avoid drastic cuts to education, but she didn't provide any guidance on how to do that.

Sen. David Hoyle, co-chairman of the Senate Finance Committee, says the House and Senate have agreed to raise $990 million in revenue in fiscal 2009-10 and $1.3 billion in the second year of the budget.

"How we get the money is where the big battle is being waged," said Hoyle, D-Gaston.

House members want to use a quarter-cent sales tax increase and higher income taxes on couples making more than $200,000 a year to generate most of the additional revenue. Senate Democrats have balked at the idea of higher sales and income taxes, however.

"We've only got 11,000 people in this state making more than $1 million. If we (raise income taxes), we'll have 5,000 people in the state (in that position)," Hoyle said.

Senators want to lower the sales tax and begin taxing a range of services, from car repairs to lawn care to home improvements.

Once lawmakers agree on how to generate the money, they have to decide where it goes. The popular choice is education and the Department of Health and Human Services, but not everyone agrees with that plan.

"I'm very concerned about probation and parole (and) corrections," said Sen. Linda Garrou, co-chairwoman of the Senate Appropriations Committee. "We have a challenge ahead."

House Majority Leader Hugh Holliman said the chances of passing a balanced budget by June 30 are about 50-50.

"I think standoffs are solved pretty quickly," said Holliman, D-Davidson. "Forget about digging in your heels on certain things and say, 'We need to work out a package here that takes the Senate's position and our position and have a total package.'"

The Senate on Tuesday passed Senate Bill 311, to allow government to keep operating past the end of June in case a budget isn't in place.

The bill orders Perdue to keep spending levels at no more than 85 percent of what was allocated in the past year's budget because lawmakers are reducing spending due to declining tax collections. The temporary spending plan also would prevent any pay increases for state workers, such as automatic step increases, from taking effect unless authorized by the General Assembly.

The House Appropriations Committee passed its own continuing resolution Thursday – House leaders have criticized the Senate bill because it doesn't include any expiration date – but House members are more focused on trying to get the budget done on time.

Hoyle said he doesn't see the General Assembly meeting the June 30 deadline.

"I'm not trying to inflame my colleagues," he said. "I'm just saying we're miles apart on philosophical differences."

Others continue to hold out hope for a last-minute deal.

"Miracles do happen," said Garrou, D-Forsyth.