RALEIGH, N.C. — Gov. Mike Easley said he had some good news about North Carolina's budget, which he shared with the state's top leaders.

Easley told state lawmakers that the state budget is on target. He said expenses are keeping pace with taxes collected for the first time since 1999.

Easley said the surplus politics of the 1990s is gone. He also said the economy has changed and we have had to change with it.

"Nobody likes change but a wet baby, but when circumstances change, we have to be nimble," Easley said. "I know we have ruffled some feathers down the street as we have gone through this process. Sometimes, you have to break an egg to make an omelet."

Easley said that for the first time, the state budget's growth was pared from 7 percent to less than 1 percent to match a struggling economy.

"The biggest thing is the projections. We have to make sure that we balance the budget based on what the projections are going to be, what the revenue is going to be, and we can't cut taxes and at the same time, raise expenditures," he sad. "That's what happened in the 1990s."

Easley said he hopes the same upbeat news that the economy is slowly recovering will improve the 2003 budget forecast. State lawmakers return to Raleigh later in January to begin work on the new budget that shows a possible $2 billion deficit.