House, Senate Approve $14.8 Billion State Budget

The votes came amid a threat by Gov. Mike Easley to veto the budget plan. However, legislative leaders hoped a supplemental budget bill giving the governor more flexibility to manage the state's finances might placate him and avoid a showdown.

The House approved the supplemental bill by an 88-27 vote. The Senate will take up both the budget bill and supplement bill for final votes on Monday.

The House approved the two-year budget for the 2003-04 and 2004-05 fiscal years by a 75-40 vote Sunday night. The 75 votes would be enough to override a veto.

In the first of two required votes, the Senate approved the plan by a 28-21 party line vote, with Republicans opposing it.

The proposed budget was voted on after House and Senate leaders reached a deal on the spending plan late Friday.

Lawmakers are trying to beat a deadline of July 1, the start of the fiscal year. Without a budget by Tuesday, or if it is vetoed, a half-cent sales tax and income tax hike on the wealthy will expire, putting another $384 million hole in the budget.

Easley said he would veto the plan because it relied on unrealistic revenue growth estimates. Legislative leaders responded that they believed the budget and its tax revenue estimates were solid.

It was unclear whether the supplemental bill, which was put together with the help of Easley advisers, would stave off a veto.

In a statement late Sunday, Easley said: "I am encouraged the General Assembly is clearly taking steps today to move closer to a balanced budget."

During debate on the House and Senate floor, legislative leaders reiterated their belief that the budget is balanced.

"Differences in actual collections verses forecasting are addressed every year," said House Co-Speaker Richard Morgan, R-Moore. "We do not see a problem because our budget balances."

House and Senate leaders also praised the spending plan for providing needed services in tight financial times.

"This has obviously been a rather wrenching time for all us. There are things in here that I would change if I were king. There are things in here that I'm sure everybody would change if they could do different," said Senate Majority Leader Tony Rand, D-Cumberland.

Some Republicans, though, said lawmakers were breaking a pledge by allowing the taxes that were scheduled to expire to continue.

"Ultimately, we are just doing the same things we have always done. We raise taxes, we take more money from the people," said Rep. Sam Ellis, R-Wake.

The taxes included in the budget plan, approved two years ago as temporary increases, raised the state sales tax to 4.5 percent and kept the top income tax bracket at 8.25 percent for couples making more than $200,000 a year.

But the budget allows two middle-class tax breaks to take effect as scheduled -- a child tax credit and an increase in the standard deduction for married couples. The Senate and Easley had proposed delaying the tax breaks for the second time in two years.

The budget includes $5.7 million in fee increases. Lawmakers also diverted $33 million that was to flow into 911 service improvement funds.

Besides the taxes, the plan depends on $67 million from the state's proceeds from a national tobacco settlement and $90 million from stepped-up tax collection enforcement.

It was also balanced with the help of a $510 million in one-time federal aid.

Lawmakers would give teachers a 1.8 percent raise and state employees a one-time $550 bonus. Higher insurance copayments for state employees are avoided by pumping $113 million in the State Employee Health Plan.

The Clean Water Management Trust Fund, which pays for sewer improvements and water cleanup projects, would receive $62 million.

The proposal pumps $150 million into the state's rainy day reserve fund, and provides $50 million for state building repair and renovations.

Easley's More at Four preschool initiative would be expanded with $8.6 million in additional money. The plan also proposes $25.3 million for his plan to reduce class size.