State News

General Assembly Tentatively Agrees on a $20.7 Billion Budget

Posted July 28, 2007
Updated July 29, 2007

State budget
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— The General Assembly tentatively agreed Saturday on a $20.7 billion budget plan, one that allows counties to raise some taxes but also phases out the requirement they pay for some of their residents' Medicaid expenses.

The budget, part of a two-year spending plan for state government, was finalized by Democratic legislative leaders nearly two months after negotiations began and four weeks after the start of the fiscal year.

"This is a difficult process," Sen. Walter Dalton, D-Rutherford, said before the Senate tentatively approved the spending plan Saturday morning on a 25-13 vote. "But it was worth it because we have a budget that we can be proud of."

The state House gave its initial approval to the budget later in the day on a 65-53 vote. The second of two required votes in each chamber is scheduled for Monday. The proposal will then go to Democratic Gov. Mike Easley for his approval.

During the unusual weekend session, the Senate Democrats who crafted the budget plan heralded its provisions to set aside $135 million for new college scholarships and tax credits for low-income families, to create a dedicated cancer research fund, and to spend $860 million in cash and debt on university building projects and land conservation.

In a statement, Easley praised the Legislature for its work on the budget.

"I commend this legislature for their vision and courage," said Easley.

But minority Republicans attacked the budget for making permanent a "temporary" statewide sales tax increase, six years after the boost was first approved during the depths of a recession to combat a budget shortfall. If the budget is eventually approved, most residents will continue to pay a 6.75 percent sales tax on most purchases.

Two tax breaks - allowing the highest income tax to fall from 8 percent to 7.75 percent and an earned income tax credit for low-income residents - will begin next year.

GOP leaders also said the budget spends too much - a 9.5 percent increase over last year - without dealing with core problems such as North Carolina's high dropout rate in high schools, or the billions of dollars in backlogged road projects.

"We have an education system that's failing our students," said Senate Republican Leader Phil Berger, R-Rockingham. "We have a transportation system that is crumbling. ... No, this is not a good budget. This is not good for North Carolina."

The final budget is a huge victory for county governments, which will have their share of Medicaid expenses - expected to reach $520 million this year - eliminated by July 2009. Rural and poor counties have complained for years that the skyrocketing costs of health care have forced them to continuously raise property taxes.

"It will make a tremendous difference," Democratic Rep. Doug Yongue of Scotland County, which has one of the highest property tax rates and percentages of Medicaid-eligible residents, said as the House debated the budget. "We've been giving lip service to Medicaid since I've been here. But that is reality now."

Counties also could either raise sales taxes by a quarter of a cent or the land transfer tax from 0.2 percent of the sales price to 0.6 percent - an additional $800 on a $200,000 home.

Although proceeds from such a tax increase are expected to be used school construction or other infrastructure needs, the final budget language contains no such requirement and wouldn't funnel any of that money to cities.

The transfer tax option delayed the budget's passage for weeks after Senate Democrats balked at the idea. The North Carolina Association of Realtors has spent nearly $600,000 this year on a public campaign opposing what it called the "NC Home Tax," arguing it would make housing less affordable.

Sen. John Snow, D-Cherokee, was the only Senate Democrat who voted against the budget, explaining in a statement he had pledged to his constituents to vote against the transfer tax. Sen. Fletcher Hartsell, R-Cabarrus, was the lone GOP member to support it.

Easley received most of what he wanted in the measure, including $56 million annually for the next two years to expand his More at Four prekindergarten program and $87 million for a program that would help low-income students complete college debt-free.

"This is a gutsy and aggressive budget that finally fulfills our historic promise to all people that they can achieve their dream of going from pre-kindergarten through college debt free," said Easley, in a statement.

"It is a truly transformational document that allows North Carolina to emerge as the nation's clear leader in facing the educational challenge of the 21st century," continued the statement.

Another $37.5 million to help reduce class-sizes in early grades fills a gap created because the new North Carolina Education Lottery has failed to meet expected profits.

The budget bill tweaks the 2005 lottery law to allow higher prize payouts as way to boost tepid ticket sales.

The Senate's signature piece is the cancer research fund, which Dalton said would place the University of North Carolina's cancer center among the top five such centers in the country.

Ultimately expected to receive $50 million annually, the fund is paid in part by raising the tax on cigars and smokeless tobacco from 3 percent of wholesale price to 10 percent.


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  • shine Jul 31, 2007

    That has to be the biggest bunch of buffaloe chips article I have ever read - They tell you what they want to spend or spent... why not say how much the lottery fell under their expectations. Doesn't anyone want to know where the money is going?

    Phil Berger - We have an educational system that is failing our students ---- Are you for real ----- You have a parent situation that is failing their children.
    The educatiion system has not failed any one except for the fact the school administrators and teachers have very little jurisdiction unlike when I was in school - and we feel sorry for everbody - so we cart to school what are less than zoo animals to disrupt everyone who have any interest in learning ! I didn't have police patrolling my halls when I was in school - grad. 1980.

    BUT ! We can say that we have an educational system that is failing our children.

    Its only Tuesday - I am sure there will be more intelligent news - after all there is only one direction to go.

  • littleredwolfie Jul 30, 2007

    I agree with suncat!!! 4% is nothing to get excited about. Once taxes, retirement, insurance, etc. is taken out, there will not be that much left. (And, usually insurance premiums go up every time we get a raise). In fact, one year when we got a raise, I actually brought home $5.00 less per month than I had before we got the raise. Go figure???

    I will be one of the first to applaud our teachers...but, all of us are government employees and we all do a service for the citizens of the State of North Carolina and therefore, should receive the same pay raise...unless you are going to judge us on our merits and work ethics. And, I welcome that any day.

  • beachboater Jul 30, 2007

    aneagle: Mike Easley is GOVERNOR, NOT George Bush. George Bush has nothing NADA to do with North Carolina's budget. Get over it.

    I must confess the budget is as expected. Honestly, did anyone believe that the temporary sales tax would be temporary?

    NC already has one of the highest, if not the highest taxes from all sources in the Southeast, if not the entire country. This is getting out of control. We will never recruit any new business without giving them outrageous incentives to come here.

  • suncat Jul 30, 2007

    State workers do not get automatic cost of living increases...only what the legislature votes in. And yes, we have to pay taxes and try to make ends meet like everyone else. A 4% pay increase doesn't go very far after taxes, medical and insurance. I'll be lucky to see an additional $20 in my paycheck, and that will just cover the increases likely to occur with the aforementioned medical and insurance that will be taken out. In the meantime, the cost of living here in Raleigh continues to go up. Sum result, my paycheck gets smaller for yet another year.

  • Seeminglyopposed Jul 30, 2007

    Jay4-The cost of living raise that the state employees receive isn't what you would call a cost of living raise. Let me clear the misconception of state workers make all of this money and do little work to deserve it. The state workers who were in place before all the merit raises and great increases were given may fit that profile, however if anyone came in the state within the last 5 years aren't making enough to survive. (Unless you are with the good ole boys)other than that we are underpaid and yes we do work, at least enough to go along with what we are paid.LOL

  • Jay4 Jul 29, 2007

    Hello? People in private companies are struggling to get any raises each year! Companies are closing, jobs are leaving, all due to the excessively high NC taxes on businesses! State workers and teachers always get a cost of living salary increase every year. These Easley salary raises are in addition to these cost of living raises.
    Go out in the real world, please.
    You will find out that most private businesses would LOVE to give raises as often and as much government employees receive...but they cannot do so and stay in business. There used to be a day when such raises were given - every year. No more.
    Now, so many businesses are having to cut jobs, cut salary increases, cut benefits, and cut out of this high tax state just to survive as a company.

  • aneagle Jul 29, 2007

    I do apologize on for saying 600 billion this year...i meant since the war started and thats all i will apologize for....and HELL nah im not from Chapel Hill

  • now Jul 29, 2007

    My, oh my. Democrats do get up after noon. You guys sleep until noon, get your government kickbacks and clog the blogs.

    Thank you ANEAGLE for your knowledge and wisdom. One can only assume you are from the Peoples Republic of Chapel Hill. We already know all of your Liberal cliché’s and talking points. We know in your demented mind that President Bush and Fox news pose more of a threat to you than terrorists that will cut your head off. We already know how Liberals think. This is about taxes in the State of North Carolina and how the Liberal lawmakers are taking everything an honest person has and why people constantly put them back into office. That is what they do for a living.

    I would suggest to you that you make a trip to Florida and recount the 2001 elections results for the thousandth time and get over your blind hatred for President Bush and get a grip on reality.

    Do they still teach the constitution on public schools or is that not politically correct these days?

  • FE Jul 29, 2007

    Let's not forget the $50 million "budgeted" for the NC Earned Income Tax Credit starting in 2008.

    As a reminder, that is NOT an income tax cut (most folks eligible already have zero NC tax liability) but instead a handout of additional money via one of the most abused programs in the federal government.

    Unless the crooks on Jones Street have a printing press, that "new" money will have to come from somewhere.

    .....but it shore 'nuff does get votes!!

  • ladyblue Jul 29, 2007

    anagle-12 billion monthly does not add up to 600 billion a year on war. We spend over 300 billion a year on the costs for illegals in this country. I don't mind spending that to fight terrorist. Second that is what Democrats do. They raise taxes. Those votes for this budget were not voted on but one Republican according to the story. Democrats usually raise taxes and increase domestic spending. Republicans usually reduce taxes and reduce domestic spending. Have you just been reading of the increased taxes the democrats have voted on or has bills on in the last week. From pop bottle to increased sales tax to transfer fee tax to raising car title fees, this is just in one week. you don;t need to talk so rude and the President has nothing to do with NC budgets.