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Sin taxes to fund teacher raises, money for mental health

Posted May 12, 2008

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— Gov. Mike Easley on Monday proposed increasing taxes on cigarettes to pay for 7 percent raises for public school teachers and higher alcohol taxes to fund more spending on the state's mental health system.

The $21.5 billion budget proposal – it's the last budget of Easley's administration – represents a 4.2 increase in spending from the 2007-08 fiscal year.

In addition to spending on teachers and mental health, the proposal calls for increased funding for the state's beleaguered probation system, phasing out the annual transfer from the Highway Trust Fund and smaller raises for all other state workers.

The state will collect $150 million more dollars in tax revenue than originally forecast. However, that will be eaten up by state workers' pay raises, teacher performance bonuses, increased student enrollment and additional fuel costs for school buses.

Each 1 percentage-point salary increase costs about $130 million. Easley needs the teacher pay raises to fulfill an election pledge to raise their salaries above the national average by the time he leaves office in January.

The state is 6.9 percent below the national average for teacher salaries, he said. A 7 percent across-the-board raise would put North Carolina at the national average without any "smoke and mirrors" of weighing cost-of-living increases, he said.

"I'm using raw dollars so we have real results and do right by teachers," he said.

Increasing the cigarette tax by 20 cents a pack would generate enough revenue to pay for the raises, he said. The increase would put the cigarette tax at 55 cents per pack, ranking the state 40th nationwide.

North Carolina last raised the cigarette tax two years ago, when it went from 30 to 35 cents a pack as part of two-phase increase.

Easley also proposed putting more money into mental-health programs, which have been plagued by problems recently. He wants to shift money set aside for administrative costs to fund patient services.

Raising the tax on liquor by 4 percent and by 4 cents a can on beer would provide an extra $68 million for the mental health system, he said.

"It's not a significant amount of money for the consumer, but it's a significant amount of help for the mentally ill," he said. "If (an extra) 4 cents a can causes somebody economic hardship, then they're probably drinking too much and are going to be customers of mental health substance abuse (programs) sooner or later."

North Carolina's beer tax is the fourth highest nationally, trailing Alaska, Hawaii and South Carolina.

Plan gets negative reactions

Although he isn't running for re-election, he said, he thinks voters support increases in sin taxes to pay for teachers and mental health care. So, legislators up for election in November shouldn't have a problem backing his plan, he said.

But the proposal left anti-tax groups fuming Monday.

"I think the real sin is increasing taxes on people who are facing recession and $4 gas prices," said Dallas Woodhouse, a spokesman for Americans for Prosperity.

Lawmakers, who reconvene Tuesday, also gave Easley's plan a cool reception.

"I'm doubtful we'll have any revenue increase in this budget. I'm skeptical there will be the support to do that," House Speaker Joe Hackney said.

To cover extra spending in some areas, Easley also has asked each state agency to make spending cuts totaling about $400 million.

Classrooms will be exempt from those cuts, and tuition will not be increased under Easley's budget.

"Having a balanced budget entails, from time to time, having to raise revenue in addition to making cuts," he said.

The slowing economy was accounted for by lowering forecasts for next year's tax collections, he said, noting his last budget was similar to his first in 2001, when the state also faced hard economic times.

Tight budgets for several years and "good decisions" by the General Assembly in recent years have left the state's finances healthy, Easley said. The proposed budget would add money to the "rainy day" fund, leaving it at about $850 million.

"It's because we built on our strengths that we find ourselves in good condition moving forward," he said.

Aside from teachers, other state employees would receive a 1.5 percent raise under Easley's proposal. They also would get a one-time $1,000 bonus and an extra week of vacation.

Easley said he didn't want to make the bonus a recurring cost in future budgets because of the uncertain economy.

The disparity in raises between teachers and other state workers disappointed officials with the State Employees Association of North Carolina.

"It leaves working families behind," said Ardis Watkins, legislative affairs director for SEANC.

The governor would also give more money to the Department of Correction to address problems in the probation system, recently uncovered by the murders of Eve Carson, the student body president at the University of North Carolina at Chapel Hill, and Duke University graduate student Abhijit Mahato.

Easley's budget included a five-year phase-out of the annual $172 million transfer of automobile-related taxes and fees from the state's Highway Trust Fund to the general operating budget. The first year would lower that transfer by $25 million.

The transfer has been in place for 20 years but remains controversial with gaps in transportation funding predicted to reach into the billions in the coming decades.

He didn't include a transportation bond in his budget, but kept the cap on the state gas tax in place.

A blue-ribbon transportation panel, formed jointly by Easley and Democratic legislative leaders, recommended a statewide referendum on a $2 billion transportation bond.

His budget also called for $31 million more in part to expand children's health insurance and child care subsidies and to help homeowners at risk of foreclosure.

The governor said about a third of the money would be used to get another 10,700 children in low-income families enrolled in a federal-state health insurance program. Another $9 million would take about 1,100 children off of the waiting list for child care subsidies, and $8 million would benefit adults participating in foster care or adoption programs.

About $1 million would go toward housing counselors to help homeowners avoid foreclosure.

The budget also included measures for a sales-tax holiday on energy-efficient products and appliances, a committee to work on statewide drought issues and a new trade office in Shanghai, China.


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  • TheAdmiral May 13, 2008

    "What I am complaining about is the fact that I work my tail off and don't get recognized equally."

    Well if that is the case, you too can have 5 straight years of 5% paycuts and uncontrolled inflation.

    Afterall - I think that is fair.

  • TheAdmiral May 13, 2008

    I think it is funny that we are pumping out Bachelors, Masters and PHD degrees at an alarming rate and now are having a problem with jobs.

    I personally would love to teach. The problem is not the money - the problem is the fifty levels of BS that each teacher has to dole out in Politically Correct nonsense and only 1 or 2 minutes of instruction.

    No raises for teachers until they say "No" to PC BS and start teaching the kids the lesson plan and they can pass the Community College Entrance Exam.

  • TheAdmiral May 13, 2008

    Why do you have to scream and itch about a government employee gets the short end of the stick.

    What about the people are being taxed to death in order to ensure you have a job.

    Pretty soon I will be tapped out - and guess what - your services - no matter what they are - teacher - DMV undereducated union drone - or whatever - will no longer be needed.

    So be ready to move on to something else.

    You should be looking elsewhere anyway if you don't think your being paid enough by the government - the free market is waiting.

  • Plenty Coups May 13, 2008

    Boyer, teachers have no union in NC. We are a "right to work state". By your logic, teachers should get advanced degrees to have higher salaries despite having to pay large amounts for their bachelor degrees/ teacher certification continuing education etc. Why should they when they aren't paid the same rate as comparable professions? Are you sayng they should get their Masters and National Board Certifications just so they can keep up with Bachelor Degrees in other professions? I worked as a salesman when I first arrived in NC and made 37,000 my first year here. It was easy, if boring work that took up weekends and holidays but required no education. My wife started teaching for the wonderful salary of 22,800 that required a bachelor's degree and certification. (11 years ago)What's wrong with the picture? As for starting at 40,000 in Wake County, undoubtably that person has experience that transferred over. By the way, all those who criticize teachers, why don't you try it sometime?

  • veyor May 13, 2008

    TooMuchGovt - gamble for the children and drink and smoke for the teachers - great analogy - love it.

  • HadMyFill May 13, 2008

    Ok... if my diaper analogy doesn't hold water for some (hold water, Ha!), how about an additional tax for cell phone users. How does a 20 cent tax per cell phone call or text message sound? This additional revenue would fully fund the teacher raises and build some quality roads as well. This sounds fair to me, that is if unfairly adding additional taxes for smokers and drinkers is fair.

  • TooMuchGovt May 13, 2008

    Now that we already have ads encouraging us to "Gamble for the Children", maybe NC can start running ads that encourage us to "Drink & Smoke for the Teachers". Why stop there? How about "Hire a Hooker for Firefighters" or "Get High for Cops". I do hate politicians so.

  • pm4hr May 13, 2008

    Give me a break! Want to really raise some about taxing EVERYONE that is overweight and goes into a fast food restaurant. Why single out the smokers and alchohol drinkers. If you are going to tax one sin then tax them all!!

  • xxxxxxxxxxxxx May 13, 2008

    "What Easley has done is completely ignore state employees the ENTIRE time he has been in office.:

    Warren G., no he hasn't ignored us. In fact he's made it a point to slap us in the face year after year. Kinda like leaving 2 cents for your waitress - paltry enough to be insulting but enough to let them know you didn't forget.

  • veyor May 13, 2008

    Warren - Then you should get a raise and keep your job, if the tax revenue allows it.