Budget writers return to negotiating table

Meanwhile, state Republican leaders said the state should focus more on reducing spending in a down economy than on raising taxes to balance the budget.

House and Senate negotiators have been at odds for a week over what to cut from the budget, how to raise additional revenue and where to spend that extra money.

The House financial team, which is working on the revenue side of the equation, told their Senate counterparts Thursday morning not to expect a proposal until at least next Tuesday morning. Hackney, D-Orange, said that was unacceptable, and he ordered the team to meet with the Senate finance team Friday morning.

The budget writers from both the House and Senate, who are focused on cuts and spending, sat down together Thursday afternoon for the first time in seven days.

"Progress is just too slow," Hackney said. "I'm dissatisfied with it, and I've talked to (Senate President Pro Tempore Marc Basnight) and I know he is as well."

Although lawmakers said they would exchange proposals by the end of the evening, they remain far apart on how to spend an extra $1 billion in tax revenue the finance teams are putting together. The Senate wants to invest more in education, while the House wants to spend it on human services programs and public safety.

State Republican Party Chairman Tom Fetzer said during a Thursday morning news conference that projections of a $4.6 billion deficit are exaggerated. He and other GOP officials said the shortfall is closer to $1.1 billion, based on recent spending, and that new taxes aren't needed at all to balance the budget.

"Families and businesses all over this state are having to roll back expenditures to levels where revenue can cover (spending)," Fetzer said. "That's what this state has to do. We can't raise taxes on the people of North Carolina right now."

House leaders have called for a quarter-cent increase to the sales tax and higher tax rates for individuals making more than $200,000 a year. The Senate has balked at raising income and sales taxes and has proposed enacting taxes on a range of services, from car repairs to lawn care to manicures.

Gov. Beverly Perdue said neither approach will work, and she has proposed raising $1.6 billion in extra revenue to lessen the cuts being suggested to education funding.

Perdue called for raising the state sales tax by a penny for 13 months, beginning Sept. 1. Her plan also would enact taxes on a range of services, raise taxes on cigarettes by 50 cents per pack and on alcohol, lower personal and corporate income tax rates and provide tax relief to home buyers and small-business owners.

House Majority Leader Hugh Holliman said budget writers are trying to balance revenue increases with spending cuts.

"We, too, are concerned with taxes, but we're equally concerned with some of the things we're having to cut, such as teachers in the classroom, assistant teachers in the lower grades (and support for) the mentally ill, who we all know we need to do more for," said Holliman, D-Davidson. "Those are the cuts we're trying to put back in (the budget) and make sure we cover with the limited tax increases we're looking at."

State government continues to operate on a continuing resolution that expires next Wednesday.