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Easley Signs $14.8 Billion Budget Bill

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RALEIGH, N.C. — Gov. Mike Easley signed a $14.8 billion state budget into law, backing away from an earlier threat to veto the plan.

Easley, surrounded by more than a dozen House and Senate budget writers, signed the bill during a ceremony at the State Capitol.

Easley said the budget plan avoids the cuts that other states have made to public schools while holding the line on spending.

"This budget reflects the values and priorities of the people of North Carolina," he said.

Easley spoke only briefly about his earlier objections to the budget agreement reached by House and Senate leaders, but also signed into law a supplemental budget bill that give the governor more flexibility to manage state finances.

Easley took no questions from reporters.

After signing the document, the legislators surrounding him started singing "Kumbaya."

The signing ceremony followed a 25-19 vote in the Senate giving final approval to the two-year budget, which covers the 2003-04 and 2004-05 fiscal years. The House approved the budget in a vote early Monday morning.

Lawmakers agreed to the supplemental budget bill to try to stave off a veto. Some Easley critics in the Legislature said it was an apparent effort to give him political cover to back away from the threat with a veto override possible.

A veto also could have led to a shutdown of some government services, with the start of the fiscal year beginning Tuesday.

Easley threatened the veto because he said the proposal relied on unrealistic tax revenue forecasts that left it more than $400 million out of balance.

Legislative leaders disagreed that the bill is unbalanced, but agreed to a supplemental bill to stave off a financial crisis.

The Senate vote went along party lines, with Republicans opposing the plan.

Senate Democrats said the document represented the best lawmakers could do in tough financial times.

Sen. Charlie Dannelly, D-Mecklenburg, said the poor would have been hurt more had additional spending cuts to social programs taken place and the tax hikes not continued.

"Think about the people we hurt when we cut. Think about the old saying, 'You get what you pay for,"' Dannelly said. "Folks, this is a good budget. If not for you, certainly for the invisible people."

Republicans agreed with Easley about the budget being based on faulty economic assumptions.

"You can't borrow money indefinitely. You have to live within your means," said Sen. Fern Shubert, R-Union. "At some point there is going to be a day of reckoning and it might be sooner than you believe."

Lawmakers were trying to beat a deadline of July 1, the start of the fiscal year. Without a budget by Tuesday, a half-cent sales tax and income tax increase on the wealthy would expire, forcing lawmakers to make up $384 million in lost revenue with spending cuts or other taxes.

The taxes, 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.

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 and relies on $510 million in one-time federal aid.

Lawmakers gave 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 clean-up projects, receives $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 is expanded with $8.6 million in additional money. The plan also provides $25.3 million for his plan to reduce class size.