Budget-writers will have a projected $2 billion to work with beyond the $17.3 billion in spending they've already authorized for the coming fiscal year, with more than half the extra money coming from a revenue surplus this year. After several shortfalls to start this decade, it's the best financial news for the state in years.
"The economy has seemed to have perked up now, and all of the work that we've done creating jobs and expanding businesses in North Carolina has began to pay off," said House Speaker Jim Black, D-Mecklenburg. "We're now in a position to do more for education and health care, and we'll continue to try to expand jobs and encourage companies to move to North Carolina."
It's unclear whether the exceptionally healthy finances will dim or brighten the spotlight on Black's legal troubles. The State Board of Elections has investigated donations to the speaker's campaign, and separate state and federal investigations tied to Black are under way. Black, in response, created a committee to recommend changes to ethics and campaign finance rules.
"I'm always amenable to clarifying the rules," said Black, who remains speaker after a few Democratic colleagues called on him to resign. "I'm going to operate under the rules we have. I'm willing to change whatever rules you want to change and play under those rules."
The additional money has raised hopes that items neglected during years of tight budgets -- such as pay raises and building repairs -- will get some attention after lawmakers reconvene Tuesday.
Senate leader Marc Basnight, D-Dare, said his chamber wants to spend at least $100 million to revive mental health reforms that have foundered over the last couple of years.
"This is exciting news to see services for mental health, developmental disabilities and substance abuse on the front burner for a change," said Robin Huffman with the N.C. Psychiatric Association, a critic of the handling of proposed reforms. "This is huge. This is huge."
But while others hope the surplus will mean more money for programs, legislative leaders will also be pressured to offer some kind of election-year tax relief. Lawmakers approved a series of new or extended taxes earlier this decade to fill budget holes, including a shortfall that reached $1.6 billion in 2002.
The largest cut could be the elimination of a half-cent on sales tax rate that generates $450 million a year. Expiration of the tax, approved in 2001 as a temporary increase, has been delayed twice and extended to mid-2007.
"The half-cent sales tax is a priority of ours. It's a promise to the voters," said House Minority Whip Mitch Gillespie, R-McDowell. "The difference is that Republicans try to keep their promises."
Democratic leaders are willing to discuss tax cuts, but they say they first want to ensure the state can pay for a list of high-priority items, including $117 million for higher than projected school enrollment, $100 million for teacher performance bonuses and about $300 million each for the state's reserves and a repair and renovations fund.
Basnight also wants legislators to begin planning to replace aging state mental hospitals in Goldsboro and Morganton, at a cost of $280 million.
"And I can give you 10 more (things) that we need to do," said Rep. Bill Owens, D-Pasquotank, one of the chief House budget-writers. "It's been played out that we've got a lot of money, so we've got a lot of requests coming in."
Democratic Gov. Mike Easley said that he would provide "broad-based tax relief" in his budget proposal later this week but hasn't provided details. But it would be unlikely that he recommend large tax cuts, since he blamed them for the fiscal emergency he inherited as governor in 2001 and doesn't want new shortfalls as he leaves office in early 2009.
Easley plans to raise teacher salaries by 5 percent on the way to raising their pay above the national average by 2008, and some legislators want more. Basnight said his chamber also is considering 4 percent to 5 percent raises for other state employees, who have received no substantial raises this decade.
A 5 percent raise for all these employees would cost about $535 million.
Lawmakers also will have to consider whether to act on two issues that polls show have strong public support -- changing how the gasoline tax is calculated and raising the minimum wage.
Easley proposed that the General Assembly cap the tax at 29.9 cents a gallon. House Democrats were expected to roll out their own idea this week. At the end of last year, Black, Basnight and Easley were cool to freezing the gas tax, arguing it would further delay road construction projects.
The minimum wage has been $5.15 an hour since 1997. The House last year approved raising it to $6, but the Senate has yet to consider the measure. The minimum wage issue pits business groups arguing that it would produce layoffs against advocates for low-income residents saying it would help about 100,000 workers.
Other issues likely to get attention at the Legislature include:
Black hinted that there may be some surprises that come out of the session, but said that many legislators want to make the "short session" live up to its name.
"We're going to have a very open session. We may allow a whole lot of votes that you may not have seen in the past," Black said. "Members want to be able to get some good work done, in about two months, and try to get out of here."