State News

Still no breakthroughs with state budget

Posted July 14, 2009 3:16 p.m. EDT
Updated July 14, 2009 7:25 p.m. EDT

State budget

— A day before a temporary state spending plan is set to expire, lawmakers said Tuesday they are no closer to working out a balanced budget than they were when the new fiscal year began July 1.

Several key budget negotiators have said the process is as if state lawmakers have "taken three steps forward and four steps back" on how to generate additional tax revenue to lessen the severity of state budget cuts.



The General Assembly barely passed a so-called continuing resolution last month that keeps state departments and services running at no more than 85 percent of what was allocated in the past fiscal year's budget.

That continuing resolution expires Wednesday night, meaning lawmakers must approve a second continuing resolution, which, as it stands now, would allow Gov. Bev Perdue and agencies to spend no more than 84 percent of what was approved in last year's budget.

Perdue has also complained that the state is losing $5 million in new revenue every day without a budget, although budget analysts disagree.

Sen. Linda Garrou, D-Forsyth, one of the Senate's chief negotiators on spending details, said the 84 percent spending cap under the proposed continuing resolution was designed to make sure that there would be a little more savings.

The Senate's version of the continuing resolution also has no expiration date – something the House wants set at July 31.

North Carolina is facing a projected $4.6 billion deficit this fiscal year, and budget negotiators are expecting to approve a budget that will spend $18.9 billion this year, compared to a budget of $21.4 billion last year.

Both the state House and Senate have agreed to $990 million in additional revenue in fiscal 2009-10 and $1.3 billion in the second year of the budget. But Perdue has asked for $1.5 billion to avoid drastic cuts to education.

The Senate wants to lower the state sales tax and tax more services, such as auto repair, lawn care and home improvement. The House wants to increase sales taxes and raise income taxes on couples making more than $200,000 a year.

Perdue has said that raising the state sales tax by a penny for 13 months would raise more than half of the $1.5 billion she wants for the 2009-10 budget. Both chambers, however, oppose that measure.

She has also said she wants to lower personal and corporate income tax rates and provide tax relief to homebuyers and small-business owners.

She also would enact taxes on a range of services, such as appliance installations and repairs, movie tickets, courier services and cosmetic surgery and would raise taxes on cigarettes by 50 cents per pack and on alcohol.

Perdue said Monday she believes a deal will be reached soon that includes her suggested one-cent temporary sales tax increase.