State lawmakers return; closing budget hole is focus

Lawmakers return formally to work Wednesday for another round of tough spending choices as state tax revenues have failed to keep up with costs for the new fiscal year starting July 1.

While the $788 million budget gap is nowhere close to last year’s fiscal chasm, spending reductions in education and health programs and at dozens of state offices will occur. Since additional broad tax increases appear off the table, requests by Gov. Beverly Perdue and others to expand programs or restore previous cuts will get close scrutiny, too.

“This is the beginning of some very difficult choices we’re going to have to make over the next several weeks,” said Sen. Tony Foriest, D-Alamance, an education budget subcommittee co-chairman. “This is not going to be easy.”

Lawmakers have been meeting two or three days a week for the past month to try to minimize House and Senate differences to adjust the second year of the spending plan they approved last summer. Perdue also helped out by rolling out her $19.2 billion budget adjustment proposal three weeks early.

The Senate expects to send its budget proposal to the House by the end of next week, said Sen. Linda Garrou, D-Forsyth, the Senate's senior budget writer.

It’s all part of a familiar refrain by chamber leaders during even-numbered years – finish the budget by July 1 and go home – but the legislature hasn’t completed a spending plan on time since 2003.

"We're going to do the budget and get out of here by the end of June," House Majority Leader Hugh Holliman said. "What we don't want to do is get bogged down on controversial issues that we can't act on."

Changes to the state’s ethics and campaign finance laws also have to be worked through before adjournment, along with some way to deal with an influx of sweepstakes games that local judges have ruled escape the state’s video poker ban. Reforms to the state’s Alcoholic Beverage Control system also are on tap.

Democrats want to keep the election-year session focused on issues that play well with voters, like encouraging job growth and lessening the financial pain on public schools, the University of North Carolina and community college systems.

“Jobs will be our first priority in ways that we can retain them, expand them, attract them,” House Speaker Joe Hackney said. “Saving education in the budget in the extent we can at all three levels will be certainly a top priority as well.”

Lawmakers plan to fill the deficit with a mix of responsible cuts and federal stimulus dollars.

"We know that our priorities are to protect education and to protect our vulnerable citizens and to do whatever we can to create jobs," Garrou said. "Those are our three main focuses for the short session."

Republicans, who remain in the minority in both chambers but have the wind at their backs entering the campaign season, will argue again that Perdue and her fellow Democrats have raised taxes needlessly because the budget gap isn’t that large and they ignored less painful ways to cut spending.

Perdue’s $86 million proposal of tax breaks and incentives for businesses to create jobs is “pitiful” and won’t help employment, House Minority Leader Paul Stam said.

“They’ve done this billion-dollar tax increase, and now they’re going to give back 5 percent and say that they’re creating jobs,” said Stam, R-Wake.

Education advocates also plan to fight additional spending cuts for local school districts proposed by Perdue above the $305 million already in place for the fall, arguing thousands of additional education jobs could be eliminated above the 5,000 teacher and staff positions removed this year.

The district spending cuts may shrink if Perdue is willing to give up spending on experience-based pay raises for teachers and her effort to pay back state employees and teachers the 0.5 percent salary reductions she required of them last year to close a budget shortfall.

She also wants her college- and career-ready initiative funded. The initiative would spend $39 million on hand-held computers in elementary school classrooms so teachers can better monitor student achievement. Health care advocates are pleased that lawmakers agree for now with Perdue to restore $40 million in funds to local mental health agencies after steep cuts last year reduced services.

“We need to stabilize,” said Dave Richard, executive director of the Arc of North Carolina, which advocates for the mentally disabled. “Keep the funding as level as we can and let us get through these cuts and manage that before we do a lot of other massive changes.”

Momentum has increased for three campaign finance and ethics bills approved by the House last year and awaiting Senate action as headlines focused upon federal and state investigations of activities surrounding former Gov. Mike Easley and his associates and illegal campaign contributions by a Wilmington businessman.

The legislation would delay more state officials from lobbying government until well after they leave state employment; ban state contractors from giving to elected officials who approve contracts that benefit the vendor; and require board appointees to report campaign donations and fundraising for elected officials who appointed them. Perdue unveiled her own ideas last month.

“For both political parties to retain their credibility, they need to end the perception that they’re not honest,” said Jane Pinsky with the bipartisan North Carolina Coalition for Lobbying and Government Reform.

Legislative leaders also must decide what to do about: