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State budget includes big debt
Rise in spending is reduced, compared with past 2 years
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Published: July 8, 2008
RALEIGH
The General Assembly tentatively approved last night a nearly $21.4 billion final budget bill for the new fiscal year, a plan that slows down the recent rapid rise in spending but provides a hefty IOU in the form of $857 million in debt.
The bill is the result of two weeks of intense negotiations between House and Senate Democrats. It increases spending by 3.4 percent, or $698 million, compared with more than 9 percent growth in each of the previous two years.
The relatively small increase results from a slowing economy that provided a meager surplus for the year ending June 30 and required legislators to make some last-minute changes to try to satisfy fellow Democratic Gov. Mike Easley.
"Not everybody gets what they want, but I believe this is a very good budget for the state of North Carolina," said Sen. Linda Garrou, D-Forsyth, a chief budget-writer, before the Senate gave it initial approval by a vote of 34-16.
The Senate and the House, which minutes later approved the spending plan 97-21, were scheduled to cast the second of two required votes today. Easley will be asked to sign the bill into law.
"It is both fiscally responsible and respectful of the problems some people are having making ends meet," said Rep. Hugh Holliman, D-Davidson, the majority leader, during the debate.
But some Republicans complained that the budget still spends too much in uncertain economic times and borrows too much without requiring statewide voter approval. And they warned that the budget would require higher taxes to pay for the debt in the future.
"I think given the economic times that we've got, it would be much more prudent for us to look at our situation realistically," Sen.Phil Berger, R-Rockingham, the minority leader, said during the Senate debate.
But the bill still breezed to initial approval with bipartisan support.
There are no new taxes and tax breaks are few this year as Easley successfully persuaded fellow Democrats to delay for a year eliminating the gift tax and expanding a refundable tax credit for the working poor.
Easley was worried that there wasn't enough revenue after tax collections missed estimates by $63 million total in May and June, forcing some last-minute spending reductions. Easley, who has never vetoed a budget bill, is in his final year in office.
"The overcollections were not what we expected them to be," said Rep. Mickey Michaux, D-Durham, the chief House negotiator.
Easley however, failed to get all he wanted for his signature.
A provision left out of the budget would have given the governor power to raise public-schoolteacher salaries if tax revenues improve this year.
"The governor is reviewing the budget," Easley budget adviser Dan Gerlach said. "You have to look at the whole budget overall, not just this thing or that thing."
Teachers would receive average 3 percent raises while other state employees would receive the greater of 2.75 percent or $1,100 -- less than what either group wanted. An Easley plan to increase taxes to pay for 7 percent teacher raises never got serious consideration from a Democratic-controlled legislature in an election year.
But Democratic legislators said that the budget still gives significant raises compared with surrounding states dealing with revenue shortfalls.
"Most any other state would be envious of this plan," Holliman said.
The bill also permits the state to borrow $857 million over the next four years to build 1,500 additional prison beds, university and state buildings -- even renovating the polar-bear exhibit at the N.C. Zoo in Asheboro.
Democratic leaders say that the borrowing -- the most authorized by the legislature in a single year in recent memory and more than either the Senate or House budget proposals offered -- could generate 20,000 jobs in the state during a tough economy. They also say it remains within the level of borrowing that State Treasurer Richard Moore says is reasonable.
"I don't know of anybody in business ... that can survive without debt," said Sen. Stan Bingham, R-Davidson, one of three GOP senators to join Democrats and vote for the budget. "It's a necessity for keeping up with the times."
The budget orders tens of millions of dollars of cuts from the Community Support program, a mental-health initiative that provides nonmedical care for patients living at home. A state review of the program said it may have wasted hundreds of millions of dollars in overpriced or unnecessary care.
The budget does extend or expand tax credits for small-business employee-health coverage, in-state film production and renewable energy. A sales-tax holiday for energy-efficient appliances would be held the first weekend in November.
Projects for Northwest N.C.
Spending in the 2008-09 State Budget for projects in Northwest North Carolina:
• $1.5 million for the Center for Design Innovation at the Piedmont Triad Research Park.
• $3 million for a science and office building at Winston-Salem State University.
• $4.2 million for a nursing building at Appalachian State University.
• $9.8 million for a student center at Winston-Salem State University.
• $11.1 million for a storage facility at N.C. School of the Arts.
• $12.9 million for a film school production design facility at N.C. School of the Arts.
Source: N.C. General Assembly
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