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Tax fight is likely for Easley
He wants to raise taxes to pay for programs; legislators oppose idea
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Published: May 13, 2008
RALEIGH
Gov. Mike Easley is proposing tax increases on cigarettes and alcohol, but he has stiff opposition from state legislators as they return to Raleigh today.
With the state facing a tight budget year, Easley said yesterday that the new taxes are needed to pay for teachers' salary increases and improvements to the state's troubled mental-health system.
But Democratic leaders in the N.C. General Assembly said they hope to pass a 2008-09 budget without raising any taxes. Easley is a Democrat in his final year in office. All 170 state legislative seats are up for re-election this fall.
"This is a year for tightening our belts. This is a year for looking for efficiencies," House Speaker Joe Hackney said. "That's what our citizens are doing. That's what our folks are doing. That's what we want to do."
Hackney said that any new taxes this year "would have a difficult road to hoe."
The 2008 legislative session will open today at noon, and the budget is likely to be the biggest topic on the table for the next month and a half. Legislators are supposed to approve a budget plan by June 30, the last day of the state's fiscal year.
Unlike many other states, North Carolina does not have a budget shortfall this year and is not projecting one for next year. Still, the sluggish economy has caused state economists to predict slower-than-expected revenue growth in 2008-09.
That means that there will be less money available for legislators to increase spending on education, roads, salaries and other areas.
In his proposal, Easley recommended a $21.5 billion budget, which would increase spending by $1 billion over the current fiscal year. Fifty-eight percent of his budget would go toward education, including major expansions of two of Easley's signature programs: More at Four, a pre-kindergarten program, and Learn and Earn, which allows high-school students to earn college credit.
"Any time there is an economic slowdown, you cannot let that become an education slowdown," Easley said.
Before Easley leaves office, he wants to make good on his promise to bring the salaries for North Carolina's public schoolteachers in line with the national average. Easley said that would take an average 7 percent raise for teachers in 2008-09. To pay for it, he wants to increase the state tax on cigarettes from 35 cents per pack to 55 cents.
Legislative budget-writers said yesterday that, while they agree with Easley that teachers should get a raise, they could not commit to the entire amount recommended by Easley.
Reynolds American Inc. said yesterday that it would oppose any effort to increase the cigarette tax.
"The median income of North Carolina smokers is about $33,000 a year," said Steve Kottak, a spokesman for Reynolds. "That's the group that the governor is piling onto with this tax proposal."
Kottak said that some states are trying to close budget deficits with cigarette-tax increases, but have found that such increases cause smokers to avoid the tax by buying cigarettes over the Internet or from other states.
Easley also wants to raise taxes on alcohol to help pay for the state's long-standing efforts to repair the mental-health system. His proposal calls for raising the beer tax from 5 cents per can to 9 cents, and raising the tax on liquor from 25 percent to 29 percent of wholesale price.
The tax on a bottle of wine would also go up 3 cents. The additional revenue would pay for expanded crisis services and other mental-health needs.
"It's not a significant amount of money to the consumer, but it is a significant amount of help to the mentally ill," Easley said.
The legislative session is a so-called "short session." Most major legislation gets passed in "long sessions," which occur in odd-numbered years.
The main purpose of the short sessions, in even-numbered years, is to work on the budget, and legislators prefer to end the short session early in the summer so that they can turn their attention to their re-election campaigns in the fall.
Still, legislators may take up a variety of issues this year in addition to the budget. Mental-health reform and the state's need for new roads will be continuing topics. Another bill in the works pushes to improve the state's water-conservation efforts and the response to future droughts.
But with a lame-duck governor, impending legislative elections and little money to play with, any landmark legislation is likely to wait until the long session in 2009.
"I know that times are tight, and I think we need to be very cautious," said state Sen. Linda Garrou, a Winston-Salem Democrat and a key budget writer in the Senate. "It's better to be safe than sorry and to be careful about the money that we spend."
■ James Romoser can be reached at 919-210-6794 or at jromoser@wsjournal.com.
■ Journal reporter Richard Craver contributed to this story.
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N.C. Politics
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The Downtown Summer Music Series will begin on Thursday. Ed Bumgardner talks to some of the organizers of the Downtown Jazz lineup, in which a form of music known as "smooth jazz" will play a more prominent role this year.
Thursday's relish stories will appear in the Entertainment section.
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