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State avoids budget clash
Perdue signs spending plan
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Published: July 1, 2009
RALEIGH
The state Senate avoided a showdown on the eve of the new fiscal year yesterday by agreeing to the House version of a temporary spending plan to run North Carolina government while a final budget gets worked out.
The Senate's 35-13 vote to accept the House plan sent the stopgap spending measure to Gov. Bev Perdue, who signed it into law several hours before the old fiscal year ended at midnight.
The temporary plan sets spending parameters that Perdue and state agencies must follow through July 15. The Senate had wanted no expiration date but conceded to the deadline, which House Democrats argue will put pressure on negotiators working out the final budget.
"It's not worth fighting over," said Tony Rand, D-Cumberland, the Senate majority leader.
State government probably wouldn't have ground to a halt without the so-called "continuing resolution," but there would have been no directions on how to spend because the old budget expired yesterday, leaving Perdue with her emergency powers.
The stopgap spending measure limits Perdue and state agencies to spend at levels no more than 85 percent of what was allocated in the past year's budget. It's a reflection of the deep cuts in Senate and House budget plans because tax collections were at least $3 billion off expectations for the year ending yesterday.
The temporary measure also prevents pay raises -- which aren't expected next year -- and directs bosses of state workers whose positions are to be eliminated in both the House and Senate versions of the budget to give them 30 days' notice before they are laid off.
Rand said he didn't know whether the House and Senate Democrats could complete their work in two weeks. The temporary measure can be extended if needed.
Negotiators are still working through two differing ways to raise nearly $1 billion in the coming year. The House has proposed raising income- and sales-tax rate; the Senate would lower rates but eliminate deductions while expanding the number of services subject to the sales tax.
Both plans would raise cigarette and alcohol taxes and require sales-tax collection on electronic downloads and online retailers who have agreements with local Web site owners to tout their merchandise.
Negotiations have centered around provisions that would tax Social Security benefits on the highest wage earners and increase the residential- and retail-electricity sales tax from the current 3 percent, said Sen. David Hoyle, D-Gaston, a co-chairman of the Senate Finance Committee.
House Majority Leader Hugh Holliman, D-Davidson, said that House Democrats are worried that as many as 50,000 businesses would have to fill out sales-tax collection forms for the first time, leading to confusion.
Earlier yesterday, Republican leaders said at a news conference that expanding sales taxes to cover more services is a reasonable change only when taxes are cut elsewhere so that no additional revenues are generated.
"This is designed to raise a billion dollars," said the House minority leader, Paul Stam, R-Wake, who with other GOP members opposed the tax proposals.
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