N.C. Budget Impasse Lingers

State legislators had hoped to have a state budget in place by July 1, the beginning of the fiscal year.

But competing budget proposals in the Senate and House and disagreements over tax increase plans as well as the need for significant budget cuts have ground the process to a near halt.

While lawmakers continue to work on the budget, the House has passed a resolution allowing the government to continue operating until Aug. 29.

No matter which plan is chosen by the legislature, cuts might be made to state agencies and the UNC system.

The UNC system has been largely spared of the budget cuts -- the Senate proposal would trim the system budget by $3 million, the House proposal by $7 million -- but that could still change as legislators continue to finalize the budget.

But different tax increase proposals have been at the center of the budget delay.

House Democrats have proposed a plan to increase the sales tax by a half-cent, increase the income tax on couples making $200,000 or more and institute a 6 percent sales tax on liquor. The plan could generate $450 million in additional revenue for the state.

Senate Democrats have called for a one-cent sales tax increase, which would generate about $850 million in additional revenue.

Democratic leaders have been struggling to build a consensus on a proposal, while Republicans have remained in staunch opposition to any tax increase plan.

On Thursday night, Gov. Mike Easley chimed in with his own plan to cover the budget gap, which consisted of a compromise between the two proposals.

Easley called for a one-cent sales tax increase combined with several tax credits. The governor's plan would produce $600 million in additional revenue.

"I'm willing to accept any reasonable plan that adopts the principles and priorities I have outlined tonight," Easley said in an eight-minute televised speech. "However, I believe this plan combines the best elements of the House and Senate proposals. It's a solution to ending our budget impasse and putting our state back on the course of progress."

Easley said that while he would accept some cuts to the state budget, he would not accept cuts that would be detrimental to the state's education system.

Easley's proposal was followed by a televised address by Senate Minority Leader Patrick Ballantine, R-Carteret, and House Minority Leader Leo Daughtry, R-Johnston.

Both Republican leaders decried Easley's plan to increase taxes and instead called for legislators to make deeper cuts to the state budget.

"At a time when thousands are losing jobs across our state and families are struggling just to make ends meet the last thing anyone needs to do is pay more taxes," Daughtry said.

Daughtry proposed a plan that would ask the head of each state agency to cut spending by three percent.

He added that he believes the state has enough money to fund essential programs if state funding is spent wisely.

"There is plenty of money if we spend it wisely," Daughtry said.

Sen. Howard Lee, D-Orange, who is the chairman of the Senate Appropriations committee, said it is difficult to gauge what kind of an impact Easley's speech will have on the legislature and the people of North Carolina.

Lee said budget negotiations will resume this week, but he said he could not predict when the budget stalemate would come to an end.

He said, "We are certainly anxious to finish up the budget process but I can't really predict when everything is going to be completed."

The State & National Editor can be reached at stntdesk@unc.edu.