NC House approves bill to keep funding government

By Gary D. Robertson
Associated Press Writer / June 26, 2009
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RALEIGH, N.C.—The Legislature isn't going to meet a deadline to get a final North Carolina state government budget approved before the new fiscal year begins, House and Senate leaders acknowledged Thursday as they went home for the weekend.

Negotiators made progress this week toward reaching a compromise on a spending plan for the next two years. But there are still many differences and a tax package that would generate nearly $1 billion next year also has yet to be finalized.

The new fiscal year begins Wednesday. A delay isn't too surprising -- lawmakers haven't completed a budget on time since 2003.

"We ain't going to make it until the next fiscal year," said Sen. David Hoyle, D-Gaston, one of the tax plan negotiators.

Lawmakers will try to finish next week or early the following week, he said.

The House Appropriations Committee also Thursday approved a temporary spending measure that directs how government agencies will keep operating through July 15, giving negotiators an extra two weeks. The Senate version of the so-called "continuing resolution" contained no expiration date.

The full House is expected to take up the stopgap spending bill Monday night, giving the two sides more than a day to get a final version passed and signed by Gov. Beverly Perdue before Wednesday.

Legislative leaders have said finalizing the tax package is the key to passing a budget.

House and Senate Democrats have differing viewpoints on how to find new taxes to help narrow a budget gap they estimated at $4.6 billion for next year. Republicans believe the amount is lower and new taxes aren't needed.

"I think we need to nail down a finance plan," said House Majority Leader Hugh Holliman, D-Davidson. "We need a sense of urgency to get this budget done."

While the House plan approved two weeks ago would raise the sales tax rate by a quarter-penny and creates a new individual income tax bracket for the highest wage earners, senators have floated a plan that would lower sales and income tax rates while expanding greatly the number of services subject to the sales tax.

The Senate proposal also would raise taxes on retail electric users and cigarettes.

Senate Democrats have promoted their offer as a way to shift the state's tax system away from one based on a manufacturing economy to a service economy. But the House hasn't been warm to the idea this year and believes their proposal balances the additional tax burden among both rich and lower-income residents.

"We're productive in that we're exchanging views," Rep. Paul Luebke, D-Durham, a tax package negotiators, said following a meeting with Senate counterparts. "We feel like we've gone a long way toward their package. We just have some disagreements and we're going to continue working."

On the spending side, top House and Senate negotiators heard recommendations from a subcommittee reconciling differences in their competing spending plans for health and human services.

The budget leaders delayed decision on several items for further discussion, including more than $100 million in spending reductions in Medicaid that lawmakers worry could hurt patients.

"It's depressing to go through this budget with the cuts we're making," said Rep. Doug Yongue, D-Scotland, said at the close of the 90-minute meeting. "We're going to be paying for it down the road."