N.C. governor signs legislature's stopgap spending plan

By Gary D. Robertson

RALEIGH, N.C.

Gov. Beverly Perdue has signed into law a temporary spending plan to run North Carolina government while a final budget gets worked out.

A Perdue spokesman said she signed the bill late Tuesday afternoon, soon after the Legislature sent the stopgap measure to her and hours before the new fiscal year began Wednesday.

The state Senate avoided a showdown on the eve of the new fiscal year Tuesday by agreeing to the House version of the 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 Perdue, who was asked to sign the legislation before the old fiscal year ends at midnight.

The final 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 Senate Majority Leader Tony Rand, D-Cumberland.

State government probably won't grind to a halt without the so-called "continuing resolution" in place, but there would have been no directions on how to spend because the old budget expired Tuesday, leaving Perdue with her emergency powers.

The stopgap spending measure directs 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 Tuesday.

The temporary measure also prevents pay raises — which aren't expected next year — and directs bosses of state workers whose positions are slated 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.

"It's reasonable. I don't know whether we can do it or not," Rand said. "The revenue package is the toughie."

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 rates, while the Senate would lower rates but eliminate deductions while expanding greatly 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, co-chairman of the Senate Finance Committee.

"We're still poles apart on the basic (tax) philosophy," Hoyle said.

House Majority Leader Hugh Holliman, D-Davidson, said Democrats in his chamber 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.

"We're willing to listen and look at that, but we want to go slower on the expansion into services," Holliman said.

Earlier Tuesday, Republican leaders said at a news conference that expanding sales taxes to cover more services is a reasonable change only when taxes are lowered elsewhere so that no additional revenues are generated.

"This is designed to raise a billion dollars," said House Minority Leader Paul Stam, R-Wake, who with other GOP members opposed the tax proposals.