The legislature approved a $20.2 billion state budget that includes no tax increases and 1.2 percent raises for teachers and state employees.

Republicans said the budget is fiscally sound, while Democrats argued it short-changes public education.

By Democrats’ calculations, K-12 public schools will lose money equivalent to the salaries of 3,400 teaching jobs.

“Maybe you thought nobody would notice,” said House Minority Leader Joe Hackney, an Orange County Democrat.

Senate Leader Phil Berger, an Eden Republican, said the budget doesn’t include everything legislators want, but it lives within the state’s means.

“We just don’t have the money to do everything,” Berger said. “We have the money to do what we have to do. This budget does that.”

The budget now goes to Gov. Bev Perdue who has not signaled whether she will veto or sign it.

The budget cancels $143.3 million in budget cuts that local school districts would have to make. That’s less than the $330 million the House wanted districts to be able to keep next year, but more than the $74 million relief in the Senate proposal.

Local school districts must make $360 million in discretionary cuts next year and face the loss of $259 million in federal stimulus money, which runs out in a few months.

State employees and school employees will receive raises – 1.2 percent – for the first time in four years. Retirees will get a 1 percent cost-of-living increase.

The budget also includes a literacy plan requiring more children to read at grade level before they’re promoted to fourth grade, requires A to F grades for schools, and directs local districts to develop plans for teacher performance bonuses. The budget includes $27 million for this package of changes, pushed by Senate leader Phil Berger, an Eden Republican.

The budget did not include two controversial school proposals: one to end teacher tenure and another to allow businesses to receive dollar-for-dollar state tax credits for donations to private-school scholarships.

Bonner: 919-829-4821