Easley proposes $21.5 billion budget

RALEIGH -- Gov. Mike Easley proposed a $21.5 billion budget Monday that would raise taxes on cigarettes and alcohol to help pay for teacher raises and mental health reform.

Easley's budget, a 4.2 percent increase from the previous year, would add a 4 percent tax to beer and wine and a 4 percent tax to liquor to pay for a $68 million fix to the state's failing mental health system.

"It's not a significant amount of money to the consumer, but it is a significant help to the mentally ill," Easley said.

Easley would raise the tax on cigarettes from 35 cents to 55 cents per pack to pay for public school teacher raises that would average 7 percent. Administrators would receive a 6 percent raise.

This is Easley's last budget proposal. He is prohibited by law from seeking a third term. He has said a major goal of his last year is to get teacher pay up to the national average.

Easley said that the proposed cigarette tax increase would take the state's cigarette tax the 40th highest in the nation. But his proposal on teacher pay should not be the end.

"We all have to keep in mind this is a salary that is going to have to continue to grow if we want a quality education across the nation," Easley said.

Pay increases would be given at a higher rate for newer teachers, said Dan Gerlach, a senior budget advisor to Easley. Most state employees would get much smaller raises. Easley is proposing a 1.5 percent cost-of-living increase and a one-time, $1,000 bonus. That's a much smaller raise than the 4 percent state employees received last year.

Retirees, who received a 2.2 percent cost of living increase last year, would get a 1.2 percent increase under Easley's proposed budget.

Easley's budget proposes spending $68 million to enhance mental health services by expanding local crisis services and increase staffing in state hospitals. Easley's budget would create 435 new positions in the mental health system.

The budget would cut the amount of hours community support services could bill the state. A series of stories in The News & Observer reported that such agencies were bilking the state out of millions in fraudulent claims. The budget forecasts the state could receive as much as $25 million in refunds from those claims.

Overall, the budget proposes creating 768 new positions, including 83 in the Department of Correction, which has recently come under fire for inadequacies in the probation and parole divisions.

Easley budget would grow $870 million from last year despite a nationwide economic slowdown. The state is in relatively good shape in part because budget writers last year anticipated the slow-down ad were conservative in revenue estimates. Easley began the budget-writing process with $492 million from last year, a combination of unspent money and unanticipated tax collections.

The budget calls for an additional $34.6 million for enrollment increases at UNC campuses, nearly doubling the estimate from last year.

Easley's budget recommends $396 million in cuts to government, which equals about 2 percent of the total operating budget.