Transfer tax holds up budget

Lawmakers approve stopgap spending plan for a month

A proposed 0.4 percent land transfer tax has become the latest hurdle in resolving a state budget and providing relief to rural counties struggling with rising Medicaid bills, House leaders said Thursday.

While lawmakers averted a partial government shutdown Thursday by approving a one-month stopgap spending plan, they also had high hopes they could resolve several major issues standing in the way of a $20 billion state budget. House Democrats emerged from a closed-door caucus meeting agreeing to a multi-pronged Senate proposal to fund the budget and fix the Medicaid problem -- but they added one caveat.

House Democrats wanted to give counties the option to adopt by voter referendum a 0.4 percent land transfer tax as part of the Medicaid fix. The tax has been vigorously opposed by home building and real estate businesses that have launched a public relations campaign with everything from TV ads to yard signs.

Senate Democrats held their caucus shortly after they received the House Democrats' counterproposal. They met behind closed doors for about two hours with lobbyists for the home builders and Realtors camped outside.

When Senate Democrats emerged, they would say only that they had no deal.

"We haven't reached an agreement," said state Sen. David Hoyle, a Gaston County Democrat.

It was good news to the lobbyists.

"No decision sometimes is a victory," said Paul Wilms, a lobbyist for the N.C. Home Builders Association.

Taking away the Medicaid burden from counties has become the dominant issue among lawmakers and Gov. Mike Easley. North Carolina is the only state that requires counties to take on a fixed percentage of Medicaid costs, which have long been on the rise.

But lawmakers don't want to take over a growing expense without getting some help from the counties. That's why they are looking at various revenues that counties receive to help subsidize the expense. Ultimately, lawmakers plan to give counties the opportunity to raise local taxes to make up for the revenues they've turned over to the state.

Local officials from urban areas have been pushing for the right to adopt a land transfer tax, saying it is a much better option for them to help finance new schools. Senate leaders, however, favor letting the counties increase their sales taxes.

The lack of an agreement means other parts of the deal still may crumble. Senate leaders, for example, agreed to make permanent the temporary quarter-penny sales tax, while House leaders agreed to let a temporary quarter-percentage point tax on the incomes of high earners expire at the end of this year. Both temporary tax increases were first adopted in 2001 and have been extended at least twice since then.

That compromise allowed the House and Senate to move forward with the temporary stopgap spending bill that keeps spending and taxes at their current levels for another month. The House passed the measure, while the Senate approved it early today. Easley is expected to sign it.

House and Senate Republicans oppose the stopgap bill because it continues the temporary tax increases, but they lacked the votes to stop it.