State strikes budget deal

Record $20.7 billion plan includes Medicaid relief, raises for state workers

House and Senate Democratic leaders talked about the record $20.7 billion state budget they tentatively approved Saturday as a "Renaissance" plan to put North Carolina among the nation's elite in education, economic development and health care. They talked about hundreds of millions of dollars dedicated to research centers, water and sewer projects and relief for poor counties struggling with Medicaid bills.

Republicans in both chambers saw the budget proposal differently. They called it a wallet-buster that will burden future generations with higher taxes without the benefit of better roads or schools.

The budget proposal is $1.8 billion more than the previous year -- a nearly 10 percent increase over the $18.9 billion budget that also represented a similar jump from the 2005 budget. It is $350 million more than the most expensive budget proposal put forward this year by either chamber or Gov. Mike Easley.

"Twenty percent in two years, and what do we have to show for it?" asked Senate Minority Leader Phil Berger, a Rockingham County Republican. "We have an education system that's failing our students. We have a transportation system that's crumbling."

Democratic leaders said the budget is among the best ever crafted because it positions the state for the onslaught of new residents who continue to pour in.

"This budget really stands out," said state Sen. Kay Hagan, a Greensboro Democrat and a chief budget writer. "I think future generations will look at this and say we did great things for the future."

Better than average tax collections helped lawmakers and Easley resolve a three-week-long budget dispute that kept the state from having a budget in place by July 1.

The final budget shows that House leaders increased borrowing on capital projects and added money for cancer research to win over the Senate. Leaders in both chambers stepped up funding of Easley's signature education programs: the More At Four pre-kindergarten initiative, the effort to reduce class sizes and the new EARN scholars program that provides a debt-free college education to needy students.

The Senate, meanwhile, gave in on the House leaders' Medicaid relief package, which includes language that gives counties the option to raise their sales taxes by a quarter-penny or increase their land transfer taxes from 0.2 percent to 0.6 percent if voters approve. Easley had supported House leaders in their position, even though legislative leaders in both chambers said a land transfer tax option would never pass by itself.

The budget includes better than average pay raises for most state employees at 4 percent, while teachers, judges, UNC faculty and community college instructors would get a 5 percent increase. Retirees would get a 2.2 percent cost-of-living adjustment.

Tens of millions in construction money would land in the Triangle at public universities, the state history and natural sciences museums and the N.C. Correctional Institution for Women in Raleigh.

Party-line vote

The vote in both chambers Saturday was largely along party lines. State Sen. Fletcher Hartsell of Concord was the only Republican to support the budget, while three Democrats voted against it. They are Reps. Lorene Coates of Salisbury, Jimmy Love of Sanford and state Sen. John Snow of Cherokee County. Snow had said he opposed including the land transfer tax in the budget.

Both chambers will have to cast a second vote Monday before the budget bill goes to Easley for his signature.

Easley signaled Saturday that he is likely to sign it. He commended lawmakers for their "vision and courage."