The Senate included budget language giving Easley the right to boost teachers' pay this fall if state revenues exceed projections. It was a measure intended to make up at least some of the difference between the 3 percent pay raise that House and Senate leaders have agreed upon for teachers and the 7 percent raise that Easley advocates to bring teachers' pay up to the national average.

House and Senate budget negotiators say they have settled many areas of the budget, but the teachers' pay provision remains a sticking point as talks resume this morning. Even Thursday's news that revenue might be slowing more than expected -- possibly creating a $70 million budget hole -- has not caused Easley and Senate leaders to back away from the provision.

"We haven't really gotten any real bad news," said Senate Majority Leader Tony Rand, a Fayetteville Democrat. "We just haven't gotten any real good news, and so none of us really knows what the future might hold."

House leaders say they would be abdicating their fiscal responsibility by allowing Easley to make the call on devoting found money to teachers' pay. Other needs could surface that might be more important, said House Majority Leader Hugh Holliman.

"If something should happen, and there's money to do it, it's always within his right to call a special session and call us back in, and we probably would do it," said Holliman, a Lexington Democrat.

Rep. Mickey Michaux, the House's chief budget writer, was skeptical of the projected revenue downturn that Easley's budget office produced Thursday. He said if the House and Senate incorporate the projection into the budget and it doesn't materialize, that gives Easley some money for the teachers' pay.

"If he's so sure he's going to have a deficit, then why does he want that [provision] in the budget?" asked Michaux, a Durham Democrat.

Easley's senior budget adviser, Dan Gerlach, said there's no sleight of hand in the latest revenue projection. He also said that the provision does not allow Easley to fudge numbers to free up money for teachers.

Gerlach noted that state lawmakers gave Easley similar authority in 2005. That October, Easley gave teachers an additional $75 a month in pay as part of an agreement between him and legislative leaders that aimed to raise teachers' pay to the national average in three years.

Easley's advisers say the national average for a teacher with a bachelor's degree and 15 years of experience is $49,520. The state's salary for a teacher with the same qualifications is $46,319. Easley sought to raise the cigarette tax to help pay for the 7 percent raise, but House and Senate leaders said they would not go along with any tax increases in this year's budget.

House leaders say they too want to bring up teachers' pay in a state struggling to keep enough teachers in growing school districts. But House leaders are also concerned about treating state government employees and retirees fairly. Easley's budget proposal gave state employees a 1.5 percent increase and a $1,000 one-time bonus, while retirees would have received a 1.2 percent cost-of-living adjustment.

The House and Senate version of the budget gives state employees a raise of 2.75 percent or $1,100, whichever is greater, and provide retirees with a 2.2 percent cost-of-living adjustment. UNC system professors and community college instructors would get raises of 3 percent.

On Friday, Easley sent a letter to legislative leaders urging them to forgo $31 million in tax breaks they have agreed upon in the budget and rework their pay-raise plan for state employees.

He said giving them all 3 percent, instead of giving lower-paid employees $1,100, would save $25 million and be fairer to beginning teachers who would receive less under the House and Senate plans. The combined $56 million in savings would help make up for the projected revenue loss.

Michaux said it's unlikely the House would go along with all of Easley's recommendations. The House tax break that Easley seeks to drop is in the form of an increase in the earned-income tax credit that lower-income working families receive.

"The earned-income tax credit is going to put more money in the pockets of people who need it to pay the high gas bills and the high grocery bills that they are facing right now," he said.

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