Staff and wire reports
RALEIGH ó The $19 billion budget North Carolina lawmakers approved Wednesday puts a focus on nearly $1 billion in new taxes and forces spending cuts on local school leaders.
The General Assembly gave the budget final legislative approval on party-line votes with Democrats voting yes and Republicans voting no. The Senate voted 27-18 and the House 66-52. Democratic Gov. Beverly Perdue said she would reluctantly sign into law the package that includes higher taxes and reduced services.
Rowan County’s representatives were split along party lines, with Republicans voting against the budget and the county’s one Democratic representative voting for it.
“It’s a bad budget all the way around,” said Sen. Andrew Brock, R-Davie. “They don’t understand what the average family, the average business is going through.”
He said the budget cuts $600 million from local school systems, an amount he said was unacceptable.
Rep. Fred Steen, R-Rowan, also voted against the budget, but said he wasn’t as passionately opposed as Brock.
“There are some things in it I don’t like and some things that aren’t that bad,” Steen said.
He said he opted to vote against the budget because feedback from his constituents was almost 3-1 against any tax increase.
“My constituents just couldn’t afford another tax increase,” Steen said. “In the final analysis, I just couldn’t vote for it. There are too many new taxes that are going to hurt people and small businesses.”
Rep. Lorene Coates, D-Rowan, said she wasn’t enthralled with parts of the budget, but said she felt it takes a stab at putting the state’s economy back on track.
“It is at least finally cutting some of the fat out of the budget,” Coates said. “Every part of state government has been cut and overall spending has been reduced. More than 500 programs were cut in the budget and more than 50 were entirely eliminated. Finally, we cut waste, duplication and streamlined many programs. State government will be smaller and more efficient.”
Coates said she was concerned about education, the elderly and mental health issues as a result of the budget’s passage, but also said it includes much good.
“These difficult economic times require us to expand spending in some areas,” Coates said. “We preserved class size in kindergarten through third grade and gave local school boards flexibility in how to reach budget targets.”
Opponents argued that with unemployment raging and some families just making ends meet, this was the worst time to raise taxes for the next two years.
“They just can’t afford any more and they ask me as their representative, don’t put any more on my back,” said Rep. Larry Brown, R-Forsyth.
Supporters like Rep. Paul Luebke, D-Durham, countered that the Democrats who run the Legislature cut spending by about $2 billion, twice the amount of the new taxes that will maintain state services. Other spending cuts were replaced with more than $1 billion in federal stimulus funds, though that money was not included in the budget. More than 700 state employees will lose their jobs.
The budget includes temporary taxes worth $990 million. About 80 percent of that comes from increasing the sales tax rate by one penny, so that most consumers would pay 7.75 cents on each dollar they spend through mid-2011. Corporate profits would face a 3 percent surtax for two years. Cigarette taxes will rise permanently by 10 cents per pack.
Also, individuals with taxable income of at least $60,000 and couples reporting $100,000 to $250,000 would face a surtax amounting to an extra $20 for each $1,000 in tax they owe in 2009 and 2010. Couples reporting taxable income of more than that would pay $30 extra for every $1,000 they owe.
Small-business owner Dave Jackson worried that higher taxes would impede recovery from the state’s worst recession in at least a generation.
“I think any increase in taxes is going to slow this process down because it’s going to reduce the spendable income that individuals have,” said Jackson, founder and CEO of Aimet Technologies in Zebulon, which manufactures components used in dishwashers and household electrical meters. Jackson said his company, which employs 70, has seen orders drop about 15 percent from last year.
He said he’s also not happy that the profits his corporation distributes to shareholders will be taxed once at the company and again after it becomes a shareholder’s income.
“I feel that the legislature stopped short of budget cuts and restructuring from what they could have,” he said.
The budget cuts land heaviest on the two biggest parts of the budget: human services and schools.
Health and human services programs were given $1 billion less than the amount lawmakers appropriated last year, though much of the state cuts may be replaced by federal recovery dollars. Community support services will be cut by $65 million, group homes will get $15.9 million less, Medicaid rates paid to doctors and other health care providers will be cut by $76 million, and the Smart Start early childhood program will lose $16 million.
Lawmakers couldn’t agree how to cut spending on public schools, so some of the burden for that will fall on local public school leaders.
The budget bars cutting teachers and raises class sizes in kindergarten through third grades. Local school districts will have to decide how to cut their share of $225 million in statewide reductions in grades 4-12, either by taking money for textbooks or other pots of money, or again turning to federal stimulus funds.
Alexander County Schools expect to lose about $860,000 once its share of the cuts is determined, Superintendent Jack Hoke said. That’s better than administrators in the rural western North Carolina district were expecting in June, when they had to tell 18 teachers they wouldn’t return when schools reopen later this month, he said.
“We may be able to save about half of those,” he said. The school district employs 339 teachers for its 5,600 students, he said.
Winston-Salem/Forsyth County Schools, one of the state’s largest, expects to lose about $1 million in state funding, but that was better than Superintendent Don Martin had been expecting.
“It could have been a whole lot worse. I don’t think we’re going to have to lay anyone off at the start of the school year,” he said. The district has lost 75 teachers since June, but all left on their own, Martin said. There won’t be any money to replace any of the remaining 4,000 teachers if they quit during the school year, he said.
“The long-term fear is what’s it going to be like next year” if the recession and state budget cutting continues, Martin said. “I think everybody has a lot of anxiety about next year.”