Easley Budget Will Include Tax Help for Businesses
Gary D. Robertson, Associated Press
April 27, 2004

RALEIGH, N.C. -- Gov. Mike Easley's budget won't include any tax increase but likely will propose some tax reduction provisions to help out North Carolina businesses, Easley's budget adviser said Tuesday.

In a letter to legislators, Easley also cautioned the General Assembly against blowing an improving economic picture by raising spending too much.

After three consecutive years of budget shortfalls, North Carolina was more than $112 million ahead of revenue projections through the first nine months of the fiscal year ending June 30.

"The tough lessons cannot be forgotten," Easley wrote last week to House and Senate members. "I know that you will agree that we must maintain our discipline."

Easley's letter provides hints for how will adjust the second year of the two-year budget approved by the General Assembly last June.

Easley will present his request of expansion items for next year's spending plan about the time the Legislature reconvenes May 10, said Dan Gerlach, the governor's budget adviser.

Easley urged legislators not to abandon "investments in education" and "smart, targeted strategies to bring jobs and investments to North Carolina." The budget also "will contain no tax increases," he added.

In the next several days, that plan will be finalized based on how much money the state received from individual income tax returns filed by April 15.

Those tax figures, which could be made public in a few days, should clear up how much additional dollars legislative budget-writers will have to come up with to pay for the costs of increased enrollment in public schools and universities and the rising costs of Medicaid.

State workers also are pushing for pay increase. There hasn't been an across-the-board raise since the 2000-01 fiscal year.

"We absolutely got to give those state employees and teachers a raise," said Sen. David Hoyle, D-Gaston, a co-chairman of the Senate Finance Committee.

Gerlach said Easley will stick to a spending cap formula he unveiled last year in which he won't offer a spending increase above an amount equal to 5.6 percent of the current year's budget, or around $800 million.

Gerlach declined Tuesday to talk specifics about what kind of tax reductions would be offered but said they would be focused on businesses.

Easley said in an interview last month that he wanted tax credits for companies that participate in research and development of new products in North Carolina.

Easley, the Republican gubernatorial hopefuls, and the state's top business lobbying group have talked about reducing the corporate income tax rate to bring it in line with other states in the Southeast.

Easley and the Legislature came to blows last year as the governor threatened to veto the budget because he said it wasn't balanced. Earlier in Easley's term, legislators criticized him for balancing the budget with money generated from a lottery that still hasn't passed.

Rep. Rex Baker, R-Surry, a co-chairman of the House Approrpriations Committee, found no fault in the tone with Easley's letter.

"The devil's in the details," he said.

While Easley has cited cost efficiencies he's made in state government, an Easley critic said the governor would have spent more on wasteful state programs if he had had the money.