Budget Update 07-01-05
The General Assembly reached a deal Thursday that would keep state government running through July 20,2005, while legislators work an a final budget agreement. The "continuing resolution" agreed to by the House and Senate will keep a half-cent sales tax until the two-year budget is finally approved. The bill also allows North Carolina to continue collecting its share of the estate tax until the federal version expires in 2010. The Senate approved the compromise by a party-line vote of 29-19 and the House soon followed its OK by a vote of 65-51. Governor Easley signed the measure into law just before 3 pm.
The House passed a continuing resolution several weeks ago and the Senate passed a different version on Monday night. Members of the House and Senate were appointed to a conference committee on Tuesday morning and got right to work on reaching a compromise, which had to be passed and signed into law by the Governor before midnight on Thursday.
Both plans sought to extend the temporary half-cent sales tax increase first adopted in 2001 at the height of the recession and job losses. If it had not been extended by the General Assembly, it would have expired Friday, and lawmakers would have lost more than $400 million in potential revenue. The major sticking point was that the Senate proposal sought to make the sales tax increase permanent, while the House extended it two years. The House plan also extended a half-percentage-point increase in the income tax for individuals making an average of $800,000 per year and the Senate wanted the tax to expire at the end of the year. The House felt it was fundamentally unfair to extend the sales tax, which disproportionately affects the poorest, while giving a tax break to North Carolina's wealthiest citizens.
House Democrats will continue discussions with members of the Senate regarding the upper income tax and a possible reduction in the sales tax, but remain committed to passing a budget as soon as possible.
One item of note to those of you who are interested in farmland preservation. I had amended the budget bill last week to add funding for the farmland preservation trust fund, which leverages millions in federal matching money to help farmers stay on their land. The conference committee eliminated that funding. If this is important to you, you might want to let your senators and house members know.