News-Record.com

RALEIGH - The House and Senate gave tentative approval to a $21.3 billion state budget Monday night despite objections that it borrows too much without voter approval and may overestimate how much money the state will take in next year.

Both chambers are due to vote a second and final time today. The bill will then go to Gov. Mike Easley for his review.

If Easley signs the budget into law, North Carolina will spend 3.5 percent more than in the previous year. Opponents, mainly Republicans, say there's increasing evidence that the slowing economy will mean less revenue to spend than budget writers expect.

"What we're doing is setting ourselves up, or rather we're setting up next year's legislature for a serious problem," said Phil Berger, a Rockingham County Republican and the Senate minority leader. He likened the pending budget to one passed in 2000 that plunged the state into deficit just as Easley took office.

"Those memories are still pretty vivid to me," Bergersaid.

He also said the state should ask voters for permission to borrow money, rather than using a mechanism that skirts voter approval but requires more expensive interest rates.

But Sen. Tony Rand, a Fayetteville Democrat and the Senate majority leader, said that growth was estimated "on a very conservative basis." Democratic leaders, who were largely responsible for compiling the final budget deal, had few reservations, he said.

Much of the borrowing, $857 million in all, will go toward new buildings for the university system, including new classroom buildings for UNCG and N.C. A&T.

The budget tackles much-publicized problems in the state mental health system, providing more money for crisis intervention and adding more beds for residential treatment.

Teachers and state employees are also due for raises under the plan. And the state would expand spending on its health insurance program for children.

Budget writers also tweaked the tax code. Most significantly, they increased the earned income tax credit to 5 percent and eliminated the state gift tax. Early drafts of those changes would have put them into effect immediately, but budget writers delayed them until 2009 in case the economy - and tax receipts - take an unanticipated downward swing.

Sen. Stan Bingham, a Davidson County Republican who represents parts of High Point, voted in favor of the budget, bucking most other members of his party.

"The bigger picture is I think we're moving in the right direction," Bingham said. The state needed to continue building its universities so that it could continue to attract investors to the state, he said.

Senators voted 34-16 in favor of the bill.

In the House, lawmakers extolled the budget plan as one that offers employees and teachers pay raises and increases spending on health care for the poor while not overestimating tax revenues for the coming year.

"Not only do we take care of our fiscal responsibilities and our employees ... we also improve our cultural resources of this state," said Rep. Alma Adams, a Greensboro Democrat and one of the lead budget negotiators.

She pointed in particular to the establishment of an African American Heritage Commission, which will work toward the preservation and promotion of African American historic and cultural sites.

Rep. Bill Owens, a Pasquotank Democrat, said the state couldn't afford not to go forward with building projects called for in the budget.

"We're a state that's growing so rapidly," he said. "Can we sit still and not build universities? Can we not build prisons that we need? I think not."

The vote in the House for the budget was 97-21, but those voting against were far from convinced.

Rep. John Blust, a Greensboro Republican pointed to a line in the budget document that estimates how much revenue the state would earn next year.

"Those that vote yes on this budget in just a few minutes are making a big bet that that number is going to hold up," Blust said.

Contact Mark Binker at (919) 832-5549 or mark.binker@news-record.com