The state Senate gave its final approval Thursday to an $18.8 billion budget for the coming year that phases out a pair of "temporary" taxes while offering healthy raises for state employees and teachers.
By a 34-14 vote, a handful of Republicans joined Democrats in sending the bill over to the House, which will create its own version. Leaders of the two chambers hope to negotiate a final adjustment to the second year of the two year budget before the new fiscal year begins July 1.
The Senate gave initial approval to its budget by a similar vote.
The plan increases the state's minimum wage by a dollar and caps the gasoline tax _ popular issues in an election year _ while improving neglected mental health and substance abuse services and the court system.
"I'm confident that this budget makes the right investments for our state," Sen. Linda Garrou, D-Forsyth, one of the chamber's chief budget writers, said before the Democratic-controlled Senate voted Wednesday.
Republicans said the budget, which adjusts the second year of the two-year spending plan approved last session, spends too much without returning enough to taxpayers who deserve a larger piece on an estimated $2 billion surplus. They are worried the budget could lead to another fiscal crisis like the one earlier this decade if the economy weakens.
"I don't think we can sustain spending at that level on an ongoing basis without a tax increase in the future," said Senate Republican Leader Phil Berger, R-Rockingham. "It's a down payment for a future fiscal crisis."
But other GOP members found it hard to vote against financial improvements to the court and mental health systems as well as reductions in the sales and income taxes.
"I voted for all the good in it instead of voting against the things I didn't like," Sen. Austin Allran, R-Catawba, one of the six Republicans who voted yes Wednesday.
The budget would begin to remove temporary taxes approved in 2001 to help cover a shortfall. The Legislature extended them in 2003 and 2005 because of a tepid revenue picture, and they're now set to expire by the end of 2007.
The proposal reduces the state sales tax by a quarter-penny as Gov. Mike Easley sought in his budget recommendation, allowing most citizens to now pay a sales tax of 6.75 percent. Senate Democrats also agreed to cut the individual income tax rate for the highest wage earners from 8.25 percent to 8 percent, a move they say would help 30,000 small business owners. Both changes would occur in January.
The proposal suggests cutting the sales tax by another quarter-penny and the income tax to 7.75 percent by the end of next year, but Republicans said it should've happened a long time ago.
"We have the largest surplus in this state history but we're still not taking all of those taxes off," said Sen. Fred Smith, R-Johnston. "We're not keeping our promise to our people."
Public school teachers would receive an average 8 percent raise, university workers and community college faculty 6 percent and other state employees a 5 percent salary increase.
Rank-and-file state workers who lobbied the General Assembly earlier Wednesday want both teachers and employees to receive a 7 percent raise.
The Senate budget also would raise the minimum wage to $6.15 in a move that would affect 139,000 workers in North Carolina. The state gasoline tax would be capped at its current rate of 29.9 cents a gallon.
The proposal would also set aside $105 million in new spending to improve community crisis services for the mentally ill, add more local psychiatrists and expand treatment centers for alcohol abusers and the developmentally disabled. The state also would borrow to build replacements for psychiatric hospitals in Goldsboro and Morganton.
Our state spends too much cash. We need to send people to Raliegh that understand this and who will fight to slow and maybe even reverse NC spending.