Budget Negotiations

House Speaker Joe Hackney and Senate leader Marc Basnight met behind closed doors twice Tuesday to work out lingering House and Senate differences on the state budget. The meetings at the top come after a week and a half of negotiating by House and Senate teams reached an impasse on several issues, including education spending, construction projects and other items. Hackney and Basnight left Tuesday night asking staff and fellow legislators to propose additional spending cuts to address a small downturn in revenue that Gov. Mike Easley has urged them to respond to in recent days. "That is something that has to be done," said Basnight, D-Dare, in an interview. "There's going to be some significant changes (from) what we've seen."

Easley, who is leaving office in January after two terms, has urged fellow Democrats to pull back on spending or tax breaks because revenues were $70 million less than expected as the fiscal year that ended Monday. "I can't sign an unbalanced budget," Easley said at a news conference. The governor has suggested that lawmakers drop tentative agreements to eliminate the gift tax and expand a refundable income tax credit to the working poor toward saving $45 million in additional spending in the new fiscal year. Democratic lawmakers have been cool to his recommendations, arguing that the final budget still projects revenue growth for this fiscal year at a reasonable rate. By late Tuesday, Basnight and Hackney acknowledged that their fiscal analysts also believe there's less money than previously believed, although they don't necessarily agree with Easley's estimates. "We know the general ballpark of it," said Hackney, D-Orange, but it "ought not to be a big problem."

Hackney said he doesn't expect dramatic spending changes. He believes the House and Senate will keep to a tentative agreement to spend $34 million more on preparing for thousands of additional students at University of North Carolina system campuses this fall. But he said that there may be less money than anticipated for More at Four, Easley's signature preschool initiative. Easley has grated on legislative leaders since he began taking them to task last week on the revenue picture. Hackney said lawmakers will create a sound spending plan. "We know how to balance the budget and we don't need him to tell us" how, he said. Legislative leaders still hoped for a final agreement as early as Wednesday, with two required votes in each chamber completed by early Friday morning or early next week. (Gary D. Robertson, THE ASSOCIATED PRESS, 7/01/08).