The State Senate approved its version of the State Budget this week.  The Senate spending plan includes over $20 billion in appropriations from the State General Fund, but few details on a tax reform package that Senate leaders are privately discussing.  The House debated at length amendments to the House rules and approved legislation to allow for public financing of municipal elections.  The House Appropriations Committee approved legislation to reform the State Health Plan with a vote on the bill by the full House yet to be scheduled.  Lastly, House members rushed to file and introduce bills ahead of the deadline that was extended to and expired on Thursday. 

The focus of legislative activity was in the Senate this week as the Senate version of the State Budget (Senate Bill 202) worked through committees and was approved by the full Senate.  Total spending under the plan would be just over $20 billion in 2009-2010 fiscal year, with significant cuts in spending called for across State Government.  The plan would eliminate 912 vacant positions, layoff as many as 700 state employees, and authorize agency leaders to furlough workers in order to achieve additional savings.  A provision that would increase class sizes by two students in K-12 education drew opposition from Governor Bev Perdue (D-Craven).  The move is expected to save the State $320 million.  Other cuts called for in the education budget include reductions of $40 million to former Governor Easley's More at Four program, $15 million to former Governor Jim Hunt's Smart Start program and a reduction of $3.6 million to eliminate end of grade tests for certain courses.  The budget also sets out uses for over $3.4 billion in Federal stimulus money approved under the American Recovery and Reinvestment Act of 2009.  All of the majority party Democratic Senators voted for passage of the budget legislation on its final vote.  The Democrats were joined by three Republican Senators for a vote of 32-16.  The bill now goes to the House. 

Despite detailed spending plans, a great deal of mystery remains as to how the Senate budget would be funded.  The revenue portion of the plan begins with the assumption that the current tax structure will yield the State $18 billion plus an additional $800 million from fees and transfers.  After federal funds and new fees are accounted for, the Senate plan leaves a $500 million gap described in the budget legislation as a "reserve for tax adjustments."  Those adjustments are the subject of intrigue and suspicion among the Republican Senators who voted against the bill and many of North Carolina's business sectors.  As we reported last week, the Senate leaders are working on a reform of the State tax code, and it is this package that is expected to raise the $500 million.  It could include new taxes on services or digital products bought online, changes to the calculation of corporate and personal income taxes, or even new alcohol and tobacco taxes proposed by Governor Perdue.  Senator Dan Clodfelter (D-Mecklenburg), a Finance Committee Chair and key tax law writer, defended the budgeting method during Senate consideration of the bill by saying that there was too much uncertainty as to the current state of tax collections to make a detailed proposal.  Senator Clodfelter and other Senate budget writers have suggested that the taxation plan could be released as early as next week, although data on tax collections through April 15^th, likely would not be available even then.  If Senate lawmakers were waiting on those numbers, their plan could not be drafted until the following week or even as late as the first week in May. 

The House session on Wednesday brought extended and sometime testy debate on legislation that would amend the Rules of the House (House Resolution 990).  Among the changes to the rules approved in this bill is the creation of a new committee to oversee redistricting in Pender and New Hanover Counties as required by a recent US Supreme Court ruling.  Republican members, who have long objected to tactics that they say reduce their influence in the chamber, offered several amendments to the proposed rules, each of which was defeated on party line votes.  Democratic members defended the proposal and the use of the rules under House Speaker Joe Hackney (D-Chatham).  Speaker Hackney was elected in 2007 on a platform of reforming the House and has emphasized fairness in the procedures of the chamber. 

The House narrowly approved legislation (House Bill 120) that would authorize candidates for municipal office to have their campaigns publicly funded.  The bill would set up a pilot project for funding non-partisan municipal campaigns that is similar to the public financing already available to state wide judicial candidates and a few statewide executive branch officials.  Proponents say the publicly funded model reduces the influence of moneyed interests in the campaigns and allow less wealthy citizens an opportunity to serve.  Opponents, who derided the bill as a tax-payer subsidy for politicians, consisted of nearly all the House Republicans and a few Democrats.  The preliminary vote totaled 60-52, with a final vote scheduled for Tuesday of next week. 

In other action, the Senate gave final approval to a bill that will allow Superior Court Judges to conduct marriages (House Bill 494) and to extend the Climate Change Commission (Senate Bill 835), and gave initial approval to legislation that will require an arts education credit for graduation (Senate Bill 66).  This week the House approved legislation that allows local school systems to use video cameras to help catch drivers who pass stopped school busses (House Bill 440) and legislation that increases the oversight of administrative boards (House Bill 221).