Budget Update 6-23-06

Budget conferees were named by Speaker Jim Black, D-Mecklenburg, and Senate President Pro Tem Marc Basnight, D-Dare, on Monday night, which officially started negotiations between the two chambers on a final budget. I was appointed to the NER (Natural and Economic Resources) Subcommittee, which will recommend funding levels for the Departments of Agriculture, Commerce (including Furniture Market Funding), Environment and Natural Resources, and Labor.

With regard to NER-related items, funding for the Furniture Market has been proposed at $1,250,000, which is a compromise between the Senate and House positions. It may change when the Appropriations Chairs (which includes Senator Kay Hagan) negotiate a final compromise. I am pleased that the Emergency Drinking Water Fund, which I proposed, survived subcommittee scrutiny and is still proposed at $500,000. This is a new program to provide testing of wells near known contaminated hot spots and emergency drinking water supplies for those impacted by contaminated water. Over 2 million North Carolinians drink water from private wells and no testing program is in place for those near contaminated hot spots.

House and Senate negotiators seem to have compromised on many differences in their respective budget bills during negotiations this week, but relief for counties with high Medicaid expenses, salary increases, education funding, tax cuts, and whether non-budget policy provisions should stay in the final budget bill all remain on the table. The House budget set aside $53 million for counties to pay their Medicaid expenses, while the Senate offered a compromise Wednesday in which it would agree to pay $20 million. Also, negotiators of the roughly $19 billion budget haven’t finalized how to fund a special effort to help at-risk students and poor school districts.

House and Senate finance leaders still must work out the scope of the reductions in two “temporary” tax increases passed during the recession in 2001 that are set to expire next year. The two chambers agreed in their budgets to reduce the state sales tax by a quarter cent, but they differ on how far the individual income tax should decrease for top wage earners. The House wants to provide a tax credit to small businesses that offer health insurance to employees; the Senate did not include this credit in their budget. The two sides also differ on whether most state employees should receive a $300 bonus to go with a permanent 5 percent raise. Legislative leaders want to reach a final agreement before next Tuesday so that it can be voted on and sent to Governor Easley for his signature by June 30, 2006, when the current fiscal year ends.