news-record.com

RALEIGH — The House scheduled a rare Friday evening session to vote on an $18.6 billion state budget that contains higher taxes added by Democrats who argued they're necessary to avoid harsh spending cuts.

Democratic leaders agreed to push forward with their spending plan at the end of this week when their caucus found consensus over closing a $4.6 billion budget gap for the year starting July 1, in part by raising $784 million in taxes.

The first of two required votes was expected after debate on the House floor, with the second to follow soon after midnight. Passage will allow House and Senate Democrats to begin negotiating a final two-year spending plan in earnest next week. The Senate passed a budget bill in April.

The House agreed Thursday to incorporate higher taxes into the spending plan in a 64-52 vote that followed party lines save for one Democrat who voted no.

Republicans have argued the new taxes aren't needed and say the impact of the most onerous cuts has been overstated to build support for new revenues.

The package would raise the sales tax by a quarter-penny so that most residents would pay 7 percent, add two new marginal income tax rates for the wealthy, and create or raise taxes on liquor, movies and digital downloads.

But the extra revenues still won't keep funding for several thousand state employee and teacher positions from being eliminated as lawmakers have watched a drop in tax collections accelerate this spring.

With one month to go in the fiscal year, revenues are down $1.7 billion — an unheard of 10 percent decline compared to last year, according to the Office of the State Controller.

The proposed House budget bill would still increase class sizes on average by two students beginning in fourth grade to save $184 million, or funding for 3,400 teachers. Eight prisons and a juvenile offender facility would be closed, and there would be no raises for teachers, state employees and retirees.

The UNC system would raise tuition by a maximum of $200 and face $263 million in cuts, or a nearly 9 percent reduction.

But the tax package eliminated $75 million in additional cuts for UNC and restored dozens of other cuts, including funds for at-risk public school students, while keeping class sizes at current levels in kindergarten through third grade.

"The economic situation in our state and nation is unprecedented for most of us, and we know that public schools must do their share to help trim the state's budget," State Board of Education chairman Bill Harrison said in a release. "The House's willingness to develop a new revenue package will allow us to maintain current efforts in some key areas."

The bill also raises money to balance the budget by taking $270 million from other dedicated pots of money and $88 million in new and higher fees, including an additional $350 fine for motorists traveling 25 mph over the speed limit or driving while impaired.