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RALEIGH — Lawmakers will miss their July 1 deadline for putting a new state budget in place as they wrangle over which programs to cut and which taxes to raise.

Barring a major blow-up,  North Carolina will operate off a temporary spending plan for some time, allowing agencies to maintain basic services but making none of the changes needed to ensure the state doesn’t fall into deficit next year.

The so-called continuing resolution will instruct agencies to hold back on automatic pay raises and other increases, allowing them to operate at 85 percent of last year’s budget. That measure is still pending in the House, where lawmakers want to give themselves two weeks to finish their work. Senate budget writers would prefer an indefinite time frame.

“We’re in pretty good shape right now except for the finance part,” said Rep. Mickey Michaux , a Durham Democrat and the House’s senior budget writer. Finance refers to the tax plan that both chambers agree is needed.

Although there are differences over proposed spending, it is the tax plans favored by the two chambers that have proved the real sticking point, negotiators say.

Democrats, who control both the House and the Senate, as well as governor’s mansion, say the state faces a $4.5 billion budget gap. That figure is based on the amount of money lawmakers projected spending over the past year before the sour economy limited the amount of money the state collected in taxes.

Republicans argue the gap would be much smaller if Democrats based their proposals on what was actually spent during the past 12 months and properly accounted for federal stimulus funds. However, the GOP controls none of the budget-writing apparatus.

Plans drafted by the House, Senate and governor all make cuts to state programs in order to balance the budget. But all rely on raising more taxes as well.

Leaders of both the House and Senate finance committees, which write the state’s tax laws, say they have agreed that they need to make changes that would raise roughly $990 million in new taxes over the next year and $1.3 billion more the year after that.

But the two chambers disagree on how that should be done.

The House budget proposal would raise income taxes on the state’s wealthiest citizens, those making more than $200,000 a year.

“It’s a good way to have a fair and balanced package that includes both a tax on high-end income and a sales tax increase,” said Rep. Paul Luebke, a Durham Democrat and the House’s chief tax writer.

By contrast, the Senate plan would lower sales and income tax rates but apply them to more items.

“We on the House side do not want to tax Social Security income or raise the sales tax on electricity,” Luebke said, speaking about two proposals the Senate had floated.

But Senate budget writers are equally adamant that raising taxes on the highest-income individuals will drive them out of the state.

“We’ll run them all off to Florida,” said Sen. David Hoyle, a Dallas Democrat and one of his chamber’s finance chairmen. “It doesn’t sit right with us.”

Hoyle said that budget writers should also include more sin taxes — increases in the taxes on beer, wine and cigarettes — which the House largely carved out of its budget.

Both sides are taking a break in their negotiations over the weekend.

“This year, they’re in very good company having to extend their budget writing,” said Thom Little, an adjunct faculty member in UNCG’s political science department. “It’s not at all uncommon across the country, particularly this year because it’s such a challenging year to balance the budget.”

Little said most citizens won’t notice that the state’s budget is overdue.

However, local officials, particularly those running county governments and school systems, may be on edge as they wait. Large portions of county funding come from the state.

On the spending side of the equation, appropriators say that there are dozens of individual items that are putatively different between the two chambers.

Rep. Alma Adams, a Greensboro Democrat who also has a seat at the top level of the budget writing process, said that there is a difference over education spending. The House, she said, would rather spend revenue raised from extra taxes on kindergarten through 12th-grade classrooms, a view Gov. Bev Perdue espoused on a recent barnstorming tour through the state.

Senate leaders say they want to ensure the UNC system receives enough public funding.

Negotiators are to continue their work this week.

Contact Mark Binker at (919) 832-5549 or mark.binker@news-record.com