Triple-A North Carolina Passes Late Budget With Cuts, Federal Funds

BRADENTON, Fla. — More than a month late, lawmakers in gilt-edged North Carolina Wednesday finally passed a biennial budget that cuts services and employees while using federal stimulus funds.

While the total budget for fiscal 2010 is approximately $47 billion, compared to $50 billion in the recently ended fiscal year, it also raises the state sales tax and includes a surtax on individual and corporate income taxes.

Gov. Beverly Perdue is expected to sign it into law, her staff said yesterday.

Debt spending authorized in the fiscal 2010 budget plummets to $50 million largely for repairs and renovations of existing buildings, according to a legislative staffer.

By comparison, the state last year issued $857 million of certificates of participation and bonds. North Carolina has $6.1 billion of outstanding general-fund support debt, with an additional $2.1 billion of authorized-but-unsold debt, the staffer said.

Debt service must not exceed 4% of general fund tax revenues, according to the state’s debt affordability policy, which is what lawmakers base their debt spending plans on.

“Because our revenues went down significantly that meant there was very little room to issue more debt but then again there was not an appetite to [issue more debt] either,” the staffer said.

Lawmakers used $1.4 billion in federal stimulus funds to help close the budget gap due to declining revenues. In addition to increasing the state sales tax by 1%, they also enacted a two-year surtax on corporate and most personal taxes to raise nearly $1 billion in revenue.

A surtax of 2% will be paid by individuals with taxable income between $60,000 and $150,000, and couples filing jointly with incomes between $100,000 and $250,000. Filers in those categories making more than those limits, as well as corporations, will pay a surtax of 3%.

There were also increases in other fees, such as those charged by courts.

North Carolina also plans to require sales tax collections on Internet-related transactions such as digital downloads. The sales tax also will be collected on retail purchases made from businesses based in the state but that sell merchandise through an online provider.

While lawmakers struggled to come up with a budget plan to cope with declining revenues, they passed two budget continuation measures as they debated the biennial budget for fiscal years 2010 and 2011.

The Tar Heel State was one of eight in the country that finalized its budget after the July 1 start of the new fiscal year, along with Arizona, California, Connecticut, Illinois, Mississippi, Ohio, and Pennsylvania, according to the National Conference of State Legislatures.

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