RALEIGH — The reports out of the North Carolina General Assembly late Wednesday were telling. After weeks of trying to sell the NC House on a package of new excise taxes on cigarettes and alcohol worth more than $300 million a year, Senate leader Marc Basnight and his fellow negotiators appeared to be close to giving up. One report suggested that a state budget might still be passed by early next week, when the new fiscal year begins, and that it would include only the sales and income tax increases already agreed to by both sides.
Several aspects of this final step in the 2003 budget dance deserve closer attention.
First, the House coalition against the Senate’s new tax increases appeared to be solid and powerful. Interestingly, it wasn’t really the coalition that bestowed power earlier this year on Speaker Jim Black and Co-Speaker Richard Morgan. That earlier coalition essentially consisted of the Democratic caucus and a few Republicans. This new, anti-excise tax coalition consisted of the Republican caucus and a few Democrats. Some of the Republicans, many of them freshmen, who voted for Morgan and for the House budget in April are likely feeling a lot of pressure from their political base back home because of their quick dalliance with tax hikes. They were in no mood to make things worse. And there are a few true liberals left in the House who don’t think that disproportionately poor smokers and drinkers ought to pay extra to help finance new sports arenas, convention centers, grocery stores, vacant airstrips, biotechnology centers, and other projects favored by powerful legislators.
Second, the public is simply not up in arms about the prospect of the hundreds of millions of dollars in budget savings that the NC House was proposing for the second year of the biennium, 2004-05. The sticking point in the negotiations was not in the first year, in the fiscal year that begins next week, where the two sides were close together. The Senate didn’t want to go along with House budget-savings recommendations in the second year. They wanted to raise taxes instead. But the only way for their position to prevail would be for House members to perceive a massive policy and political downside if their 2004-05 proposals were enacted. They didn’t see it, quite possibly because it isn’t there.
Third, Gov. Mike Easley still has some bones to pick with the emerging budget deal in the legislature, and not without reason. He argues (and I agree) that the General Assembly should probably use less optimistic revenue forecasts. It would be better to be pleasantly surprised by robust growth than to be unpleasantly shocked, once again, by tepid growth. And he argues (and I disagree) that necessary state services will suffer in the budget without a state lottery.
I don’t think that the governor will get his way on the lottery. Some are saying that the idea has gained support in recent days in the House, but it had a long way to go there. Black has indicated that there might well be a vote in the House on the lottery after a budget is enacted — which wouldn’t technically address Easley’s proposal but could, if passed, be essentially used in the 2004 budget adjustment to add additional spending based on expectations of lottery proceeds for at least part of the year.
Even if the chances of winning the vote don’t look that great, I don’t think Easley will give up. If persistent rumors are correct, both Republican and Democratic polls taken statewide in the past few weeks have shown President Bush with sky-high popularity, Easley in the mid-40s in approval, and the share of voters favoring the governor’s reelection mired around one-third. He probably thinks his advocacy of a state lottery is his best chance of political redemption — and of a lasting legacy.
The issue isn’t just going to disappear.
Hood is president of the John Locke Foundation and publisher of Carolina Journal.