Democrats expect budget surplus - News & Observer

Gary D. Robertson, The Associated Press

House Democrats who talked frankly about Speaker Jim Black's future Tuesday night also got a look at the budget, and the news is good for a change.

Overcollections of state taxes have nearly doubled in the past three months to about $400 million, essentially assuring a budget surplus for the third consecutive year after four consecutive years of shortfalls, according to legislators and their research staff.

Add to that money unused by state agencies or unallocated last year and more than $1 billion in cash should be available for lawmakers when they return to Raleigh next month to adjust a $17.3 billion spending plan that takes effect July 1.

Budget-writers already are downplaying the cash influx, saying they have lined up all the money for programs neglected during the recession or high-priority items such as state employee pay raises and the repair of deteriorating state buildings.

Legislative fiscal analysts say revenue has grown by 3.4 percent ahead of the $11.7 billion target set by lawmakers for the first nine months of the fiscal year ending June 30.

They attribute the growth to new jobs in North Carolina since early last year, reflected in a steady 8-percent rise in tax withholding payments by those employees. Sales tax revenue also is growing a strong clip, according to documents.

The researchers predict a surplus of at least $605 million by the time the fiscal year ends June 30, although that could change because of the historic volatility of April 15 tax payments for both individuals and corporations. The legislature and governor usually wait until those numbers are in before completing their budget proposals.

There's also an additional $517 million that legislative leaders projected would be left unspent from the second year of a two-year budget that passed last year. State agencies also could return at least $100 million that they never spent this year.

“Overall, with reverted money, you're probably looking at $1.3 billion,” said Rep. Jim Crawford, a Granville County Democrat and one of six chief budget-writers in the House.

Crawford and colleagues say there probably will be enough money left in the final pot to pay for routine annual expenses not included in the budget.

High on that list of projects presented to budget-writers meeting Tuesday include $300 million for the state's repairs and renovations account, $200 million for the so-called “rainy day” reserve fund and $100 million for annual teacher performance bonuses.

Another $117 million likely will be required to cover higher-than-projected school enrollment, while beefing up a beleaguered mental health system might cost $160 million.

And with Easley expected to ask for a 5 percent raise for teachers, other rank-and-file state employees will be seeking the same amount.