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by KERRA BOLTON FISHER on 5/28/01.

RALEIGH - Politics, it has been said, is the arena where power and conscience meet.

It is difficult to say whether power or conscience will ultimately rule the day as the General Assembly hashes out a $14 billion budget compromise at a time when the state faces a shortfall of $850 million this fiscal year and $450 million next year.

Senate leaders rolled out their budget proposal Thursday after weeks of secret negotiations. The budget capsules released this week covered spending for the next two years in areas such as education, transportation and health and human services. A full budget document will be presented today to the Senate Appropriations Committee. State senators are expected to vote on the entire budget proposal by the end of next week.

Senate negotiations were often conducted in a "hole in the wall" filled with filing cabinets, legislators and a few staffers. The negotiations were kept under wraps, even from other legislators, until subcommittee budget proposals were officially released this week.

Some lawmakers argued that closed sessions were needed to discuss the budget freely without worrying that their comments would be misinterpreted in their home districts.

"The perception that the entire process is closed is not reality," said Sen. Charles Carter, D-Buncombe, and vice-chairman of the Senate Education Appropriations Subcommittee. "There is plenty of time to talk about the budget when it's released in subcommittees, while it's in the full Appropriations Committee and when it goes to the Senate floor for a vote."

Political observers say having a completely open budget negotiation process would be a double-edged sword.

"If they were completely transparent, there would be some pressuring from different groups," said Andrew Taylor, assistant professor of political science at N.C. State. "But the budget isn't something people would discuss at the dinner table or after church. A bad decision is a bad decision whether you're making it in public or private."

The Senate's budget proposal will then go to the House, where representatives will begin to put their stamp on the budget. House members will vote on their budget and send it back to the Senate for agreement. Traditionally, the Senate has not agreed to the House's budget proposal, resulting in both chambers meeting to hash out the final details. North Carolina lawmakers are constitutionally obligated to have a balanced budget for the state by June 30.

"Two of the government's major roles are taxing and spending," Taylor said. "The budget is a comprehensive statement of the state's priorities over the next couple of years. It is an expression of basic things that the government does in the context of current economic and political conditions."

Top priorities are earmarked by spending increases or expansion programs. Areas that have fallen lower on the list of priorities may encounter severe cuts or elimination of programs.

Education first

Education is the top priority for state lawmakers, judging by the senate proposal.

While cuts were spread out between the state's public school, community college and university systems, each area also received money for expansion programs. State lawmakers called for a 5 percent across-the-board increase in university tuition, But offered to offset the tuition hike by increasing need-based financial aid -- $8.9 million for university students and $1.06 million for community college students.

The senate's plan to fund public schools followed closely along that of Gov. Mike Easley to reduce class size in lower grades, maintain school accountability, recruit new teachers and close the minority achievement gap.

"We try to keep sacred as much as possible the programs that affect the student/teacher relationship," Carter said. "We need to re-examine those programs that are furthest from the students and make sure they fit. The student 's relationship with the teacher is the most important we fund."

Senators included a provision to spend $40 million to hire more teachers and reduce class sizes for kindergartners and children in "high priority" schools. Those considered "high priority" are schools where 80 percent or more children qualify for free or reduced lunch and 45 percent or more students are performing below grade level.

The senate proposal includes $97 million to step up accountability efforts and for bonuses for schools where students meet and exceed projected achievement standards. One provision in the senate education expands a pilot program statewide in which teachers and teaching assistants received an extra $750 and $325 respectively, if minority students met their student achievement targets.

Another portion of the senate education proposal calls for $2.8 million to recruit qualified teachers through college scholarships for teaching assistants and other efforts. Teachers would also receive $200 to purchase classroom supplies.

Banking on education

But the place where the Senate does differ with the governor is on how to fund the education expansion.

Gov. Easley has been a staunch proponent of the lottery. While he projected a lottery could bring in as much as $600 million in its first year, he only allocated $300 million from lottery proceeds to be used for education.

State senators, on the other hand, intend to close at least $180 million in tax loopholes to pay for the new education programs. Suggestions to change tax structures for telephone and satellite television are being considered by the Senate, but no definite options have been made public yet.

Some House Republicans could fight senate plans to close tax loopholes, which the Republicans say is a matter of semantics. Rep. Gregg Thompson, R-Mitchell, a chairman of the House Appropriations Committee, suggested that their budget proposal will have more modified spending for expansion programs.

"Closing loopholes is raising taxes on whatever is closed," he said. "Education is an issue that is difficult to work with because it affects everyone. But at the same time throwing more money at it is not going to improve education. If we leave teachers alone and let them teach, that will improve education."

At least 61 House members, many of whom were Republicans and conservative Democrats, signed a pledge not to raise taxes, according to the North Carolina Citizens for a Sound Economy.

Western North Carolina pledges include: Rep. Mark Crawford, R-Buncombe; Rep. Andy Dedmond, D-Cleveland; Rep. Mitch Gillespie, R-McDowell; Rep. Larry Justus, R-Henderson; Rep. Wilma Sherrill, R-Buncombe; Rep. Gregg Thompson, R-Mitchell; Rep. Trudi Walend, R-Transylvania; and Sen. Bob Carpenter, R-Macon.

The House Republican alternative to raising taxes will most likely be to make program and position cuts.

"My first priority was to protect the taxpayers and try to find cuts that wouldn't have seriously damage the services," Sherrill said. "In other words, let's cut the fat and not raise taxes. I was also mindful of the state employee. It's a balancing act. You want to protect the taxpayer and protect the worker."

Senate leaders will answer the House Republicans' suggestions early next week when they release their plan to fund education and other government agency expansions.