June 2004 NCCBI News

Taxes Dominate Talk at Legislative Conference
The General Assembly won’t raise any taxes this year but it isn’t likely to cut many, either, legislative leaders told about 300 business leaders at NCCBI’s annual Legislative Conference on May 12. However, it was apparent from the legislators’ remarks that there is support for Gov. Mike Easley’s proposal to give small businesses a break on corporate income taxes.

”We’re not going to be raising taxes this year,” House Democratic Speaker Jim Black said flatly. Republican House Speaker Richard Morgan repeated that assertion when he followed Black to the podium: “No tax increases.”  That threw cold water on calls by Senate President Pro Tem Marc Basnight’s for a sharp increase in cigarette taxes.

Black and others sought to dampen the enthusiastic response to news that, for the first time in four years, the state will end its year in the black. “The worst thing that has happened to us is those newspaper headlines saying the state has this huge surplus. I would say there has been about $2 billion in spending requests for various good causes and we’re supposed to pay for all that out of this $190 million surplus.”

There just isn’t enough revenue to meet the financial needs of a growing state and enact a 1 percent cut in the state’s corporate income tax rate, a chorus of conference speakers said. Reducing the state’s 6.9 percent corporate income tax rate, the third highest in the Southeast, is a major objective of NCCBI.  “We have about $600 to $700 million in real needs that go beyond the supposed $190 million surplus” the state expects to realize at year end, Black said.

David Crotts, senior analyst in the General Assembly’s Fiscal Research Division, said it may require as much as $800 million in additional spending next fiscal year to pay for the needs of a growing state, including small raises for teachers and other state employees, money to repair and renovate state buildings, contributions to the state’s Rainy Day Fund, and to account for increased enrollment in the schools and universities.

The governor’s proposed budget for the fiscal year beginning July 1, which he submitted to the General Assembly on the opening day of its short session, provided the backdrop to many of the comments at the conference. Most speakers said they would give serious consideration to Easley’s proposal to exempt the first $20,000 of a corporation’s income tax by 2005, which theoretically would save small businesses about $33 million in revenue. However, only S corporations could take advantage of the tax break, not C corporations and LLCs.

Easley’s $15.86 billion budget plan calls for giving state employees a 2 percent pay hike, plus a $250 bonus. Teachers would receive an average raise of 2.5 percent and  community college instructors 4 percent. Easley also would increase money for industrial recruitment and biotechnology development, and spend $50 million to reduce class size in the third grade. About $104 million would go to pay for enrollment increases in the public schools, universities and community colleges.

Some speakers complained that the governor would pay those recurring expenses mostly by using money the state isn’t sure it will realize in the future. Sen. David Hoyle (D-Gaston), co-chair of the Senate Finance Committee, said, “There is almost $1 billion of non-recurring revenue earmarked for continuing needs” in Easley’s budget. That point was echoed by Senate Appropriations Committee Co-Chair Linda Garrou (D-Forsyth).

A surprising degree of agreement was heard about the move to require local schools to open after Labor Day, a change sought by travel and tourism interests. “It would be a huge help for our economy if we had that two to three weeks” of additional summer vacation, Black said. “I believe you have to do that because there are administrators in this state who will start school the day after Memorial Day if you let them,” Basnight said. He said he believes the 220-day work schedule for teachers is too long and could be reduced by trimming the number of teacher workdays, currently at 20. A bill recommended by a legislative committee would mandate that local school systems may not begin classes before Aug. 25 and must end by June 10.

The Senate’s new Republican leader, Sen. Jim Forrester of Gaston, made his debut speech at the NCCBI conference, having been elected to the post two days before. The seven-term Senate veteran, a family physician, made many of the same political points but gave less-strident remarks than were heard in the past from Forrester’s predecessor, Patrick Ballantine. “The change in our caucus leadership does not mean there’s any change in our basic philosophy,” Forrester said.

Watts Carr, chair of NCCBI’s Economic Development Committee and a member of the state Economic Development Board, said  “I think our input (on strengthening the state’s economic development policies) is falling on receptive ears in the General Assembly. I think we will see numerous enhancements in our business climate.”

Martin Lancaster, president of the state community colleges, said he was pleased with the governor’s proposed funding increases.

New members: Companies that joined or rejoined NCCBI in March and April, along with the name of the key executive at each company, include: ADA Computer Supplies, Jerry Fox, Greensboro; Bryan Pontiac Cadillac Honda, David C. Bryan, Fayetteville; Capitol Advantage Associates Inc., Theresa Kostrzewa, Raleigh; Capitol Communications Inc., Paul A. Shumaker, Jr., Granite Falls; Carolina Legal Staffing, LLC, John Lassiter, Charlotte; Carter Worthy Commercial, M. Carter Worthy, Raleigh; Charlotte Bobcats, Chris Weiller, Charlotte; Charlotte Mecklenburg Board of Education, Dr. James L. Pughsley, Charlotte; Chatham County United Chamber of Commerce, Jane J. Wrenn, Siler City; Docusource of North Carolina, LLC, Adele C. Fine, Morrisville; First American Hotels Inc., Sanjay Mundra, Cary; First Horizon Corporate Financial Services, John Fox, Winston-Salem; Fleishman Hillard Inc., Britton W. Carter, Durham; Full Circle Solutions Inc., Robert Waldrop, Woodstock, Ga.; Hayes, Seay, Mattern & Mattern Inc., Ladson Brearley, Charlotte; Heath Investment Group Inc., Duffy Heath, Raleigh; Hinrichs Flanagan Financial, Timothy C. Flanagan Jr., Charlotte; Jackson County Economic Development Commission, Thomas McClure, Sylva; Keith E. Green & Associates, Keith Greene, Greensboro; Kennedy Office Supply, Mary Catherine K. Sigmon, Raleigh; McGee Brothers Co. Inc., Sam McGee, Monroe; N.C. Motorcoach Association, Linda Morris, Randleman; NC Assocation of School Administrators, Dr. James F. Causby, Raleigh; Newcomb and Co., Robert Newcomb, Raleigh; Office of Gerald Quinn, Gerald H. Quinn, Warsaw; Olmsted Village Co., Marty McKenzie, Pinehurst; Paladin and Associates, Bill Warner, Wake Forest; Parkway Services, Edward Evans, Greensboro; Pro Sports Security Consultants Inc., Brian Yarborough, Colfax; Project Resources, Randall Bell, Charlotte; Redding and Associates Advertising, Don Redding, High Point; Reidsville Chamber of Commerce, James G. Eastridge, Reidsville; Run For Your Life, Tim Rhodes, Charlotte; Shumaker, Loop & Kendrick, LLP, Steven Meckler, Charlotte; Springboard Telecom, LLC, Rich Brashear, Charlotte; Targacept Inc., Alan Musso, Winston-Salem; The Tapestry Group, Sharon A. Decker, Rutherfordton; The VTA Group, Rob Gerlach, Wilmington; URS Corp., Randall Taylor, Morrisville; and Wells, Jenkins, Lucas & Jenkins, R. Michael Wells, Winston-Salem.


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