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Anyone with doubts about whether North Carolina is still friendly to business had only to stop by the annual legislative conference hosted by N.C. Citizens for Business and Industry in Raleigh last week. At an evening reception at the new Entertainment and Sports Arena, and in the high-ceilinged confines of N.C. State University's McKimmon Center, lobbyists and legislators met, mingled and reassured each other that business-backed initiatives will fare well during the current legislative short session--despite a looming $450 million gap in the state budget.

Speaking to the crowd at the McKimmon Center, state budget analysts were quick to insist that the revenue gap is not a sign of economic downturn. Instead, they tied the shortfall to $1.3 billion in state tax cuts (mostly to businesses and plaintiffs in court cases), $1.2 billion in lawsuit settlement payments and the costs of cleaning up after Hurricane Floyd. They neglected to mention that the General Assembly decided last year to fund hurricane relief by depleting state savings instead of levying a one-time tax. Nor did the analysts explain how North Carolina might weather another natural disaster or stormy economic fortunes now that the reserves are gone.

Among the other messages from the podium:

Legislative ABCs: Although lawmakers lamented that they won't be able to approve more tax cuts or fund any new projects, they assured the crowd that business-supported education reforms--including higher teacher pay and student achievement initiatives--won't be among the programs destined for cuts. And they were upbeat about the chances for getting a $3.1 billion bond issue for higher-education needs on the ballot this fall. Just what will be given the budget ax remains a mystery until Gov. Jim Hunt unveils his spending plan, possibly this week.

Read our lips: Legislative leaders are committed to passing a balanced budget without raising taxes. Senate leader Marc Basnight was adamant: "No tax increase. Absolutely none," he told conference participants. Although businesses have been given a disproportionate share of state tax relief, some lawmakers took the podium vowing to ease that burden even further by supporting tax credits for telecommunications companies and opposing added taxes on Internet sales. Senate Minority Leader Patrick Ballantine said he'd push for a "taxpayer protection act" that would limit government spending to the rate of population increase and inflation. How's that for smart growth?

Mere coincidence?: House Minority Leader Richard Morgan couldn't resist waxing nostalgic about the "glory years" of the late 1990s, when Republicans controlled the state House. "The battle then was over how much of a surplus to spend and how much to return to the people," he said. "Fast forward to today, when Democrats control the House and Senate, and what do we have? A shortage." Looks like partisanship is alive and well in the General Assembly.

As the conference agenda wound down, the audience grew restless. The atmosphere had been decidedly more festive at the previous night's reception. Tim McDowell, a lobbyist for private colleges and universities in North Carolina, said the financial news from the podium was "so sad I feel like crying. We've got some serious money woes. Everybody hopes they won't get cut."

But not everyone was daunted by the grim budget reports.

When asked what brought her to the conference, Pam Wescott, a lobbyist for Sprint, gave an energetic smile. "We're interested in simplifying the telephone tax and maybe putting a state tax on long-distance bills," she said.

Stay tuned.

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