BECAUSE SHE SAYS SO: Gov. Beverly Perdue dropped a $1.6 billion list of proposed tax increases. The sugar meant to help the bitter pill go down: some of them are temporary. The Republicans were not convinced. Speaker Joe Hackney says Perdue's pitch could help budget negotiators actually get somewhere.

POLITICAL NUMBERS: The state wasted $635 million, or 25 percent of the money it spent on community services over three years. Meanwhile, Rep. David Lewis, a Dunn Republican, launched a campaign to show that the Democrats are using faulty math in describing a budget deficit. And early this week, the legislature enacted its 272nd law of the still-going session.

BULGING INBOXES: Perdue toughened the state's policy on e-mail retention, wiping away nearly all of the discretion employees had on deciding whether a message should be kept. Some state government delete keys will appreciate the rest.

IN OTHER NEWS: Federal investigators continue to look at more details of Mary Easley's work at N.C. State University. A Senate team chugged milk fast enough to win $200 for charity. And in a debate over whether to make state laws gender neutral, Rep. George Cleveland, a Jacksonville Republican, noted that he had lots of respect for "the female race."

The Senate was in a rush to adopt their draft of the state budget.

Now the document is on hold while the House waits for updated tax revenue numbers. The numbers will be based on what the state Revenue Department sees by the April 15 income tax filing deadline.

Rep. Mickey Michaux, the chief House budget writer said the numbers should be available by April 20. It's only then, he said, that the House can start to put a budget together.

"We're not going to do anything until we get the numbers," said Michaux, a Durham Democrat.

Income tax returns accounted for $11.4 billion or 54 percent of state revenue in the current budget.

The recession has made predicting revenue a difficult task for analysts. Michaux said the Senate's assumptions about revenue won't likely hold up after April 15.

"In my book, they didn't have to rush," Michaux said last week.

The state has to have a balanced budget. That means, lawmakers can only plan to spend what they believe they will collect. Michaux said he fears that those numbers could push the state's deficit to more than $4 billion. The Senate's budget, like Gov. Beverly Perdue's assumed a $3 billion deficit.

The state's revenues dropped $286 million or 14.3 percent in January compared to the same period last year.

The news was released Monday in a report by state Controller David McCoy.

"Revenue growth is slowing dramatically," McCoy said in a news release. "This decline was expected, and the state's financial plan was adjusted, but we are continuing to feel the strain of budget pressures." 

According to McCoy's report, personal income tax collections accounted for the nearly all of the loss in revenue for the month. McCoy also reported that investment earnings declined by $16 million, or 89 percent. State spending is down by 1.7 percent. Education and health and human services spending, the largest category of state expenditures, was 5.6 percent higher in January.

Perhaps a reflection of all this bad news, sales and use taxes, alcohol and tobacco taxes grew by $42 million or 8.5 percent in January 2009.

The NAACP is 100 years old and the North Carolina chapter celebrated the day by calling on lawmakers to spare the poor when they eviscerate next year's budget.

The civil rights organization was founded on Feb. 12, 1909. 

"While we celebrate our birthday today, we cannot take a break," said the Rev. William Barber, president of the state chapter. "Don't balance this budget on the backs of the poor."

Barber was, of course, referring to next year's budget deficit, which is expected to be at least $2 billion, nearly 10 percent of last year's $21.5 billion budget.

Lawmakers have demonstrated little appetite to raise taxes to fill the budget hole. The state is required to have a balanced budget and lawmakers are likely to adopt deep spending cuts to get there.

The state's largest expenditures are for education and health and human services. Barber and members of the Black Caucus advocated Thursday for leaving those categories out of the cuts.

"Simply talking about cutting across the board is a good sound byte, but it's bad public policy," Barber said.

State revenues are down 5 percent through October.

According to a report released Friday afternoon by the legislature's Fiscal Research Division, state revenues are $320 million below the $6.3 billion target set through October. It's still too early to say what next year's budget deficit will look like, but most signs say it will be big.

"We've really got some weaknesses in our economy-based taxes and when you look forward that weakness is not going to turn around soon," said Barry Boardman, an economist with the division.

The revenue shortfall could reach $1.6 billion, said Rep. Mickey Michaux, a Durham Democrat and a key budget writer in the House. Lawmakers are going to have to make serious and deep cuts, he said. The good news, Michaux said, is that the budget can be balanced without raising taxes.

"We're going to have to do a lot of things that are going to be sort of hurtful," Michaux said.

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U.S. Sen. Elizabeth Dole is being criticized for her vote on a student loan bill.

In December of 2005, the Senate took up an omnibus deficit reduction bill aimed at cutting $39.7 billion from the federal deficit.

One section in the bill targeted student loans.

The bill cut costs by reducing subsidies to lenders and kept a shift from variable interest rates on loans to a 6.8 percent fixed rate.

At the same time, it increased loan limits for first- and second-year students and established a new $3.7 billion grant program for low-income college students studying math, science or certain foreign languages.

In all, it achieved $12.7 billion in net savings.

The Senate voted 50-50 on the bill, with Vice President Dick Cheney breaking the tie in favor. Dole voted for the bill. 

Republicans argued that the cuts in student aid would only affect banks and other lenders, while Democrats and college administrators said that two-thirds of the savings would be borne by students and their parents.

"This is the biggest cut in the history of the federal student loan program," said David Ward, president of the American Council on Education, an umbrella group for colleges, at the time.

But a Dole spokesman defended the bill.

"The bill had $9.2 billion in new education spending on students," wrote Dan McLagan in an e-mail to Dome. "The net effect is an increase in benefits for students and a decrease in payments to lending institutions." 

A recent TV ad by the Democratic Senatorial Campaign Committee criticizes Dole for her vote on the bill.  

Beverly Perdue says Richard Moore flip-flopped on a budget commission proposal.

The lieutenant governor pointed out that the state treasurer favored a commission to cut federal subsidies when he ran for Congress in 1994.

According to a candidate questionnaire printed in the N&O's voter guide on April 30, Moore's take on the deficit was given as this:

Would like a commission—similar to the base-closing commission—that would have the power to cut federal subsidies of $150 billion to $200 billion per year.

Perdue's campaign said that is similar to their proposal for a state budget commission, which Moore criticized this afternoon.

"It sure would be a refreshing change if he operated the treasurer's office with the same kind of transparency and accountability he talked about today," Perdue spokesman David Kochman said in a statement.