Today marks not only the start of the new budget year but a variety of new state laws go into effect. Here's a sampling courtesy of the Associated Press:

-- State government takes over completely the Medicaid cost-sharing payments that counties paid for decades.

-- The state gasoline tax that was supposed to drop by 2 cents a gallon on Tuesday will remain the same.

-- A $675 million-plus bailout of the health insurance plan for teachers and state employees takes effect.

-- The state also expands property tax breaks for completely disabled veterans, the elderly and people with "working waterfront" property such as fisheries.

-- Active duty members of the military, including those who are home on leave, can hunt and fish without a license.

North Carolina motorists might not get a break in gas and diesel fuel taxes this summer, after all.

The tax is scheduled to drop by 2 cents to 27.9 cents a gallon on July 1. The current tax, 29.9 cents, has been the highest allowed by state law since 2006, Bruce Siceloff reports.

But — to boost revenues for the state Department of Transportation — the Senate Finance Committee this week proposed to make 29.9 cents the minimum rate, instead of the maximum.

If the General Assembly agrees, the July 1 tax cut will be canceled and the rate will stay the same — and it could go higher in the future.

North Carolina's motor fuel tax rate is set by a formula that rises and falls with a percentage of recent wholesale gas prices. The rate is fixed at 17.5 cents plus either 3.5 cents or 7 percent of the wholesale average, whichever is higher.

The Senate Finance proposal would fix the rate at 17.5 cents plus either 12.4 cents or 7 percent of the wholesale average, whichever is higher. That adds up to a minimum tax of 29.9 cents per gallon.

More after the jump.

   Comments (2)

North Carolina is not alone in considering an odometer tax.

Arturo Perez, a fiscal analyst with the National Conference of State Legislatures, said that a number of states are considering a so-called Vehicle Miles Traveled tax.

"There is a sense among many states that there needs to be an alternative to the traditional forms of financing transportation," he said.

Perez said that the gas tax used by many states and the federal government to fund road improvements has not kept pace with inflation in the costs of road-building materials.

Even when the tax is raised, it's not enough, he said. 

According to a 2006 report by the NCSL, 14 states raised their gas tax rates 19 times since 1997, but only three raised them sufficiently enough to keep pace with inflation.

North Carolina is considering taxing drivers for how far they drive.

The proposed "road-use tax" would at first be simple, with the state checking your odometer annually and taxing you based on how many miles you've driven. 

But transportation experts say new GPS technology could allow the state to charge people different rates based on when and where they drive.

Talk of a Vehicle Miles Traveled tax has long been discussed as a necessity, especially since cars are becoming more efficient, leading to a drop in gas tax revenue.

The 21st Century Transportation Committee suggested that motorists pay a quarter-cent for each mile they drive, with the first 2,000 miles free. A motorist who drives 12,000 miles a year would pay $25, possibly when their car is inspected. (Char-O)

A special transportation committee gave final approval Wednesday to a report that proposes creating a tax on the number of miles a car is driven each year, as well as several other options for generating highway and transit money.

The vehicle miles tax would be calculated during the car's annual inspection and likely would supplement or replace the gas tax. Legislators on the 21st Century Transportation Committee cautioned that a new tax is unlikely to advance during the sort of budget crisis the state faces this year.

The special committee was formed to propose a menu of options for transportation funding, because the state's primary sources of money, the gas tax and a tax on car sales, are flat or declining in revenue because of factors such as more fuel efficient and longer lasting vehicles.

The group also proposed toll booths on I-77 and I-95.

Committee member Chuck McGrady, however, said the committee skirted the question of overhauling how the Department of Transportation operates after years of complaints about turf battles, political patronage and dysfunctional divisions.

"We haven't gone far enough," said McGrady, a Henderson County Commissioner.

Asheville Mayor Terry Bellamy, another committee member, cast the lone 'no' vote on the final version of the recommendations, saying the vehicle miles tax unfairly penalized rural residents with long commutes and no public transportation.

Committee chair Brad Wilson, chief operating officer of Blue Cross Blue Shield of North Carolina, said the road funding report could gather dust on a shelf unless individuals and communities support the recommendations. He acknowledged that raising new taxes is unpopular but said that a failing transportation system will make the state less attractive to new employers.

Criticism of the report after the jump.

   Comments (14)

When the Legislature capped North Carolina's gasoline tax in 2006, it gave politicians something to crow about at election time to show they cared about voters' pain at the pump.

While motorists currently save about a nickel for each gallon they buy because of the cap, its loss for the state Transportation Department is much greater: $600 million.

That's about how much less the department will have taken in cumulatively by the time the cap is scheduled to expire next June 30, compared to the amount that would have been collected had there been no cap, according to state estimates.

The department and General Assembly researchers estimate more than half of that money would have been collected this fiscal year, when record gas prices combined with the state's variable gas tax formula would have brought in more than $400 million extra.

Lawmakers returning to Raleigh in January must decide whether to let the cap expire or extend it and find money elsewhere to pay for road construction and repair. There's an estimated $65 billion gap between transportation revenues and needs in North Carolina through 2030, the Department of Transportation has said.

"Politically to some it would be better not to touch" the cap, said Rep. Becky Carney, D-Mecklenburg, a member of a blue-ribbon transportation funding committee meeting last week. "But there's no money. We're going to have to find it somewhere and it's going to have to be in the form of a tax or fee."

The extra money could have been used to reduce a road-building backlog that now stretches for decades. This year's uncollected money would have been enough to cover the $316 million shortfall now projected for the Highway Trust Fund and Highway Fund this fiscal year. (AP)

N.C. Transportation officials expect road construction money to continue decreasing over the next two years.

The department's revenue from gas and car sales taxes is down 11 percent, or $317 million, from what was budgeted in July, according to Mark Foster, the department's chief financial officer.

"We're not anticipating a rebound over the next couple of years," Foster told the Joint Legislative Transportation Oversight Committee Thursday.

Foster said the department expects a similar decline in the budget that runs from July 2009 to June 2010. Prices for construction material have skyrocketed, especially on petroleum-based asphalt, while gas and car sales taxes have fallen due to fewer car purchases and less driving. The gas tax also was capped at 29.9 cents two years ago instead of rising with gas prices to pay for similar rises in asphalt prices.

The current dip in gas prices and lower construction bids have helped, Foster said. Both could speed up construction — the good news — but that creates a cashflow problem of having the money to pay for construction that finishes early — the bad news.

"We're not sure where this story ends," Foster said.

The Republican Governors Association's first ad against Beverly Perdue accuses her of wanting to continue the "status quo" in Raleigh.

What the ad says:The ad shows two actors playing Raleigh insiders. They walk into the state Capitol to speak with an actress playing Perdue.

First insider: "We have to get Beverly Perdue to maintain that status quo."

Second insider: "How hard can that be?"

One of them holds a red "status quo" button — a take-off on an ad campaign for office supplies.

First insider: "Status quo Beverly Perdue!"

Second insider: "Bev, we have a new tax-increase plan!"

First insider: "Together, we've passed over $6 billion in new taxes."

Second insider: "The largest-growing tax burden in the country."

First insider: "Push the status quo button, Bev!"

The actress pushes the button and nods to other requests.

First insider: "Bev, time to raise the gas tax."

Second insider: "Just like we've done for almost 20 years."

First insider: "And no offshore drilling."

The actress pushes the button again.

First insider: "Bev, more pork-barrel spending."

Second insider: "Let's take it out of the slush fund you passed."

First insider: "Push the button, Bev!"

Narrator: "Tell Beverly Perdue North Carolina can't afford the status quo."

The background: The ad raises three issues — taxes, gasoline and government spending.

TAXES: The Republican Governors Association says the "$6 billion in new taxes" is the amount raised by new state taxes imposed from 2001-06. Almost half of that came from two temporary taxes that lawmakers and Gov. Mike Easley imposed because of a 2001 budget crisis: an extra half-penny sales tax and a new upper-income tax bracket. The rest came from more than 60 other tax changes.

Easley and lawmakers have also cut taxes since 2001. In the 1990s, when Perdue was a legislator and a lead budget writer, lawmakers and Gov. Jim Hunt cut or eliminated some taxes.

The RGA says the claim about the "largest-growing tax burden in the country" is based on an April 12, 2007, article from The Tax Foundation in Washington, D.C. The article says "North Carolina's tax burden rank has seen the largest increase of any state since 2000," jumping from the 36th highest state-local tax burden in 2000 to the 19th highest.

The article, though, is based on outmoded methodology. According to the foundation's revised data, North Carolina's tax burden rank was 20th — not 36th — in 2000. It has since fluctuated between 17th and 22nd. In 2008, it is again 20th.

Contacted Tuesday, a foundation spokesman apologized for the confusion and an economist there said the newer methodology is more accurate.

Perdue represented the New Bern area in the legislature from 1987 until 2001. She has since served as lieutenant governor, a position where she presides over the N.C. Senate. As lieutenant governor, Perdue can vote only in the case of a tie. So her role in tax changes since 2001 has been only procedural.

GASOLINE: North Carolina started taxing gasoline in 1921 at a penny a gallon. Lawmakers raised the tax over the decades, and in 1989 Democratic lawmakers and Republican Gov. Jim Martin pushed through an increase from about 16 cents a gallon to about 21 cents a gallon. Under the 1989 law, the tax fluctuates with the price of gas. It now stands at about 30 cents a gallon, the maximum under a 2006 law.

Perdue was a co-sponsor of the 1989 law. She has been largely silent in recent years while legislators debated a cap on the gas tax. She told The Charlotte Observer this year that she would support local-option taxes for transportation and consider other new revenue sources, such as a tax on miles driven.

On drilling off the North Carolina coast, Perdue says she wants to hear from scientists before taking a position. As recently as June, she had said she was "100 percent opposed" to the idea.

SPENDING: The terms "pork-barrel spending" and "slush fund" are generally associated with spending that meets any of several criteria: it does not follow a regular approval process, it is not transparent or it is not based on measurable criteria or need.

From 1995 through 2000, Perdue was a co-chair of the Senate Appropriations Committee. Though any spending must be approved by the full legislature and the governor, the position meant Perdue was involved in closed-door budget negotiations. There were at least two instances during this time when lawmakers, including Perdue, were accused of creating or using a "slush fund."

Before the 1996 fall election, legislative leaders and Hunt divided up $21 million from a "repairs and renovations" fund without specific approval from the full legislature. The money went to local projects around the state. The next year, lawmakers added another $39 million to the fund — a decision Perdue defended while promising more oversight.

"There will be a complete review," Perdue told the Greensboro News & Record. "There isn't a slush fund."

(The fund continues to this day. A legislative committee is charged with reviewing its spending.)

In March 1997, The Charlotte Observer reported on a $9 million annual transportation fund that lawmakers — not transportation experts were in charge of dividing up. Over a 26-month period, Perdue ranked second in allocations from the fund for local projects like road-paving. (The fund continues to this day.)

Is it accurate? The claims about taxes are inaccurate in two ways. Perdue has presided over the N.C. Senate since 2001, but she has rarely voted and has lacked the power to "pass" any tax changes. The support for the claim that North Carolina's tax burden is the country's "largest-growing" is outmoded.

The claim that there would be "no offshore drilling" under Perdue is a prediction that may or may not turn out to be accurate, as are the claims that Perdue would raise the gas tax and increase "pork-barrel spending."

— David Ingram

How often have North Carolina's senators worked with John McCain?

A quick search of legislation filed in recent years shows a handful of bills which U.S. Sens. Elizabeth Dole and Richard Burr have cosponsored with the presumptive Republican presidential nominee.

Burr signed on to four McCain-sponsored bills: Imposing sanctions on the Burmese junta, creating a federal gas-tax holiday this summer, requiring illegal immigrants to pay back taxes before becoming citizens and designating a National Mentoring Month.

Dole signed on to the Burmese sanctions and the mentoring month as well as an amendment to name a military spending bill for Sen. John Warner, a Virginia Republican.

In addition, McCain signed on to two Dole bills: Recognizing the Lumbees as a tribe and awarding a Congressional Medal of Honor to Tony Blair.

He did not sign on to any Burr-sponsored bills. 

N.C. Go says Gov. Mike Easley's proposed budget is sound.

The coalition of transportation advocates praises proposals to phase out the transfer of money from the Highway Trust Fund, starting with a $25 million reduction the first year.

"In 1989, when the transfer originated it was a sensible proposal, helping to hold harmless funds previously directed to the General Fund," vice chairman Berry Jenkins said in a statement. "Since that time, the General Fund has grown while the Highway Trust Fund – and most other transportation funding – has remained virtually flat."

The group argues that transportation revenue should be spent on transportation projects.

On a separate issue, the coalition says the state should undo the cap on the state gas tax, which Easley has recommended leaving in place.