* State tax officials are scrambling to alert nearly 200,000 businesses how to comply with a sales tax increase that went into effect last month.

Retail businesses began collecting a higher sales tax Sept.1 from shoppers under a tax increase that was passed during the summer as part of the state budget.

But the rush to pass the budget left the N.C. Department of Revenue, which collects the tax, without time to produce new tax forms to reflect the higher tax rate. As a result, businesses in the state were stuck with obsolete tax forms.

The timing couldn't have been worse: All restaurants, mom-and-pop shops, department stores and other retail businesses that charge the sales tax have to file in October to reflect September sales.

Now Revenue Department officials are trying to warn about 180,000 businesses not to use the old tax form. (N&O)

UNPOPULAR POLS: Gov. Beverly Perdue's approval rating has slipped to a new low: 30 percent in one poll. Her solution: barnstorm the state calling for higher taxes for everyone. The good news for her is that she'd have a long way to fall before matching the unpopularity of former Gov. Mike Easley, who is apparently the target of a wide-ranging federal investigation. Meanwhile, former U.S. Sen. John Edwards declared to the Washington Post this week that he isn't paying attention to his reputation. We noticed.

COMMANDMENT 11: Now that the candidates to lead the state Republican party are finished beating the stuffing out of each other, the new chairman, Tom Fetzer, turned his attention to the real enemy — Democrats. Fetzer launched a broadside against a fundraising reception for Democratic lawmakers calling the event inappropriate. Democrats mostly ignored the attack, but it probably felt good for the GOP to go after the other guys for a change.

BUDGET: After a lengthy, public and at times painful budget debate in the House last week, the actual budget can now be written by the select few in the conference committee. Big changes, particularly to the House's proposed taxes, are in store.

IN OTHER NEWS: former state Rep. Cary Allred, wearing his pajamas, was stopped for reckless driving with the smell of alcohol on his breath six days after he quit the legislature. The state Revenue Department held up tax refunds for big families because it wants proof. Newly graduated teachers and lawyers are both having a hard time finding jobs.

Taxpayers who have to write a check to the state tend to wait until the very last day.

And the roster of procrastinating taxpayers includes folks who owe six figures or more, said state Budget Director Charlie Perusse.

"Folks who are required to pay final payments for the prior tax year, especially large income tax payers, hold onto their money as long as possible," Perusse said.

It's human nature to wait to write that check to the state. There's also a financial incentive — the money draws interest if a taxpayer hangs onto it.

All those checks getting mailed on the deadline is part of the reason why April numbers are a big deal for those writing the state budget. Perusse said the revenue department is still processing tax returns and it's too early to know whether the state's $3 billion budget deficit will grow or shrink.

In past years, the state has collected more than $1 billion in April. Officials have been pleasantly surprised in past years when the April numbers were even better than expected.

"Obviously the surprise could go either way," Perusse said.

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.

North Carolina is about four weeks behind last year in sending out taxpayer refunds in a deliberate policy to manage state government's fiscal crisis.

"We're backed up on that about four weeks," Ken Lay, the state revenue secretary, said in an interview.

Lay said he has heard from numerous taxpayers expressing concern about their tax refunds — some of them from people who have lost their jobs and are in dire financial straits, Rob Christensen reports.

"Some people have asked: Have you stopped writing checks?’" Lay said. "We haven't. Since the beginning of the year we've sent out refunds totaling more than $900 million. We continue to send out refund checks every week."

"What we are doing is managing the distribution of the refunds very carefully because we are keeping our eye on the budget and on the cash flow," Lay said.

Lay said the average refund, for people eligible for a refund, is $542.

The typical turn around time — from the time the tax form is submitted until the arrival of the refund – is six to 12 weeks for paper tax returns and two to four weeks for tax forms filed electronically.

A bill would withhold taxes for workers who may be illegal immigrants.

Sen. David Hoyle, a Gaston County Democrat, said he filed the bill after hearing from the N.C. Department of Revenue that some contractors don't pay income tax.

Under the current system, contractors who have Individual Taxpayer Identification Numbers, or ITINs, instead of Social Security numbers can avoid having state income tax taken out of their paychecks.

But Hoyle said the state has no way to find those workers later on if they don't end up paying, since federal law prohibits the Internal Revenue Service from sharing information on ITINs to other government agencies.

"You can't get an address. You can't track them down. You can't audit them." he said. "Osama bin Laden could get an ITIN number and nobody would ever check him."

He said the Department of Revenue is losing "hundreds of millions of dollars" from unpaid taxes.

"Everybody should have to pay their taxes," he said. 

State agencies are cutting back in small ways too.

As noted previously, Gov. Beverly Perdue asked Cabinet-level agencies to trim their spending. A list of the cuts includes some interesting items:

* The Department of Administration has stopped printing most publications.

* The Department of Cultural Resources is training employees online and turning off computers at night.

* The Department of Revenue is encouraging carpooling.

Some of these cutbacks actually have positive benefits. For example, environmentalists might support putting more state publications online rather than printing them, while carpooling and turning off computers saves gas and electricity.

Fiscal conservatives, meantime, support reduced spending on travel and other items.

State agencies are cutting costs in myriad ways.

Asked to trim spending by up to nine percent by Gov. Beverly Perdue, agencies are delayng the opening of prison units, cutting their own grass and driving Highway Patrol cars longer. 

They have put a freeze on most hiring, reduced travel to professional conferences and delayed the purchase of cars, computers, mowers and tractors.

The N.C. Department of Transportation laid off 1,200 — or 92 percent — of its temporary workers, who typically fill potholes, mow grass and clean out drain pipes. 

The Revenue Department delayed by a month the hiring of temporary workers who handle the spring state income tax rush, and the Department of Environment and Natual Resources is hiring fewer seasonal workers for state parks. (N&O)