UNCLE SAM'S BUYING: The state is using $140,000 in federal stimulus money to send 16 employees to child development workshops in San Diego while North Carolina has thousands of struggling families seeking subsidized care for their children. Critics say the money should be used to create jobs. (N&O)

LINE INSURANCE: PSNC Energy, the Triangle's natural gas utility, is raising questions with its newest line of business: insuring water lines and sewer lines against damage. The insurance coverage is not regulated by the N.C. Utilities Commission. (N&O)

TAX BREAK: The legislature estimates the state will forgo $1.4 million in tax revenue this weekend, and area retailers say they have high hopes based on how they did last year during tax holiday. (N&O)

CHECK THE MAIL: Gov. Bev Perdue's administration has not responded to a letter from the state's District Attorneys complaining about the erosion of services for the mentally ill who are accused of crimes. (N&O)

JUDGE NOT: Sen. Kay Hagan has withdrawn her support for a possible lifetime federal appointment for a state judge who ruled in favor of a company that includes Hagan's husband. (Greensboro N & R)

SPEND AWAY: A higher sales tax means North Carolina consumers will get a larger break when they purchase energy-efficient appliances during this weekend's tax break. (AP)

NOT SO FAST: The N.C. Office of the Commissioner of Banks has proposed new regulations that would stop foreclosure once a homeowner asks for a loan modification. The rule would give homeowners more time to try to keep their homes. (N&O)

TO THE RIGHT: Independents who swept Barack Obama to a historic 2008 victory broke big for Republicans on Tuesday as the GOP wrested political control from Democrats in Virginia and New Jersey, a troubling sign for the president and his party heading into an important midterm election year. (AP)

TAX TALKS: Lawmakers met for the first of a series of meetings that will focus on proposals to overhaul the state's tax system. (AP) 

State revenues are 1 percent lower than projections, according to a report by the legislature's Fiscal Research Division.

Revenue collections through the end of September, the first quarter of the fiscal year were $45 million lower than a $4.2 billion target, according to the report prepared by Barry Boardman, an economist for the legislature.

It's very early in the fiscal year and the most important indicators of whether the state can make its budget won't come until the spring. But the early decline suggests that the state's recovery from the recession will be a slog.

Revenue is down, generally speaking, because consumers are spending less and workers and corporations are making less money. Those declines mean the state is collecting less tax revenue.

Other states are doing much worse, according to the National Conference of State Legislatures. North Carolina's projected loss in tax revenue is currently less than South Carolina, but higher than Virginia and Tennessee, according to the NCSL.

Senate Republican Leader Phil Berger delivered a big ol mess of opinion surveys to the governor's office Tuesday.

The answers included on the "Conservative Voter Survey," sent to prospective Republican voters are likely the least surprising thing in state politics. Berger showed off the surveys in a wheelbarrow. Here's a sample of the questions.

Do you think death panels made up of government bureaucrats should decide if your loved ones live or die?

On Dome's sample, the respondent said "yes," so we're glad we're not kin.

Do you oppose Bev Perdue and the Democrats' plan to pass a job-killing $1.6 billion dollar [sic] tax increase in the middle of a recession?

Well, when you put it like that. Also, the tax increase was $1 billion for the coming fiscal year.

Update: Post adds context on the size of the tax increase.

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Should Gov. Beverly Perdue take on taxes?

Gary Pearce says it may be just the issue Perdue, a Democrat, needs to make her mark.

Pearce, in his Talking About Politics blog, writes today that Perdue needs to find an issue that will get more attention than recent announcements she has made on new industries, rural health care and nanotechnology.

"It may be time to stop the short-yardage plays and start throwing for big gains," Pearce writes.

"In fact, it may be time to consider devoting her next two years to what common sense would tell you could be political suicide: sweeping tax reform."

Pearce argues that it takes a big issue to cut through the media clutter these days. He says such an issue could be a tax reform package that ends the state's "boom-and-bust budgeting" and pays for education reforms.

"Right now, Perdue's biggest problem is that nobody really knows what she stands for," he writes. "It's time to find it and stand for it."

The N.C. Justice Center says that tax increases approved by the legislature this year are likely to prevent job losses in the private and public sectors.

The Center issued a release on a new report that contends that the popular notion that tax increases will lead to job losses is not true.

The report says that without the tax increases, deeper cuts would have been made in state services such as education.

"Those cuts certainly would have caused job losses in both the private and public sectors, while credible research concludes the revenue increases likely will not negatively impact the job market," reads the report.

The report says that North Carolina's tax increases are equal to a small fraction of the state's economy and do not put North Carolina out of line with taxes in other states. As a result, the report says, the tax increases should not put North Carolina at a competitive disadvantage with other states when it comes to jobs.

Finally, the report says that a comparable set of tax increases by North Carolina in 2001 did not have a negative impact on the state's economy.

The report concluded:

Taking a balanced approach to addressing the budget shortfall allowed the state to avoid major setbacks in public programs and avoid laying off tens of thousands of state workers, which would have had negative effects on the state economy.

Update: Well, it didn't take long for the other side to chime in. The folks at the Civitas Institute have posted a response to what they call a "bizarro-world 'analysis."

The Civitas post says the Justice Center report "does nothing to bolster its claim that higher taxes have no effect on job growth. Any basic Econ 101 theory will describe how job and economic growth is based largely upon the accumulation and investment of new capital and the proper incentive structure."

The post says that increasing taxes reduces the amount of capital available for invements and "destroys the incentives for entrepreneurs to engage in productive investment."

Gov. Beverly Perdue says the steep drop in revenue made it hard to keep a campaign promise to help seniors.

Perdue was responding to questions posed by readers of The Charlotte Observer. Two readers asked her about a plan Perdue touted during her campaign to expand the homestead exemption and freeze property tax evaluations for seniors who make less than $50,000 and have lived in their homes for 20 years.

Perdue said the recession and a steep deficit made such a promise difficult to keep.

North Carolina faced a shortfall of $4.7 billion — a 20 percent hole in the state budget — for this fiscal year. Even with new revenue and federal recovery funds, we cut $2.1 billion from the state budget. As a result, many tough decisions had to be made to balance the budget and to protect public school classrooms and other core services in health and public safety.

I'm hopeful that as the economy rebounds we'll be able to make progress on many issues this budget could not address.

Republicans have said Democrats overstated the size of the deficit by measuring available revenue against what they would have hoped to spend in the best of times instead of what was actually spent in the previous year.