Gov. Mike Easley's proposed 2004-05 budget would fully fund enrollment growth within the UNC system while using the state's Escheats Fund to expand need-based student aid.

At the same time, it would impose yet more budget cuts on the UNC system.

UNC President Molly Corbett Broad, in a May 10 letter to chancellors at system institutions, said the draft budget would impose permanent cuts of $28.5 million to the UNC system's operating budget, coupled with additional non-recurring cuts of about $5.7 million.

The budget cuts within the UNC system are part of Easley's plan to make nearly $350 million in spending cuts from state government while providing resources for job creation and education.

Broad told chancellors that these cuts would be "of lesser magnitude" than cuts imposed in recent years. "Importantly, he recommends that the University (system) have full flexibility in administering these proposed reductions," Broad said.

Easley's budget also would provide funding for the Carolina-based Schools Attuned Program, as well as the Distinguished Professors Endowment Trust Fund, the UNC Center for School Leadership Development and economic development initiatives.

The budget also includes mandatory funding to pay the debt service associated with the 2000 higher education bonds.

Easley's plan would offer most state employees a 2 percent pay raise, along with a one-time bonus of $250.

At a May 5 Employee Forum meeting, Executive Vice Chancellor and Provost Robert Shelton said the proposed 2 percent pay raise was "better than zero, but it's certainly not what we all hoped for."

Easley, in a May 10 press release that outlined various components of his recommended $15.86 billion budget, said that the pay raises for state employees were well deserved and long overdue.

`'We would not have been able to maintain our commitment to education over the past three years without the hard work and dedication of our state employees," he said. "I recognize and appreciate the sacrifices that have been made.''

Shelton said he was confident the numbers will "bounce" upward as budget proposals move through the legislature this summer. Shelton said Carolina administrators will lobby for a higher raises to counterbalance what essentially has been a salary freeze in recent years.

One piece of good news is that the University has not been required to make mid-year budget reversions this year, Shelton said.

"That's the kind of good news like we stop banging our heads against the wall, and it feels good," he said.

Last year, Easley recommended a spending cap tied to the 10-year average of personal income growth and reiterated the need for it in his draft budget. The plan proposed by Easley today falls under the cap by $14 million. The plan increases the state's reserves by more than $100 million and stays within the spending cap proposed by Easley last year.

Easley's budget provides full funding of enrollment growth at all levels as well as funding for professional development for educators and ABC bonuses for the state's teachers. In addition, this budget expands the class size reduction initiative to grade three and provides funding to serve 12,000 at-risk four-year-olds in the state's More at Four pre-kindergarten program. More at Four is currently serving 10,000 students across the state.

Easley's budget provides more than $48 million in tax relief to small businesses to stimulate the economy and create jobs for North Carolina families. At the same time, it provides more than $15 million in enhanced support for crucial small-business initiatives, expanded funding for cutting-edge biotechnology start-ups, advanced worker training for new and existing businesses and regulatory streamlining.