By Gary D. Robertson

Associated Press

RALEIGH — There should be enough money for the budget. North Carolina finally has a lottery, and new ethics rules are on the books. The governor appears content to spend his final two years in office expanding his education initiatives, and neither leader in the House and Senate has a singular issue driving them to action.

And so when lawmakers return to Raleigh on Wednesday to open the two-year legislative session, many believe the time could be right to address some not-so-sexy questions unlikely to appear in campaign ads or stump speeches.

“We don’t have a natural disaster to deal with and we have … a replenished rainy day fund, but there are lots of pressing issues,” said Rep. Joe Hackney, D-Orange, expected to be elected House speaker. “Maybe not in the sense of one thing that dominates everyone’s attention.”

Lawmakers said that could open the door to debate on reformatting the state’s tax system, changing the division of responsibilities between state and local governments and figuring out how to pay for a backlog of school and mental health needs.

In what’s likely to be his first term leading the House, Hackney said he intends to stick with a moderate agenda: expanding access to affordable health care, economic development and improving education.

The latter is a favorite of both longtime Senate leader Marc Basnight and Gov. Mike Easley, who is likely to push for raising teacher salaries to the national average by 2008 and expansions of programs aimed at his improving the state’s high schools.

As the nominee of the Democratic Party, Hackney is widely expected to win election as speaker, succeeding Rep. Jim Black, D-Mecklenburg, who decided last month not to seek the chamber’s top post after a year of state and federal investigations into his campaign finances and associates.

Considered more liberal that Black, Basnight or Easley, Hackney backs a moratorium on the death penalty and public financing of campaigns and has also served as a foil to business interests on environmental issues. That worries some Republicans, who are also concerned the 14-term lawmaker might also press to grant state workers collective bargaining rights.

“There is at least concern from the business community about the possibility (of) taxes and about some regulatory initiatives,” said Senate Minority Leader Phil Berger, R-Rockingham. “The question within the House itself — Are there enough votes for those kind of things?”

While Democrats hold 68 of the 120 seats in the chamber, Hackney has said the caucus isn’t much different than it was two years ago when a death penalty moratorium was scuttled for lack of support. He’s also skeptical the House would vote to grant collective bargaining rights to public employees.

But others suggest the five seats Democrats added to their majority in November gives the party the ability to push for legislation they haven’t taken to the floor this decade because of Republican opposition.

“Whenever there’s a large margin for Democrats, there’s going to be a larger percentage of Democrats in the caucus who are willing to move on progressive issues,” said Rep. Deborah Ross, D-Wake.

As usual, the biggest job for lawmakers will be to pass a two-year state budget before the July 1 deadline. That assignment won’t be as difficult as it was earlier this decade, when annual budget shortfalls reached as high as $1.6 billion.

Lawmakers expect a revenue surplus for the fourth year in a row, but they will still have to figure out how to pay for cost increases tied to growing public school and university enrollment, ongoing mental health reforms and raises for state employees.

“What I think we’ve got is going to be manageable,” said Sen. David Hoyle, D-Gaston, a longtime co-chairman of the Senate Finance Committee. “There will be enough one-time money around to continue to balance the budget and get along.”

A lingering fiscal challenge will be coping with the loss of $300 million in tax revenue from the phasing out of two “temporary” taxes originally approved in 2001 — an extra halfpenny on the sales tax and a boost in the income tax bracket for the state’s highest wage earners.

Democrats began the phase out last year and want to complete the task, in part to remove a political issue for Republicans in 2008. They also have generally balked at Easley’s suggestion to keep some of the extra sales tax on the books to pay for a targeted tax credit for low-income residents.

“The equitable thing to do is to drop them together,” said Rep. Paul Luebke, D-Durham, Hoyle’s counterpart on the House Finance Committee. But he suggested there may be enough money for the credit even if the temporary taxes expire as scheduled.

Beyond the budget, lawmakers could turn to the following issues:

* Tax reform. A commission studying the state’s tax code could make recommendations this spring on whether to expand the sales tax to include services — such as haircuts, home repairs or legal services. The sales tax rate would likely drop to make the change revenue neutral.

* Medicaid costs. County commissioners will again try to rid themselves of sharing Medicaid costs with the state and federal governments, a bill that totals about $470 million annually.

“That is local property tax revenue that is being diverted from local needs, such as schools and public health and safety,” said Vance County commissioner Terry Garrison, president of the state commissioners’ association.

* Bond issues. Lawmakers will consider asking voters to approve issuing billions of dollar bonds to pay for public schools improvements, land conservation, roads, and water and sewer system repairs.

None of those issues will fetch the same headlines as the creation of the state lottery did in 2005, or the death penalty — should opponents succeed in winning a moratorium.

But Basnight, D-Dare, said just because there’s not an overriding issue heading into the session doesn’t mean there’s not work to be done.

“It’s a bit unfair to say what you have to fix,” Basnight said. “All of it needs improvement.”