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Speaker Black's office sent an e-mail that read, in part:

A compromise on the state budget, which was reached late Thursday night, is expected to be unveiled on Monday. House Speaker Jim Black (D-Mecklenburg) and Senate President Pro Tempore Marc Basnight (D-Dare) said today that the budget provides critical funding for education, health care, and public safety, all of which are vitally important to improving our economy and creating new jobs. Highlights of the budget agreement include:

(snip)

Pay raises: Teachers will receive an average pay raise of 2.24%; State employees will receive a pay raise of either 2% or $850, whichever is greater, and will receive an additional week of vacation (40 hours)

Cigarette tax: The state's cigarette tax will increase from its current level of 5 cents (the lowest in the country) to 35 cents per pack by next July. This would occur in two phases: The tax would increase by 25 cents on September 1, 2005 and by another 5 cents on July 1, 2006. Other tobacco products would be taxed at 3%.

Legislators also continue to finalize an agreement on the lottery and how future proceeds will be allocated to various education programs such as early childhood education, school construction and college scholarships.

More details on the budget will be released over the weekend and on Monday as they are finalized.

Meanwhile, Sen. Kay Hagan, one of the chief budget negotiators for the Senate, sent this out in her weekly newsletter:

Back at the General Assembly, I am finally pleased to report that we have resolved the major differences in the budget. The plan is to finalize things this weekend, and vote on the budget next week.

My next newsletter will provide many more details about the budget, but the two most significant issues resolved late Thursday night were tobacco taxes and salary increases for teachers and state employees.

Under the proposed agreement the cigarette tax will increase 25 cents the first year and an additional 5 cents the second year. North Carolina's cigarette tax is currently 5 cents (the lowest in the country).

We also agreed to 2.24% salary increases for teachers; most other state employees would receive raises of 2% or $850, whichever is greater, plus an additional week of vacation.

Talks continue on the lottery with just a few issues left to iron out, such as how best to use lottery proceeds for important educational needs.

Of course, there are already folks unhappy with the pending compromise budget. Among them are advocates who wanted to see a steeper increase in the state's tobacco taxes. The author of a release for the Campaign for Tobacco-Free Kids wrote:

The North Carolina legislature's long overdue decision to increase the state's lowest-in-the-nation cigarette tax missed an opportunity to achieve significantly greater health and economic benefits on two counts.

First, once fully implemented, the cigarette tax increase will bring the total cigarette tax to only 35 cents per pack-far below the national average of 90 cents per pack. Second, because the tax increase is split into two stages instead of a single increase (increasing by 25 cents on September 1, and by an additional 5 cents on July 1, 2006) the impact of the price increase will be less significant, and fewer North Carolinians will quit smoking and fewer lives and dollars will be saved.

For an overview, our friends at the Associated Press sent this out on Friday:

RALEIGH (AP) - Even as legislative leaders put finishing touches on a state budget agreement Friday, advocates complained that portions of the tax and spending plan fell short of their expectations.

Compromise reached by House and Senate Democrats would raise the cigarette tax by 30 cents per pack by next summer _ 5 cents more than several rural House members had said they could stomach.

It's a whole lot less than the 75-cent increase sought by liberal Democrats and smoking prevention groups, who argued a small increase would do little to keep teenagers from lighting up and raise revenue.

North Carolina's 5-cent-per-pack tax currently is the lowest in the nation.

"We're disappointed that our Legislature had a historic opportunity to do something meaningful for the health of our children, but instead it appears that they will just pass a tax without any significant health benefit," said Pam Seamans with the North Carolina Alliance for Health.

Under the agreement, reached after meetings Thursday night by Senate leader Marc Basnight and House Speaker Jim Black, rank-and-file state employees would receive a raise of 2 percent or $850, whichever is greater. The workers also would have an extra week of vacation. Teachers would get an average pay raise of 2.24 percent, according to the offices of Basnight and Black.

Lawmakers hope to vote on the roughly $17 billion budget by the middle of next week. But Democrats only hold a 63-57 advantage in the House, so a few unhappy members could delay the process.

"It's infuriating that state employees could once again be mistreated in this year's budget," said Dana Cope, executive director of the State Employees Association of North Carolina.

Cope said the SEANC is now pushing for a raise of the greater of 2 percent or $1,000. "We feel we have enough friends in the House to keep our fight for a higher pay raise alive," he added.

The teacher pay raises are "not something that we would be pleased with," said Eddie Davis with the North Carolina Association of Educators.

Basnight told The Associated Press a provision inserted in the budget would give Easley the authority to increase teacher salaries higher than what's set in the budget, with legislative consultation.

Democratic Gov. Mike Easley has been preaching fiscal caution, insisting that spending this year increase by no more than 5.6 percent compared to last year.

Basnight, D-Dare, said negotiations went the best they could given the state's financial picture.

"I was unhappy. I wanted a higher cigarette tax," said Basnight, whose chambers sought a 35-cent increase this year. The House backed a 25-cent increase.

The proposal would raise the cigarette tax by 25 cents per pack on Sept. 1 and by another nickel next July. At least one House Democrat who argued for one 25-cent increase didn't sound too worried about voting for the compromise.

"I think that's a doable kind of thing," said Rep. Nelson Cole, D-Rockingham.

As expected, the final budget would contain language on how to distribute revenues from a lottery that's yet to be approved.

Under the tentative agreement, 5 percent of revenues would be placed in reserve fund that could be tapped if lottery profits don't meet expectations in a bad year. The reserve would be capped at $50 million, said Senate Majority Leader Tony Rand, D-Cumberland.

Fifty percent of the remaining revenues would go toward Easley's class-size reduction and More at Four pre-kindergarten initiatives, Rand said. Forty percent would be used for public school construction and the remaining 10 percent for college scholarships, he said.

An advertising ban proposed by the House in a bill approved in April would be loosened, but details were being finalized.

The budget's lottery language wouldn't create an actual numbers game: the Senate still would have to approve the House lottery bill as is. A handful of senators have expressed reservations about a lottery, leaving passage uncertain.