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RALEIGH, N.C. -- Gov. Bev Perdue said Thursday she d like to see video sweepstakes outlawed once and for all, but as long as they re legal, she wants to tax the games to fund the state s public schools.

As budget talks continue in the Republican-led General Assembly, Perdue challenged lawmakers to squeeze a new source of state revenue out of the sweepstakes games.

We need to tax the heck out of them and regulate them, regulate them hard, said Perdue, a Democrat.

Perdue said she is opposed to the sweepstakes parlors that now operate across North Carolina. But she said taxing them is a reasonable idea now that legislative leaders have dismissed her budget proposal. She had recommended a temporary sales tax increase to generate more money for public schools that she said had been hurt by budget cuts.

I m giving them another pathway, another piece of a solution, she said of lawmakers as a gaggle of schoolchildren snapped photos of her outside the Capitol. The bottom line is they ve got to fund public schools in a different way. There s got to be more resources for our kids.

Taxing the sweepstakes industry could be an iffy proposition because the games have been in legal limbo for some time. In 2010, the legislature prohibited video sweepstakes, but this spring the state Court of Appeals struck down the ban. The issue ultimately will be decided by the state Supreme Court.

Republicans weren t receptive to Perdue s idea.

Senate leader Phil Berger, a Republican from Eden, said it didn t make sense to regulate something that may be deemed illegal.

I think we need to let the current law be vetted by the court system, he said. I just think we need to let the case run its course.

In the meantime, sweepstakes parlors dot the state, offering players electronic poker and slots on banks of computers. Some local governments have taken steps to regulate and tax the sweepstakes.

The Internet Based Sweepstakes Organization threw its support behind Perdue s proposal, which would give the industry greater legitimacy as the legal battle continues.

We are very pleased to have the Governor announce her support for the regulation for the video sweepstake industry across the state, Chase Brooks, the organization s president, said in a statement. This is a positive step forward, and we will work with her administration and the North Carolina General Assembly as this public policy issue proceeds through the Legislature.

Others say sanctioning the sweepstakes is the wrong way to go.

It is troubling that, once again, the Governor has proposed a revenue option that will take a particularly heavy toll on low- and moderate-income communities communities that are more likely to be marketed to by gaming companies, said a statement from Alexandra Sirota, director of the left-leaning N.C. Budget & Tax Center.

Perdue didn t offer a specific tax structure for the industry, nor did she say how much money it could generate for schools. In 2010, state lottery officials estimated the state could reap at least $350 million a year if it controlled video sweepstakes.

The House budget proposal includes $7.69 billion for the public schools, avoiding further state cuts but not restoring thousands of school jobs lost in last year s budget reductions.

But education leaders fear more job cuts ahead as schools are slated to lose $258 million in federal money that kept teachers employed during the worst of the recession.

The Senate budget proposal is expected next week.

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