Local Politics

State budget could go $3B in red in fiscal 2010

Posted November 11, 2008

State budget

— State agencies have already started trimming their budgets to deal with the struggling economy, but an independent analyst said Tuesday that officials might have to make deep cuts next year.

In a grim long-term forecast, Elaine Mejia said the state budget deficit could top $3 billion by the 2009-2010 fiscal year, which starts next July.

"It's going to be probably the most difficult budgeting situation our state lawmakers have faced in decades," said Mejia, project director of the NC Budget & Tax Center, a left-leaning public policy group.

A legislative budget analyst said last week that the state's deficit would likely be between $800 million and $1.6 billion during the current fiscal year. Gov. Mike Easley already has ordered state agencies to cut their budgets by 2 percent to 5 percent to make up for the slowing stream of tax revenue.

Mejia said the trend of declining taxes on sales and on corporate and personal incomes will blow an even bigger hole in the budget as the national recession continues. If spending growth stays the same and state workers get a 2 percent raise next July, she has forecast a shortfall of up to $3.3 billion, which amounts to about 15 percent of the budget.

"If we're going to have to meet that entire budget shortfall strictly with spending cuts, that's going to mean, certainly, layoffs of state workers, drastic underfunding of public schools (and) lots of things that a lot of people are going to be very, very concerned about," she said.

Governor-elect Beverly Perdue hasn't yet said whether she would be willing to consider deeper cuts or tax increases to deal with the deficit. Legislative leaders have said they want to see updated financial forecasts before acting.

State Sen. Neal Hunt, R-Wake, said the next session of the General Assembly will be a painful, but important, year for lawmakers to cut unnecessary spending.

"It's going to be hairy. It's going to be tough because we're going to have to make some hard decisions," Hunt said. "I think raising taxes would be a bad mistake right now. ... I can see no raises (for state workers)."

Mejia disagreed with Hunt on the tax question, saying lawmakers need to look at reforming the tax system to include collecting sales tax on services provided by everyone from barbers to accountants.

"They're going to have to talk about ways that we can raise revenues," she said.

Hunt said new taxes unfairly punish those who create jobs.


This story is closed for comments.

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  • beachboater Nov 12, 2008

    Right now we are only "one of the highest taxed states" in the southeast and the country. Why settle for second best?

    Sales tax is a tax on tangible goods. Services (labor) in not tangible. They would / will have to rewrite the entire tax code to accomplish that. Which I'm sure they will be happy to do givent he opportunity.

    Ask your starving barber (if you can find a barber instead of a hair dresser) when the last time he got a 7% increase in his charges was? And if the state gets this, it'll be 7% plus any cost of living the barber might need.

    Yes, NC is a great place to live. (sarcasm added). It amazes me that the projected deficit was only $1 billion until the election. The cost of the election and registering all those new non-tax paying democrats must have been really really expensive.

    I just threw up a little in my mouth.

  • Southern Fried Yankee Nov 12, 2008

    Let's see......89,708 state employees at $38,725 each........Divide by 6 add 2343113 multiply by a factor of 13344...

    Why, that's about $3,473,542,300....give or take a little....If my math is right that's well over what's necessary to balance out the budget and even have a bit more....

    Let the pink slips fly!!

  • Garnerwolf1 Nov 12, 2008

    As of March 21, 2007 (the latest I can find)
    For the 89,708 permanent full-time State employees, which include permanent, probationary, trainee, time-limited employees, the following statistics apply:
    Average Annual Salary = $38,725.40
    Average Age = 44.2
    Average Employee Service = 124.0 months (10 years 4.0 months)

  • snidelyputz Nov 12, 2008

    Lest we forget the trickle down theory. State tax increase to compensate reduced revenues, county tax increase to compensate for reduced revenues, city tax increase for reduced revenues.
    New tax plan coming soon. How much did you make last year, SEND IT IN!!!

  • donnaforeman36 Nov 12, 2008

    $50,000.00 Average pay for state employees? NO ONE in my department makes that. That is a joke. Southern Fried Yankie are you a state employee?

  • BULLDOZER Nov 12, 2008

    It's no wonder main street America can't manage their finances. The government is such a role model!!

  • gunny462 Nov 12, 2008

    "I know! Lets tax I-95 and I-40 at the border. That is far enough away from Raleigh so we won't pay it. And if we must leave the state, we'll just take a jet on taxpayer money there. Problem solved. hi_i_am_wade"

    Hmmm... got me to thinking about tolls on 540 again...

  • gunny462 Nov 12, 2008

    "Why didn't this article come out before the election? It could have been very revealing about how the Democrat-majority has mis-managed the State.billybob72"

    Dole/MCcory(sp) tried but then she goofed with the religious Ads and he tried playing 'nice'.

    "No rainy day fund to help out, and no prior measures to reign-in growth, which could have avoided this problem. billybob72"

    Ooh man... I thought we had one, we don't??

  • Bendal1 Nov 12, 2008

    IIRC about 85% of the state budget is in mandated programs like education, prisons and welfare. That leaves the remaining 15% to try and make up the shortfall with, and it won't work. If there's not enough tax income to pay for those programs, Perdue could cut every other program to the bone and there would still be a shortfall.

  • Southern Fried Yankee Nov 12, 2008

    Here's the plan. If the average wage per state worker is $50,000 a year and the deficit is $3 billion. The solution is easy. Layoff all state workers. Problem solved.

    But then, that would mean no State cops, no firefighters for forest fires, no welfare check processing, no state tax refunds processed, no DOT road repairs, no DENR making sure no one is dumping pollution into the air or water.....but hey...Maybe that's not all bad.