Local Politics

Tax increases, furloughs on lawmakers' table

Posted February 26, 2009
Updated March 9, 2009

— The specter of tax increases and furloughs of state employees is growing in the Legislative Building as state lawmakers try to tackle a growing budget deficit and declining revenue.

"We all agree (we've) got to look at everything. We've got to figure out how to make this (budget) work," said Sen. A.B. Swindell, D-Nash, co-chairman of the Senate Appropriations Committee. "This is uncharted territory. We've never been here before."

State budget Groups push for income, sales tax increases

The latest projections call for the state budget deficit to grow to $2.2 billion by June and easily top $3 billion in the 2009-10 fiscal year.

State Controller David McCoy said Monday that state revenues fell 14.3 percent in January from a year ago, including a 21.4 percent drop in personal income tax collections. State spending was down 1.7 percent overall in January, although spending on education and health and human services was up 5.9 percent, he said.

Gov. Bev Perdue on Wednesday ordered state agencies to cut spending by 9 percent during the 2008-09 fiscal year, which ends June 30. The size of the required cuts has grown steadily since former Gov. Mike Easley called for 2 percent reductions in September.

Perdue had been counting on money from the massive federal economic stimulus package to plug holes in the budget, but she said other actions are needed because North Carolina's $6.1 billion share of the stimulus – most of it is earmarked for infrastructure projects – won't be available to cover the deficit.

Before the General Assembly convened last month, lawmakers began discussing raising taxes on alcohol and cigarettes and closing some corporate tax loopholes to erase part of the deficit. One loophole exposed in a recent WRAL News investigation allows Lowe's Cos. to forgo collecting sales tax on items installed by the retailer's contractors.

Human services advocacy groups have started pushing lawmakers to expand that focus and to consider raising personal income tax rates and the state sales tax to avoid cuts that would devastate their programs.

"Even if we cut agencies across the board by 10 percent, use all stimulus money available and totally raid the rainy day fund, we're still going to have a $1 billion shortfall, most likely, for next fiscal year. So, cuts alone aren't going to do it," said Rob Thompson, executive director of Covenant with North Carolina's Children.

"There's some things we're considering right now," Thompson said. "One would be closing corporate tax loopholes that really benefit multistate corporations at the expense of small business. Another would be broadening the base on personal income taxes (and) broadening the base on the sales tax to (include) services."

Lawmakers said tax increases are the last resort and would only be added to the mix if enough cuts couldn't be made to balance the budget.

"We aren't ready to talk about new revenues. We're just starting on the budget process," House Speaker Joe Hackney said.

"Our people don't have the money to pay more taxes. This is not a year to raise tax rates," said Rep. Paul Stam, R-Wake.

Among the cuts under consideration are closing some state prisons and challenging all nonprofits that receive state funding to justify their appropriations.

With private-sector companies cutting people to stay afloat, legislators conceded state jobs also will come under scrutiny. Forcing state workers to take time off without pay could get a closer look, Hackney said.

"The state of Georgia furloughed 25,000 employees, and you have to wonder whether that's not what it's going to come to here in some number," he said.

Thirty-eight of the 46 states with budget deficits this year have proposed or implemented reductions to their work forces, including nine that have furloughed workers

North Carolina has never furloughed state workers, and lawmakers said doing so would likely require a change in state law.

"They would probably rather be furloughed than laid off, than unemployed," said Rep. Ty Harrell, D-Wake. "I think we have to look at every single option that's out there, no matter how painful it is right now."


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  • ifcdirector Feb 27, 2009

    That's fantastic. I hope the steal ten times the money from every liberal democrat that voted these clowns into office and that the plague of criminals they are going to unleash hits the homes of these same liberals until they have nothing left too. Why wouldn't the democrat legislature release a gang of criminals? It's just professional courtesy after all.

  • dws Feb 27, 2009

    ""We all agree (we've) got to look at everything. We've got to figure out how to make this (budget) work," said Sen. A.B. Swindell, D-Nash, co-chairman of the Senate Appropriations Committee."

    the key words are "look at everything", and to that I would add set your operating priorities to a survival mode.....$2.2 BILLION budget shortfall by June, growing to $3B+ for fiscal 2009-2010 is critical.....

  • deactivate Feb 27, 2009

    "NCSU has already announced the first round of lay-offs and the second round will most likely be announced soon.

    I bet the overly paid Mrs. Easley is not on the list of lay-offs at NCSU.

  • livinggood2 Feb 27, 2009

    How can North Carolina Blame President Bush for all of its trouble the Democrates have been in charge,well it seems forever,and they are the ones that have Driven us into this mess,and again they still get elected,I don`t get it,Maybe I am missing something.

  • Garnerwolf1 Feb 27, 2009

    I absolutely was not trying to insinuate that state gov't should not make cuts. I certainly beleive they should. And drastic ones at that. Let me try to illustrate my point with a real-life example. I once sat on a board at church that was discussing giving the church employees a 4.5% pay raise for that year. An employee (of a worldwide soft drink company) made the statement that 'he would be offended if his employer "only" gave him a 4.5% raise'. State employees got extra leave that year but no money. Private employee offended at a 'small' 4.5% raise while public employees got nada. He was used to large raises, bonus, perks, etc. State employees are used to small, if any, raises, no bonus, and no perks. Public employee was later laid off, but public employees normally don't have to worry about that. It's a trade off - big reward vs security. And now even the security is threatened. That's all I'm saying.

  • Duckman Feb 27, 2009


    You cannot turn children away when they show up at school. With the growing population in NC, the public school system is even more burdened. Look at the state budget, education (k-12, community college, public universities) makes up about 58% of the spending, health and human services (NC portion of Medicare, Public Health, Social Services) about 25%, and Crime Control and Public Safety about 10%. That's 93% of the allocated budget in those 3 programs. The entire remainder of state government operates already on 6-7% of the budget.

    Are any of the people on here complaining willing to take a cut in the services provided?

    Are you willing to give up all the state parks, museums and the zoo, the community colleges and universities, maintenance of the roads or policing of them by the Highway Patrol, the court system? Or better yet, are you willing to give up the response to emergencies like fires, floods, or storm emergencies.

  • Duckman Feb 27, 2009

    The problem the thinking of many outside of government on here is that state government doesn't have all the options available to individuals or private businesses when it comes to budgeting.

    Harder economic times increase the demand for state services. Workers who have lost jobs seek job training at the community colleges or assistance at agencies like the ESC. An increase in Medicare and other social based health programs goes up as those at or near the poverty line has less work and income. Generally as poverty rates increase so does crime rates which means more spending needed for police and other public safety programs, courts, prisons, etc.

    At the same time, revenue is dropping as income and sales taxes decrease, which make up a large portion of the funding.

    Plus there are some things that can't be cut. Its state law that all children up to age 16 must attend school and by law, those children are guaranteed a basic education no matter where they live in the state.

  • Alexia.1 Feb 27, 2009

    "Several comments about the public sector should get with the private sector and bite the bullet. problem with these blanket statements is that not everyone in the private sector is taking a hit."

    Garnerwolf1, I absolutely believe that those in the public sector not only should, but MUST, bite the bullet. While it might be true that not all in the private sector have been affected, I would say that most have. Many have lost their job and those that still have jobs have likely seen pay reduction in the form of pay cuts, days/hours cut, or bonus reductions. Business owners in almost every area are getting less business, with many closing up shop. So what if there are a few who are not affected? The state does not have enough money from those working (and those working with less wages) to support itself. It must cut expenses, and that means cuts in salary, hours/days, or layoffs. I'd prefer to avoid putting anybody on the street, so that latter would be a last resort for me.

  • NeverSurrender Feb 27, 2009


    Whilst we're on the subject, finding incompetence in government agencies would be like shooting fish in a barrel.

    DOT is a walking talking cluster of an agency. They can't seem to build roads in time frames smaller than decades and when they do finally build the thing, we get stiffed with repaving bills because some idiot at DOT completely whiffed on oversight.

    It could be worse, though...DHHS hasn't exactly covered itself with glory vis-a-vis the new Dix up in Butner or their existing fiefdoms down east...both of which have been cited for serious violations that put their Federal funding in jeopardy.

    But incompetence isn't limited to the state ranks...Wake County public schools is absolutely featherbedded to the rafters with people who could be made redundant without any significant loss of amenity. Between busing for mediocrity to interminable forms and layers of bureaucracy for the simplest of things...yeah, could make quite a saving there by weeding out the bozos.

  • nobama Feb 27, 2009

    How badly will the Obama-Purdue tax increases damage the economy? Will it send an already weak economy into a depression?