Local Politics

State budget sinking amid rising unemployment

Posted March 11, 2009
Updated March 12, 2009

State budget
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— North Carolina's growing jobless numbers spell trouble for state lawmakers as well as for the people filling Employment Security Commission offices.

job cuts Jan. jobless rate hit 9.7 percent

ESC officials said Wednesday the state's unemployment rate jumped to 9.7 percent in January from 8.1 percent in December. The number of people out of work – 443,000 – is a state record, and the January rate is the highest in 26 years, officials said.

"As unemployment goes up and less people are working, we're seeing reduced revenue collections in our major tax categories of income, sales and corporate (taxes)," said Charlie Perusse, state budget director.

State revenues are more than $1 billion below projections for the year, and the shortfall keeps growing, Perusse said.

Gov. Beverly Perdue said Wednesday she had taken control of the state's $787 million "rainy day" reserve fund to stabilize the budget. She said she would use $250 million to shore up the troubled State Health Plan and would use the rest to manage daily cash flow.

"Securing the rainy day fund is necessary for the continuance of day-to-day government operations. Put simply, this move makes sure we will have the cash to pay the bills,” Perdue said in a statement.

Because of declining revenues, Perusse predicted a $3.4 billion deficit in the 2009-10 fiscal year, which starts in July.

The state is counting on $1.7 billion in federal stimulus money to cut the projected deficit in half, and Perusse suggested several scenarios to fill much of the remaining gap.

One plan would cut spending by most state agencies by 10 percent. The University of North Carolina and North Carolina Community College systems and the Department of Health and Human Services would take 7 percent cuts, and public schools would have to reduce spending by 4.5 percent.

Those moves would save $1.3 billion, Perusse said, leaving lawmakers to make up the final $400 million.

"It is unlike anything we've seen before. It is truly significant pain," Senate Majority Leader Tony Rand said.

Other scenarios called for 15 percent cuts for some state agencies. Perdue has hinted that some programs could be eliminated altogether, but she has refused to provide details of possible cuts or tax increases until she releases her proposed budget next Tuesday.

Perusse's scenarios are based on existing spending levels – no new programs and allowances only for increased school and Medicaid enrollments – and on flat revenues.

The rising unemployment numbers and Perdue's push to increase per-student spending cast doubt on both of Perusse's budget assumptions, however.

"I'm probably more discouraged than I was," North Carolina State University economist Mike Walden said about the state's employment picture.

Walden said unemployment could climb to 13 or 14 percent by next year before the economy turns around, and he thinks the state might be too optimistic in its revenue forecast.

"I would probably plan for worse than that and hope that it is stagnant or better than stagnant," he said. "But I would have a contingency plan."

Rand, D-Cumberland, was one of several legislative leaders who met with Perdue on Wednesday on budget matters. Many of them back her push for more school spending amid the tough economy, but Rand said no one has a clear idea of how to pay for it.

"It's going to take massive cuts, and we may raise revenue some around the edges. I don't know," he said.


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  • justly8997 Mar 12, 2009

    To the Govenor,all State,County and City employees: The private sector is your pay check.The only way you pay taxes is by the taxes the private sector has paid you......

    Do you think that State employees don't pay taxes, Do you think all State employees have received their refund checks...
    I work for the State and I pay taxes and I have not received my refund check yet...

  • whatusay Mar 12, 2009

    Simple, very simple. Illegals receiving entitlements and taxpayers getting ready to revolt.

  • seeingthru Mar 12, 2009

    of course it's a state record-all the extra folks who moved here because it was 'best place to live' and found out otherwise--it's all due to uncontolled population growth and resulting extra demand on services when the doo doo hits the fan.....

  • testing2005 Mar 12, 2009

    ratherbnnc - not everyone is making 24K. Go back few weeks and you will read about garbage manager making over 100K.
    If we dig deeper, we will find many workers sitting in the office making over 100K, while their job is done by assistant or office full of people.
    If the company has less profit - they lay off people, cut salaries and try to survive. I haven't seen that in any state or federal government. They are running the franchise like they can always get more money.

    And after Obama finishes his socialistic rage, we will be 3rd world country with trillions of debt owned to CHINA.

  • ignc73 Mar 12, 2009

    I think S.C. governor is the only sane governor out of all 50 states - stating that US is heading for 3rd world country status is right on the money.

    SC is one of the states that IS close to being a 3rd world state. SC is an embarassment.

  • ratherbnnc Mar 12, 2009

    CUT the spending, cut state salaries and start saving money. Is that too much to ask?

    Cut non essential spending YEs...cut the salary of a state employee making only $24,000 a year.. You need to go retake that medication your on!!

  • whatusay Mar 12, 2009

    TheSecondAmericanRevolution_NEW1.wmv (4657KB)

    Watch this if you want to be enlightened.

  • whatusay Mar 12, 2009

    xxxxxxxx says "By your logic, if our grandparents were immigrants, that means our parents weren't citizens, which makes us not citizens, even if we were born here." My grandparents did not sneak across the border, they came in with the help of the US government the properway and became citizens the correct way, before my parents were born. They learned to speak english, which was a requirement, they had to learn and agree to defend the US (present illegals have done none of that).

    And, the easy way to find them and deport them is very sinple, 1. go to Wal-Mart, 2. Make their employers pay for their deportation (entire family), as well as a stiff fine, 3. cutt off the welfare to them and their families. If our government can find a cow with "mad cow disease", and trace its way back to where the cow was born and the parents of the mad cow they can find illegals. I know I could find a thousand every day for weeks by myself so don't think they are hiding under houses or in holes.

  • nobama Mar 12, 2009

    When people are unemployed they don't pay as much taxes back to the state. Who hires people, that's right companies. We need to do everything we can to encourage and support companies. That includes tax cuts and other incentives that the republicans have called for.

  • Beachnut Mar 12, 2009

    Some misinformed soul above said: "Only government can help sort out this mess... Obama will make sure government does its part to help the poor and disadvantaged."

    I would only add: "...and with all incentives to lift themselves up effectively swept away, they will forever remain poor and disadvantaged-- and a pertpetual burden on the rest of us."