Local Politics

Perdue's budget cuts programs, jobs – not spending

Posted March 17, 2009

— Gov. Beverly Perdue's budget proposal, released Tuesday, eliminates more than 20 programs and cuts more than 1,000 state jobs, but includes a 3 percent spending increase over current, reduced levels.

Perdue defended the nearly $21 billion budget, which quickly drew criticism from the right and the left.

"I'm a big girl and can take on a challenge," she said at a news conference announcing her proposal.

The two-year budget plan relies on targeted tax increases to deal with the state's worst fiscal conditions in generations. The current budget is $2.2 billion in the hole for the 2008-09 year, which ends in June, and analysts expect revenue to fall by another $3.4 billion in the coming fiscal year.

State budget Perdue proposes $21B state budget

A $1-per-pack increase in North Carolina's cigarette tax and an extra 5 percent surcharge on alcohol to raise an additional $508 million, along with quadrupling professional licensing fees to $200 each, would generate another $27 million, according to her projections.

Perdue said she didn't want to throw too many tax increases into the mix because the recession has left North Carolina with record unemployment and has families cutting back as much as possible.

"I would be very reluctant, if I were anyone in North Carolina with times as tight as they are, to talk about an increase in corporate or personal income tax or sales tax," she said.

Republican leaders and the left-leaning N.C. Budget & Tax Center pounced on the proposed tax increases, saying they were uncalled for in the current economy.

"To increase taxes and create an entirely new tax, as she proposes, will further damage our economy and cost jobs," Senate Minority Leader Phil Berger said. "Elected officials should be concerned about protecting the budgets of North Carolina’s families. This budget protects entrenched political and special interests."

"Gov. Perdue’s new budget breaks previous promises to abstain from raising taxes and does not protect core priorities of state government," said Linda Daves, chairwoman of the state Republican Party. "Not only does Gov. Perdue propose raising taxes, as well as creating new taxes, she is balancing the budget by placing the burden on some our state’s taxpayers least able to afford to pay more in difficult times."

"The reason we have a revenue problem is that people don't have money," House Minority Leader Paul Stam said. "This is the worst year to raise tax rates."

"There is no doubt that cigarette tax and alcohol tax increases will be felt on a much more heavily or deeply level on low- and middle-income taxpayers than on higher-income taxpayers," said Elaine Mejia, director of the Budget & Tax Center. She said she hopes lawmakers look at putting a heavier burden on wealthy North Carolinians.

Perdue proposed cutting $1.3 billion from most state agencies, but spending increases in education and some other initiatives more than offset that.

Overall, the plan would cut spending by 2 percent from the 2008-09 budget lawmakers approved last year. Because subsequent cuts have reduced that budget by almost $1 billion, however, Perdue's proposal would increase spending by about 3 percent over current levels.

Republicans also criticized the proposal for lacking deeper cuts, as well as the fact that Perdue is relying on about $1.7 billion in federal stimulus money to help close the revenue gap. She also includes $1.2 billion in federal money to help with the 2010-11 budget.

"The substantial use of one-time money to cover recurring obligations does not deal with fiscal matters in a responsible way. It puts off dealing with years of overspending by Democrats, which is a substantial cause of the current problem,” said Berger, R-Rockingham.

Perdue's proposal would cut state spending on public schools by 3.2 percent, but she plans to supplement that with stimulus money so that schools would net a $350 million increase in spending.

Higher education also would benefit under her proposal. Community colleges would see a 6.4 percent increase, while the University of North Carolina system's budget would go up by 4.8 percent.

"North Carolina leadership must position our people across the state to participate through technology in a global economy, and right now, we are not prepared to do that," Perdue said.

UNC President Erskine Bowles contended Perdue's proposal cuts the university system's budget by 6.5 percent, with most of the cuts permanent. That could result in hundreds of job losses, he said.

Education advocates said they support the concentration on the classroom, but they worried about what happens when the federal money runs dry.

"Our question is, will there be money beyond two years because this is a recurring cut?" said Bill McNeal, executive director of the North Carolina Association of School Administrators.

In addition to education spending, she said creating and keeping jobs in the state was her primary consideration in drafting the budget.

"The No. 1 priority – and you've heard me say this since the day I was sworn in – is to create jobs," she said. "My budget contains key investments around infrastructure, assistance to small business and work force development."

Two state departments that have come under fire in recent months would see their budgets cut under her proposal.

The Department of Correction, which has been criticized for poor supervision of people on probation, would lose $68 million and have 527 positions cut. Most of the cuts would come from closing six minimum-security prisons and a prison hospital.

The Division of Community Corrections, which includes probation offices, would get an extra $13 million next year to hire dozens of officers and supervisors and provide them with additional training.

Meanwhile, the state mental health system, which has been cited for patient abuse and neglect, would lose 47 jobs and $17 million overall.

The programs slated for elimination would save the state about $37 million.

More than 1,000 state jobs, some of which are vacant, also would be cut under the governor's budget.

Some dislike proposed 'sin tax' increases

Many lawmakers said they were more interested in furloughs or pay cuts for state employees.

"Everything is on the table. I like the furlough personally better, but we'll see how the caucus feels on the whole," House Majority Leader Hugh Holliman said.

Perdue also plans to freeze longevity pay and state worker salaries. Teachers would see an average 1.8 percent pay increase, however, because salary steps are built into their contracts.

"It's been hard. I mean, the choices are hard," she said.

Despite her concern about the tax increases, Mejia said she thought Perdue did her best to balance spending cuts with increased revenue.

"We're lucky to have the federal government as more of a partner than usual ... but she also raised revenues and she also cut spending," she said. "So, I think she took a balanced approach."

The higher cigarette tax, if approved, would make North Carolina's rate the 20th-highest in the country, compared with its current rank of 45th, according to Perdue's budget. The cigarette tax was just 5 cents a pack until the legislature agreed in 2005 to raise it over two years.

The state's liquor tax of almost $2 per bottle is the eighth-highest in the country. Wine is taxed at about 16 cents per bottle, while the beer tax is about 26 cents per six-pack.

"This is an important move for health care in North Carolina," Perdue said. "Those of use who choose to use those two products can afford to suck (it) up."

Some local smokers and retailers who sell cigarettes and alcohol disagreed with the governor's assessment.

"It's going to hurt not only us, it's going to hurt the 'Joe Sixpack' that goes to work every day and just grabs a pack of smokes," said Steve Byers, who owns the Grocery Boy Jr. convenience store.

"I think I will stop smoking if I have to pay $4 a pack for cigarettes instead of $3," Pamela Battle said.

"My preference is, at this particular time, we might not be taxing people more for anything, but it's something we have got to look at, given the times we are in," said Sen. Richard Stevens, R-Wake.

North Carolina remains the country's leading flue-cured tobacco state, and its revenues and jobs helped build the state for much of the 20th century. But reduced demand for the leaf and changing views on smoking and health have led the Legislature to pass more smoking restrictions.

The budget proposal also calls for exempting the first $25,000 of net income from state tax for businesses with profits of less than $100,000 and the first $15,000 for business making between $100,000 and $200,000.

Perdue also would seek a "caregiver tax credit" to benefit people who take care of aging citizens, along with the creation of a sales tax holiday for people who purchase equipment that helps conserve water, according to the budget document.

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  • Nancy Mar 18, 2009

    "Like it or not, there are essential services provided by the state. You hope you never need them and many citizens never encounter them but you really do not want to see your town and highways without them."

    That's the problem. You're talking about BASIC services the government is collecting taxes for.

    When is the last time you looked at a pie chart of where the tax revenue is spent in your county or in this state?

    You'd be surprised to learn that a lot of it is not on basic services and those social programs are a HUGE chunk of your tax burden that you may or may not ever get a benefit from.

    Those who work pay for those who don't (by choice or not).

  • 11of10j Mar 18, 2009

    Perdue needs to take some accounting classes....A tax is a tax no matter where you place it.

  • beachboater Mar 18, 2009

    I guess Bev has it in mind to sue the states of Virginia and South Carolina to recover the money spent on the lottery tickets before NC started it educational lottery. Wait a minute......did I say EDUCATIONAL lottery? My bad.

    Well, maybe Bev is planning on annexing southern Virginia and Northern South Carolina. They need taxation without representation just as much as we do!!!

    We can only hope that this PROPOSED budget stays a PROPOSED budget. Hopefully, even the democrats will have more sense than to pass such a bad bill.

    Someone mentioned above about the sin taxes. They are taxing alcohol and cigarettes because of health care. That doesn't even come into play at all. Those taxes are attractive because nobody will speak up against them. Who is going to stand up and have their picture taken about alcohol taxes, when they know the preacher will be reading the paper.

    I'm sure Bev's shoulder must be sore from patting herself on the back so much. DISGUSTING!~~~~~!!!!!

  • carols0289 Mar 18, 2009

    Seriously, taxing cigs will only cause people to order their cigs on the internet from the Indian Tribes or buy them in cartons while in bordering states.

    As far as alcohol, Bev fails to realize that taxing alcohol is only really going to affect restaurants and bars. If the cost of a drink now goes even more at the local watering hole, fewer people will go to the bar when they can have a drink at home for much less. Or they will limit how often they go out for a drink. It might be great for the ABC stores but it will hurt the bars and restaurants.

  • carols0289 Mar 18, 2009

    Hey nolegirl:
    "Who would you call if your house got broken into? The police, sheriff's department - paid by the state"

    I would just shoot them, then there would be no need for the police, judge or jail....just a $25.00 shovel!

  • jbco Mar 18, 2009

    NCPictures

    Who would you call if your house got broken into? The police, sheriff's department - paid by the state

    Who would respond if you had a car accident on the way home from work? The highway patrol - paid by the state

    Who would you depend on to put the drunk driver who his you one night in jail? The DA's office, a District Court judge - paid by the state

    Like it or not, there are essential services provided by the state. You hope you never need them and many citizens never encounter them but you really do not want to see your town and highways without them.

  • whatusay Mar 18, 2009

    Sorry people, you voted the straight ticket that got Perdue elected. You got Obama, Pelosi, Reid, Frank, Dodd, and Perdue. Real change.. They all think that you can tax and spend your way out of debt.

  • cameragirl Mar 18, 2009

    I am a State Employee and I resent Perdue taking the longevity pay from long time state workers. It seems that those of us that have stuck it out with the State of NC are taking a pay cut and those that have only just started or have not reached 10 years get to keep their full salary and the teachers will get a raise. She states that it won't affect our retirement but it will affect it. When you go to sign up for Social Security your payments will be less since you will be making less. Does Perdue think we are stupid? If she wants to lower paychecks then she needs to do it across the board, including teachers. It's not fair to put the burden on hard working people who believe they can make a difference working for State Government. Yes, there is fat in almost every department but if Perdue sticks with the hiring freeze then people will just have to take on more responsibility which in turn means that they deserve what little pay the receive. DON'T PUT IT ON THE LONG TIME WORKER'S BACK

  • maddie Mar 18, 2009

    Thanks a lot, Gov. Purdue for penalizing long-term state employees who depend on longevity to dig them out of financial holes! I don't need 94 hours of bonus vacation. I need money to pay my bills. What an insult...

  • artist Mar 18, 2009

    In my opinion, the "sin" taxes are not singling out a minority.. or anyone for that matter. These are "product" taxes, non-essential ones at that, nothing more. Each individual can now make a personal decision as to whether you want to pay the price for that product or not.

    We all get shafted on some product that is irrelevant to others. Some people have to take certain medications that have no generic substitutes... and they pay out the wazoo for them. I think a non-essential. personal choice item is a good alternative for a tax. I would be ticked if I was required to pay for someone's smokes... but I am more than happy to pay taxes on a bottle of my favorite booze... and I get to choose when I pay that tax. There are many products/services that fall into this category that could be taxed... and I'm sure when Raleigh identifies them, taxes will be levied.

    Of course, the best plan of action would be to cut the spending. But I would rather get to choose when/where I get taxed.

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