Local Politics

State budget still on shaky ground

Posted November 12, 2009

Map Marker  Find News Near Me

— Lawmakers factored an economic recovery into their calculations this summer when they passed a $19 billion state budget, but analysts now say it's unclear if the economy will improve enough to avoid cuts in the coming months.

A new report from the Fiscal Research Division of the General Assembly shows tax collections were 1.5 percent below projections, or about $95 million short, through the first four months of the fiscal year.

North Carolina Sales Tax Sales, income tax revenue forecasts gloomy

A one-cent increase to the state sales tax rate went into effect in September, but analysts said sales tax collections have plummeted in recent months. Collections were down 11.7 percent in July to September from a year ago, which was a much sharper decline than the forecasts used to craft the state budget.

"This has been a horrible recession for retailers, and we're seeing that reflected in sales tax revenue, even though the state did increase the rate," said Mike Walden, an economist at North Carolina State University.

Withholding and personal income tax collections were 2.7 percent below projections during the first quarter of fiscal 2010, compared with 2.4 percent a year ago.

"Until the employment situation improves, withholding taxes will continue to weaken," the fiscal research report states.

The state has lost almost 270,000 jobs since the start of the recession last year, but analysts said signs point to renewed hiring in the coming months. Temporary employment is up, and the housing market appears to have stabilized, the report said.

"The caution is it's going to be a modest turnaround," Walden said.

Economist Brent Lane, of the Center for Competitive Economies at the University of North Carolina-Chapel Hill, paints an even gloomier picture. He said the state budget picture will be even worse than this year, when lawmakers had to erase a $4.5 billion deficit.

For one thing, officials won't have federal economic stimulus money next year to help balance the budget. This year, about $1 billion in stimulus money helped ease the budget crisis.

"Those are very difficult, difficult decisions," Walden said of balancing the budget. "So I don't think it's going to get a lot easier anytime soon."

Senate Majority Leader Tony Rand said he sees the clouds hanging over the state budget and said climbing out of this budget hole won't be like past years.

"Even if it's a recovery, you still have significant problems," said Rand, who plans to resign his legislative seat in the coming weeks to become chairman of the state Post-release Supervision and Parole Commission.

25 Comments

This story is closed for comments.

Oldest First
View all
  • LMRA Nov 13, 2009

    Wish I had seen you challenge earlier. But here goes . . .

    Review and cut middle management. Not across the board. I would review all org charts to find places where there is top heavy management. I would cut most of the 'analyst' positions.

    Re-configure the State budget system. No more 2 year budgets (of course this would take a change to the State Constitution and probably several laws). One year budgets are a little more efficient - using real time data.

    No more salary reserve/lapsed salary. If you don't have it in your Personnel budget, you can't use it.

    I would consider instituting Zero Based Budgeting. Each year, you have to justify your programs.

    Consolidate 'like' services across Departments. There are several programs that cross between DENR and DHHS.

    Consider the recent state vehicle issues raised on WRAL. Remove cars permanently assigned to individuals.

    OH I've offered these suggestions to the BRAC set up by the Gov too!

  • CarZin Nov 13, 2009

    Actually, you're not making much of an argument. Regardless of the economy, government should strive to be efficient. It doesnt matter if we are in good times or bad. Whats interesting, and a point many of you people seem to forget, is that EVEN IF THE STATE WERE PERFECTLY EFFICIENT, YOU WOULD STILL NEED TAX RAISES TO KEEP REQUIRED SERVICES FUNDED. No way around it. The solution many of you keep talking about is simply robbing Paul to pay Peter. Except in this case, you are targeting funds that you personally consider a waste of tax dollars as a solution, when there are plenty of people that believe they are useful services. Thats only a stop-gap solution even if it is implemented. Quite honestly, if the economy was forcasted to never get better, then yes, we slash our education/public works/police etc. HOWEVER, if it forcasted to improve, why are we screwing future generations to avoid a couple years of tax increases.

  • colliedave Nov 13, 2009

    sounds great in theory, but it doesnt work for government. Quit applying household budgeting to government budget. If unemployment is 50%, do you only want to employ half the police officers, fireman, and teachers? How does this make things better for society?

    WRONG. Household budeting elimates non-essential items such as cable/satetlire/internet. Entire departments such a the Department of Cultural Afairs can be eliminated with no effect on the operation of state government. ABC stores and state museums can be privitised. Adninistrative overhead of all state government can be slashed.
    And BTW, if you want to use household budgeting, MOST HOUSEHOLDS USE CREDIT WHEN THINGS GET TIGHT. So does the government.
    CarZin

  • CarZin Nov 13, 2009

    "SIMPLE (WHEN YOU FIND YOURSELF IN A HOLE STOP DIGGING)CUT SPENDING. EVIDENTINALY OUR LEGISTURE DOEN'T UNDERSTAND THIS PRINCIPAL. YOU CANT SPEND WHAT YOU DONT HAVE.THEY NEED TO PRACTICE WHAT I AN MY WIFE HAVE HAD TO DO ALL OF OUR ADULT LIVES AN THAT IS AT LEAST ATTEMPT TO LIVE WITHIN THE REVENUE INCOME THAT YOU HAVE COMING IN THANK YOU"

    sounds great in theory, but it doesnt work for government. Quit applying household budgeting to government budget. If unemployment is 50%, do you only want to employ half the police officers, fireman, and teachers? How does this make things better for society?

    And BTW, if you want to use household budgeting, MOST HOUSEHOLDS USE CREDIT WHEN THINGS GET TIGHT. So does the government.

  • CarZin Nov 13, 2009

    "a 10% increase is being conservative. where do you think it's going to come from genius?"

    I actually misread your post. I thought you said it would go to 10%. Not up 10%.

  • pbjbeach Nov 13, 2009

    SIMPLE (WHEN YOU FIND YOURSELF IN A HOLE STOP DIGGING)CUT SPENDING. EVIDENTINALY OUR LEGISTURE DOEN'T UNDERSTAND THIS PRINCIPAL. YOU CANT SPEND WHAT YOU DONT HAVE.THEY NEED TO PRACTICE WHAT I AN MY WIFE HAVE HAD TO DO ALL OF OUR ADULT LIVES AN THAT IS AT LEAST ATTEMPT TO LIVE WITHIN THE REVENUE INCOME THAT YOU HAVE COMING IN THANK YOU

  • time4real Nov 13, 2009

    a 10% increase is being conservative. where do you think it's going to come from genius?

  • beachboater Nov 13, 2009

    Aw come on guys....... the good ole boys in Raleigh will just raise a tax here, or a user fee there. Everything will be just fine.

  • CarZin Nov 13, 2009

    "Food, beer, wine, clothes, school supplies, it's all going up by 10% by March!"

    Yeah, right. Care to make a wager on that? More rhetoric garbage.

  • CarZin Nov 13, 2009

    "For one thing, officials won't have federal economic stimulus money next year to help balance the budget. This year, about $1 billion in stimulus money helped ease the budget crisis."

    I dont think that is a correct statement. As much as I read about the state budget, I recall reading that we would end up getting a lot of stimulus money this year and next, then there would be none. Anyone care to verify that?

More...