Raleigh, N.C. — When Gov. Beverly Perdue unveils her budget proposal Tuesday morning, it will include millions of dollars in spending cuts, some new fees and more money for state workers and teachers, legislative sources told WRAL News.

Fiscal analysts project a $788 million deficit for the budget year that begins in July, and cuts will be used to erase most of that gap, said sources who have seen a draft of Perdue's proposed budget.

Watch Perdue unveil her budget proposal at 9:30 a.m. LIVE on WRAL.com.

"Everybody's going to be hit. Everybody has to, you know, suffer," said Rep. Mickey Michaux, D-Durham, senior chairman of the House Appropriations Committee.

State agencies were told in recent months to draw up spending plans that reflect 3, 5 and 7 percent reductions for the coming year.

A coalition of 100 state organizations sent a letter to Perdue and legislators Monday supporting a more balanced approach to budgeting and expressing opposition to a cuts-only approach.

Michaux said lawmakers will try to protect education and the Department of Health and Human Services from cuts as much as possible.

"We certainly don't want to do anymore on education than is necessary. We don't want to do any more on health and human services, particularly in mental health and personal care services," he said.

The governor also has proposed raising court fees to generate some additional revenue, sources said. No tax increases are included in the budget plan.

Last year, lawmakers approved about $1 billion in new taxes to close a $4.5 billion deficit, including raising the state sales tax and imposing higher taxes on alcohol and cigarettes.

Perdue's budget also includes money to repay state workers for furloughs ordered a year ago to save money in the 2008-09 fiscal year and to reinstate the step increase in teacher pay that was frozen last year to balance the 2009-10 budget, sources said.

Some cuts will free up money in the budget for those pay increases, while others could allow some state programs to expand.

Perdue's budget advisers say the goal is to be more efficient and to trim state government spending with minimal job losses. Vacant positions will be targeted in most cuts.

Michaux said he is confident the money is out there to accomplish that goal.

"I can tell you one agency right now that's sitting on a $20 million surplus. I can tell you another agency – and this is in education – that's sitting on roughly $200 million," he said, declining to be more specific.