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Dwindling tax collections put N.C. in cash crunch

Posted March 6, 2009

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— Like many cash-strapped homeowners and businesses in the recession, North Carolina is trying to ensure its spending matches its income.

The balancing act has caused headaches for many taxpayers awaiting their state tax refunds. WRAL News reported Thursday that the state Department of Revenue is taking longer this year to issue refund checks so that it maintains a positive cash flow.

"We're living in historic times with regard to our economy and our state's budget," State Controller David McCoy said Friday.

State Controller David McCoy N.C. balancing income, expenses

With unemployment lines growing and people curbing their spending, income, corporate and sales tax collections have slowed, McCoy said. In January, for example, personal income tax collections were down 21 percent from a year ago.

Because the state doesn't have enough General Fund cash to pay its workers and bills, it's pulling money from savings or reserve accounts, McCoy said. Officials resorted to similar tactics during downturns in 1992 and 2001.

"When you're at the zero line," McCoy said, referring to the difference between a positive and negative cash flow, "you have to pay very, very close attention to make sure that you don't put the state in a circumstance where it's obligations are not being met."

McCoy and Secretary of Revenue Ken Lay said taxpayers would eventually get their refund checks, but the assurances don't sit well with taxpayers who say they need the money as much as the state does.

"Money is money. It's my money," said Nick Brown, who recently bought a house in Johnston County.

Brown and his wife, Niya, filed their tax return in January, and they were depending on their $600 state refund to help them with expenses.

Niya Brown, taxpayer awaiting state refund Taxpayers anxious for state refunds

"We have a [portable storage unit] coming. We have to furnish a refrigerator that doesn't come with the house," he said. "I know $600 is not a lot to some people, but to me it is."

WRAL.com has received more than 145 complaints from taxpayers since first reporting the refund delay. One person wrote, "People's homes, cars, food and medicine depend on it." Another said, "This isn't your money and never was."

Niya Brown said she has called the Department of Revenue and gone online but has been unable to get any answers about the delay.

"If you could call the Department of Revenue and speak to a representative instead of an automated line, that would help," she said.

McCoy said he expects tax collections to increase closer to April 15, and he said state budget moves would replenish the General Fund.

"To my knowledge, we are not holding any bills past what the statutory requirement is to pay," he said.

An investment banker with Barclay's Bank and North Carolina State University economist Mike Walden said the state's cash-flow crisis is a troubling sign. It highlight the state's larger challenge of filling the ever-growing budget deficit.

The latest projections call for the deficit to hit $2.2 billion by the end of June and to top $3 billion in the 2009-10 fiscal year.

Gov. Beverly Perdue and state lawmakers say everything is under consideration, including deep cuts to state spending, possible furloughs and layoffs of state workers, salary reductions and tax increases.

Revenue officials declined to say how many refund checks have been delayed. Spokeswoman Kim Brooks said the state would eventually owe taxpayers interest on overdue refunds, but she declined to say when interest would start accruing.

Meanwhile, McCoy said officials are trying to collect more than $1.8 billion in money owed to the state, including outstanding student loans, unpaid permits and hospital bills.


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  • parc Mar 10, 2009

    i hope that every democrat who voted for perdue remembers their vote and be mindful of the mess that they made

  • oldschooltarheel Mar 9, 2009

    No LamWal, the State is not "doing the best they can". The State is taking monies that are overpaid & doing as it pleases - grossly overpaying "Legislators" who should be there for public service, not public coffers, & tossing money at all kinds of ridiculous stuff that ought to be the individual's decision on whether to give to or not. For example, Gov. Easley's wife's trips to Russia & Europe on "behalf of the arts in NC". You want to pay for that - go right ahead, I surely don't appreciate being coerced into coughing up for that one, not one bit. Excessive spending on "education - it's for the chilluns"; top 10 in US for spending on education & the chilluns' scores are where? Look to the bottom 10 - too much money being wasted.
    6 figure salaries for city, county, state representatives & "administrators"? Waste of $$$, criminal waste. Naw, State government is there for more State Government. Back to taxation w/o Representation, if you pay taxes, that is. If you don't - u r luvin' it

  • mrmud4x4 Mar 9, 2009

    This may be shocking to some of you big government lovers, but If they just funded the SBI and the State Troopers, then shut down the rest of the state government for one year...........One months seperation pay, one year vacation for all state workers (except the cops) ...........Wow............Shut it all down for one year.
    I don't think it would bother me one bit. I probably wouldn't even notice.

  • jbtilley Mar 9, 2009

    'How about the dwindling income of the tax payers? Huh? You all only think about yourselves."

    I'm right there with you on that one. If the state has a budget shortfall they have no problem in passing a few more taxes along to more than make up the difference. Meanwhile the people get squeezed on both sides.

    NC's motto should be a people "for the government by the government". Can't let the revenue stream decline!

  • mewuvbb Mar 6, 2009

    The state refunds are funds that we overpaid in taxes, this is money that I government has already received out of our paychecks. If our government would quit with the wasteful spending they have been doing over and over again, and not only our local government our USA government we would not be in the shape we are in now. The reasons why we have got this way, is because the blue collar jobs, such as Textile and Tobacco, money that brought revenue into our state, a state that we at one time were making a living with, those jobs are gone. It is big corporations that got greedy, and sent our jobs overseas. The blue collar jobs are gone, middle class is no more.

  • Tax Man Mar 6, 2009

    If you are an employer and do not turn over your taxes immediately to the NCDOR they will fine you, attach your assets and ultimately close your business down - and if you still don't pay they will charge you criminally and put you in prison for tax evasion!

    Now, they are holding your refund "in trust" for you and are supposed to pay it to you immediately upon proof they owe it (when you file your return), so they should send it out as quickly as they expect you to send it in. And, if they pay late they should pay you the same 10% late payment penalty and interest from the day it is due until they pay it!

    I suggest changing your withholding so you owe the state every year and then you just make sure you pay them on 4/15 with no interest or penalty!

  • irishale Mar 6, 2009

    "you have to pay very, very close attention to make sure that you don't put the state in a circumstance where it's obligations are not being met."

    So... giving back people the money you owe them is not an obligation?

  • starglow2005 Mar 6, 2009

    ..... meanwhile, the DOT is living it up and partying hardy on the taxpayer's dime down in Wilmington.

  • time4real Mar 6, 2009

    add my 2008 taxes to your default list. I don't have it and NC ain't gettin' it!!!!

  • Sophie Lowe Mar 6, 2009

    The best idea is: change your deductions. Let the state owe you. Then, take 6 months to pay them back because it is hard times.

    If enough people do it, then they will actually have to act responsibly.

    Me, I have been doing that for a long time. Never saw the sense in lending the state or the feds my money for a year.