Local Politics

Many states in budget bind

Posted June 15, 2009 5:57 p.m. EDT
Updated June 15, 2009 7:09 p.m. EDT

— As House and Senate leaders prepare to begin negotiating on North Carolina's budget, they might find some comfort in knowing that legislators nationwide are in similar fiscal straits.

The average state deficit for the 2009-10 fiscal year is 18.9 percent of the general fund budget, according to a recent study by the left-leaning North Carolina Budget and Tax Center.

"It's an extraordinary time. It's not just a usual budget downturn," Republican Vermont Gov. Jim Douglas said.

Douglas is among about 20 governors who were in Cary Monday for an education symposium sponsored by the National Governors Association and the James B. Hunt Jr. Institute for Education Leadership and Policy.

The Budget and Tax Center study found that 16 states have raised various taxes to help balance their budgets, and 17 others aside from North Carolina have proposed tax increases.

Vermont lawmakers have erased a $250 million budget shortfall with a mix of cuts and taxes, Douglas said.

"They increased taxes on gasoline, on liquor, on cigarettes, on income (and) on estates, and they put in a new tax on downloading music to your iPod," Douglas said.

Minnesota lawmakers won't resort to tax increases, despite facing a $3.2 billion deficit, Republican Gov. Tim Pawlenty said.

"We're going to have to tighten our belts and live on a little less for a while until the economy returns," Pawlenty said.

A budget proposal passed late Friday by North Carolina House members would raise taxes by $784 million to close a projected $4.6 billion deficit. Much of the revenue would come from a quarter-cent sales tax increase, with the rest coming from higher income taxes on couples earning more than $200,000 a year and new taxes on services like appliance installations and repairs.

Senate leaders support higher taxes, but they say increases to sales and income taxes shouldn't be part of the mix.

Scores of advocacy groups rallied outside the Legislative Building Monday night, urging House and Senate budget negotiators to include a balanced mix of tax increases and spending cuts as they hammer out a compromise budget.

Gov. Beverly Perdue said she believes higher taxes are necessary to avoid drastic cuts, especially to education funding. She is expected to lay out an updated budget plan on Wednesday.

"I am studying, reviewing and trying to decide where I believe the absolute figure must be for North Carolina to protect kids and to protect our future," Perdue said.