Local News

State Budget Shortfall Expected To Hit $1.5 Billion

Posted May 1, 2002 5:52 a.m. EDT

— A shortfall in tax collections that has already forced state agencies to slash spending is getting worse and is expected to reach $1.5 billion, legislative analysts told lawmakers Wednesday.

"The final numbers are not in, but we are trending toward $1.5 billion," said Rolf Blizzard, an aide to Senate leader Marc Basnight.

The number is $300 million higher than previous worst estimates for a shortfall in the current fiscal year, which ends June 30. Legislators and Gov. Mike Easley had been working under the assumption that the shortfall would be between $900 million and $1.2 billion.

Legislative fiscal analyst David Crotts said April tax collections didn't meet forecasts even though they had been lowered because of the soft economy.

Crotts said April income tax payments were down close to 30 percent, while refunds were up 17 percent. He did caution that the numbers are preliminary.

"I think everyone had hoped this would not be as bad as `91," Crotts said, referring to the 1991 budget shortfall that reached $1.2 billion.

Tax collections - minus the $440 million in new taxes approved for the year - have declined 6 percent from the previous fiscal year. Lawmakers had forecast for 4 percent revenue growth during the year.

In the 1991-92 fiscal year, the shortfall reached 15 percent of the $8 billion budget.

On a percentage basis, this year's shortfall will be around 10 percent of the total general fund budget.

Crotts said the drop in revenue is the worst since the 1949-50 fiscal year.

Easley announced in February that he was tapping various state trust funds and ordering 7 percent agency reductions to meet the shortfall. He also intercepted $209 million that had been scheduled to go to local governments.

The agency cuts and funds he has identified so far total only about $1.2 billion.

But Easley budget analyst Dan Gerlach said the governor is looking at other options and that the bad news was expected.

"We knew April was going to be bad. He is considering options to meet the constitutional requirement (for a balanced budget). We are going to end the year with a balanced budget," Gerlach said.

He would not say what other steps Easley might take, saying final decisions had not been reached.

The higher shortfall also means that legislators will start off in a worse hole as they put together agency budgets for the next fiscal year.

A glum group of legislative budget writers said there are no good options as they try to find agency cuts that could now total more than $2 billion in a $14 billion budget.

"It's a pretty sorry scenario, frankly," said Rep. David Redwine, D-Brunswick, co-chair of the House budget writing committee.