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State Budget Shortfall Expected To Hit $1.5 Billion

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RALEIGH, N.C. — A shortfall in tax collections that hasalready forced state agencies to slash spending is getting worseand is expected to reach $1.5 billion, legislative analysts toldlawmakers Wednesday.

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

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

Legislative fiscal analyst David Crotts said April taxcollections didn't meet forecasts even though they had been loweredbecause of the soft economy.

Crotts said April income tax payments were down close to 30percent, while refunds were up 17 percent. He did caution that thenumbers 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 approvedfor the year - have declined 6 percent from the previous fiscalyear. Lawmakers had forecast for 4 percent revenue growth duringthe year.

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

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

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

Easley announced in February that he was tapping various statetrust funds and ordering 7 percent agency reductions to meet theshortfall. He also intercepted $209 million that had been scheduledto go to local governments.

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

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

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

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

The higher shortfall also means that legislators will start offin a worse hole as they put together agency budgets for the nextfiscal year.

A glum group of legislative budget writers said there are nogood options as they try to find agency cuts that could now totalmore than $2 billion in a $14 billion budget.

"It's a pretty sorry scenario, frankly," said Rep. DavidRedwine, D-Brunswick, co-chair of the House budget writingcommittee.

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