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General Assembly Looks at Plan to Repay $800 Million to Retirees

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RALEIGH — North Carolina must repay $800 million to thousands of retired government workers. The money was improperly collected on their pensions.

The refunds have to come from somewhere, and it looks like it'll be out of taxpayers' pockets. Lawmakers say if there was a good time to pay out such a settlement, it is now. The strong economy means higher tax collections than expected, so the state has the cash on hand.

Still, lawmakers must submit a budget that will balance, and that means some programs have to be eliminated, at least for now.

"I think it's good because the state has honored its commitment, its agreement, its contractual obligation," says state retiree George Jones.

To make the payment, the state plans to set aside $400 million for the retirees this year, and $399 million the next.

This year's budget losers could be state universities and community colleges, which may have to wait a few more years for new buildings and other big ticket items.

"I would say that most of the money would come out of capital projects, universities, technology for our public schools, a lot of money that we would have used to enhance education," says Senator David Hoyle (D-Gaston). "I think that's where the bulk of the hit would come from."

The retiree payments may also impact the package of tax cuts lawmakers had planned to make. Senate budget writers predict the food tax will still be eliminated, but other cuts are in jeopardy, such as an inheritance tax cut, higher standard deductions, and bigger deductions for corporate giving.

"I don't think we can do any more tax cuts other than what we've done," says Senator Aaron Plyler (D-Union). "I supported what we've done but I don't think we can cut another $200 million out of our budget and still survive."

This budget is still not written in stone. The House version of the budget has the settlement and all the tax cuts still in it. House leaders also point out the state currently has a $1.5 billion budget surplus.