Over the weekend Governor Mike Easley said North Carolina's bank accounts are empty and a tax increase may be needed to raise as much as $800 million.
Right now, the governor says the state does not have enough money coming in to keep the budget going.
Since taking office in January, Easley says he has already shifted funds twice just to meet the state payroll.
Three main reasons have been given for the budget crisis:
- A huge drain on state reserves due to hurricane recovery expenses, court ordered reimbursements to taxpayers and higher-than-expected Medicaid costs.
- About $1.8 billion in tax cuts during the 1990's chopped state revenues.
- The nationwide economic slowdown has hit North Carolina faster and harder than almost any other state. Unemployment hit 5.2 percent in May, resulting in dramatically lowered tax collections.
The governor says a tax increase will be necessary even if a lottery is approved.
Easley's call for a tax increase has drawn mixed reaction. A tax watchdog group believes lawmakers need to work harder to find money.
"We'd like to see more accountability, we'd like to see less spending in government," says Linda Williams of Citizens for a Sound Economy.
"We'd like to see them get together and put their heads together and say 'Let's find solutions to this. Let's brainstorm and see where we can go from here.' We're not seeing that right now. All we're seeing is that the only solution we have is to raise taxes and really, that should be the last resort," says Williams.
There is no consensus in the legislature to raising taxes. Nine days into the fiscal year, lawmakers still have not come up with a state budget, because they cannot agree on how to spend the money.
Some Republicans oppose raising any taxes. Liberal Democrats saya sales tax increase would affect the poor disproportionately.
But with news from Governor Easley that the state needs anadditional $700 million to $800 million thisyear to restock its empty bank accounts, some middle of the roadlegislators may reconsider their stances.
State Representative Leo Daughtry, a Johnston County Republican,says more of his party colleagues are becoming sympathetic to alocal increase. They don't see a tax charged by the counties as atax increase.
The taxes could allow the state to keep millions of dollarsthat it normally turns over to local governments. Local governmentscould use the sales tax revenue to offset the loss.