Perdue skipped some options to balance budget

Posted February 18, 2011 4:56 p.m. EST
Updated February 18, 2011 6:35 p.m. EST

State budget

— When Gov. Beverly Perdue rolled out her proposed budget for the next two years on Thursday, she said she used a combination of 72 percent cuts in spending and 28 percent additional revenue to balance the budget.

Her $19.9 billion spending plan for the 2011-12 fiscal year, which starts in July, includes a mix of consolidating state agencies, eliminating programs and jobs and continued taxes.

"We're making tremendous cuts, but we are also making investments to preserve our core, which is jobs and education," Perdue said.

The choices she and her staff made in recent weeks are similar to those being made in state legislatures nationwide as different states try to tackle their deficits.

Wisconsin, California, Maryland, Michigan and Nevada, for example, are pushing pay cuts or furloughs of state workers. Perdue avoided those choices but chose to freeze the pay of North Carolina government employees, lay off 3,000 workers and eliminate another 7,000 vacant positions.

"Public employees are always the ones that politicians look to blame," said Dana Cope, executive director of the State Employees Association of North Carolina.

"Looking at layoffs versus pay cuts or furloughs, (layoffs are) a more permanent way of cutting the budget," said Edwin McLenaghan, a public policy analyst with the North Carolina Budget & Tax Center.

Republicans lawmakers criticized Perdue's decision to extend a temporary sales tax that is scheduled to expire in June. She called for rolling the penny increase back to 0.75 cent.

"We intend to balance the budget without raising taxes," Senate President Pro Tempore Phil Berger said Thursday.

Perdue also wants to raise more from the state inheritance tax by lowering the threshold from $5 million to $1 million. The move would generate $100 million for the state in the 2011-12 fiscal year, according to her budget projections.

Other states looking at tax increases include cash-strapped California, Connecticut and Minnesota.

States like Florida, Iowa, Michigan and Maine are echoing Perdue's call to reduce corporate income tax rates. She said cutting North Carolina's rate from 6.9 percent to 4.9 percent would create 10,000 jobs over the next three years.

The governor and legislative leaders said they don't plan to tap into video poker and sweepstakes machines for revenue, unlike Florida, Iowa and Ohio, which plan to expand state-run gambling to raise revenue.

Tax reform advocates in North Carolina said they are disappointed that neither Perdue nor lawmakers want to look at broadening the tax base to include a sales tax on services to solve the state's budget problems.

"By implementing modernization, by broadening bases and lowering rates, you improve the stability of tax revenues," McLenaghan said.

Instead, the new Republican-led legislature plans to close a projected $2.4 billion deficit by cutting more government jobs and programs than the cuts suggested by Perdue. They said they intend to finish their budget by June 1.