By Staff
President-elect Barack Obama faces the challenge of helping make a sick national economy healthy. The City of Washington is looking at cutting expenses to reflect an anticipated decrease in revenues.
Now comes the news that North Carolina’s budget shortfall could reach $1.6 billion this fiscal year. That means Governor-elect Bev Perdue faces the challenge of making a sick state economy healthy.
On Thursday, state lawmakers learned from Barry Boardman, state economist, that North Carolina’s budget shortfall could range from $800 million to $1.6 billion. That information is much more bleak than the General Assembly report issued last month, a report that indicated there is at least a $230 million gap between project tax collections and actual tax collections in the first quarter of this fiscal year, which began July 1.
Faced with the news about the shortfall, state budget officials are withholding money, up to 5 percent less than the Legislature authorized this past summer, from state agencies. That’s up from the 2-percent cut in funding that Gov. Mike Easley ordered in October.
At least Easley, who leaves office in January, is providing some help early on in the fiscal year by ordering those cuts. That help should provide Perdue with a foundation from which to work as she prepares to take on the task of helping restore the state’s fiscal health to an improved condition.
As with the new president-elect, Perdue will find working to improve the economy one of her top, if not the top, priorities when she becomes the Old North State’s first female governor. She cannot do it alone. Perdue will need the help of the General Assembly, the Council of State and others when it comes to improving the economy.
When the economy is booming, most people have much more disposable income to spend on items that are not basic necessities. That spending creates sales-tax revenues, occupancy-tax revenues and other revenues for local, state and national governments. Those governments formulate budgets on those revenue projections. When those revenue projections don’t come to fruition, those governments must reduce expenses to reflect the decline in revenues, cut programs and services or find other revenue sources. Sometimes the solution is a combination of those options.
As James C. Smith, Washington’s city manager said in his memorandum to the mayor and City Council concerning his recommended spending cuts to help the city’s budget, “Nonetheless, we cannot spend money we do not have.” And that is why state agencies are being told to reduce their budgets by up to 5 percent. And if the economy worsens, it is possible those agencies may have to make more budget cuts.
When Perdue was in the Legislature, she learned a thing or two about putting together budgets. That experience should prove beneficial as she faces the budget challenge. Perdue — and North Carolina taxpayers — must keep one thing in mind as she prepares to do what she can to improve the economy: She cannot do it alone.
The solution to the problem will be found in the executive and legislative branches working together, which includes bipartisan cooperation in the General Assembly, assistance from the Council of State and state agencies finding ways to reduce spending and increase revenues.
The sick economy is not Perdue’s problem to solve alone. It’s North Carolina’s problem to solve.
However, North Carolinians expect Perdue to lead the way to an improve economy. She was elected to provide such leadership. Here is an opportunity for her to deliver.