Red ink demands $800 million blotter

Published 4:24 pm Friday, May 14, 2010

Staff Writer

State Senate finance committee members are hammering out proposals to plug an $800 million revenue hole in the state budget.
The shortfall reportedly comes amid slowing tax collections and other issues related to the sluggish economy, and members of the N.C. General Assembly are looking at numerous ways to curb spending without raising taxes in an already-difficult election year.
The finance committee members are likely to complete their work next week, and the full Senate could vote on adjustments to the two-year budget next Thursday, related Schorr Johnson, spokesman for state Sen. Marc Basnight, D-Dare County.
After that vote, the House will get its turn at crunching the numbers.
Johnson said it is hoped that lawmakers will have completed their budget work by the July 1 beginning of the upcoming fiscal year.
Johnson said that Basnight, president pro tempore of the Senate, is leaving the specific crafting of spending proposals to the Senate appropriations members.
He said Basnight has been consulting appropriations chairs, but Basnight is trusting that the committee system will produce a bill for the full Senate to take up.
“He has kept a broader view of what his priorities would be in the budget,” Johnson said.
This doesn’t mean Basnight lacks his own ideas about what the bill should look like.
Asked whether the Senate’s road map to spending is likely to include a tax increase, Johnson said, “Sen. Basnight says that is very unlikely. You can’t say that anything is off the table because the budget has not been finalized yet, but he does not see any tax increases” in sales or income taxes.
It is possible that some fees could increase, but those increases haven’t been finalized, Johnson noted.
It is unlikely that state employees — teachers included — will see a pay raise this year.
“Sen. Basnight said that, with the unemployment situation, with unemployment being high in the private sector, businesses scaling back and, in some cases, reducing people’s pay, he does not believe that in that environment it would be appropriate to give anyone a pay raise this year,” Johnson commented.
Gov. Beverly Perdue’s budget proposal included the restoration of an experience-based pay raise for the state’s public-school teachers and a one-time bonus to cover a furlough that cost teachers and state employees 0.5 percent of their salaries.
Basnight would not favor the salary increases or the furlough make-up proposed by Perdue, according to Johnson.
Senators “are working as hard as they can to protect teaching jobs and protect the classroom,” Johnson said. “Sen. Basnight cannot imagine funding a pay raise for some teachers while having a large cut in funding that will result in teacher layoffs at the same time.”
Perdue’s plan contained more than $950 million in cuts, which would be achieved by slashing or reducing dozens of programs, as previously reported.
Basnight “likes a lot of what he sees” in the governor’s proposal, Johnson said.
“There will be a package of provisions in the budget to help stimulate the economy and help small businesses protect and retain jobs,” he said. “Some of it will (likely) be similar to what the governor has proposed.”
As Senate committee members cycle through their tasks, the House prepares to do its share.
“We’ll be looking at continuing to streamline state government and curtail spending,” said state Rep. Tim Spear, D-Washington County. “We’ll have to make some necessary cuts, which will be painful in places, but we have to do what’s best for the state and what every person in the state had to do in the economic slowdown, and that was try to look at spending and cut back where we can.”
The House needs to examine ways to help businesses create new jobs and protect existing jobs, Spear said.
This can be accomplished partly through tax credits and incentives for small businesses, he stated.
One thing that’s on the table is a tax credit for small businesses that provide health-insurance coverage to employees, according to Spear.
Perdue proposed a $250-per-person credit for small businesses that buy health insurance for their employees.
There will be individual proposals along those lines originating in the House and Senate, Spear forecast.
“We’ll mesh those together,” he said.
Like Basnight, Spear sees no path toward raising the pay of state employees.
“We have some excellent state employees that do an excellent job in the roles that they play, and our teachers,” he said, adding that the economic climate precludes raises for those employees.
“Frankly, my biggest concern is maintaining their jobs,” he said.
State Rep. Arthur Williams, D-Beaufort, could not be reached for comment.
Some conservatives are predicting even deeper budget troubles than those being confronted by legislators this year.
In an article posted on the Web site of the conservative John W. Pope Civitas Institute, policy analyst Brian Balfour writes of the “fiscal tsunami” engulfing the state.
Balfour foresees a larger-than-reported deficit in the next 26 months and beyond as temporary sales and income taxes expire, federal stimulus money runs out and the economic recovery moves slowly.
In an interview, Balfour said the state’s budget woes are the products of a pattern stretching back through three decades.
“Obviously, this is a manifestation of a long-term crisis in the making,” he said, adding, “What we would certainly like to see is some measure of spending reform.”
One answer could be tying the annual growth rate of the state budget to the growth rate of North Carolina’s population plus inflation, he stated.
Any excess revenues “would be aggressively set aside for a rainy day,” he concluded.