Thursday, May 7, 2009

Budget Hole

House budget-writes learned Wednesday that the state's budget gap has widened by roughly $1.5 billion, reaching an estimated $4.6 billion. The estimated shortfall is based on new projections generated after final tax payments due April 15 fell by 40 percent compared to a year ago. During the last two recessions, final tax payments fell by only half of that percentage. For the fiscal year ending June 30, the state is on pace to see a nearly 11 percent decline in total tax collections compared to last year, which Barry Boardman, the General Assembly's chief economist, called "unprecedented" in recent state history. "The state has never experienced the types of shifts in revenue that we're experiencing now," Boardman told lawmakers.
The news means House Democrats, who are drawing up their version of a spending proposal for the next two years, will have to dig deeper for spending reductions beyond what the Senate found in its budget plan approved last month. Additional taxes beyond the Senate's $550 million proposed increase for next year are possible, too. "These figures are astounding right now," said Rep. Mickey Michaux, D-Durham, senior co-chairman of the House Appropriations Committee. House budget subcommittee leaders should receive their spending targets by the end of the week, he added. The latest revenue projections predict North Carolina will receive $17.52 billion in revenues during the 2009-10 fiscal year, or $1.3 billion less than projected earlier in the spring, according to a report provided to lawmakers. Officials must add another $200 million to that gap because Gov. Beverly Perdue opted to use some of next year's federal stimulus funds to close this year's shortfall, said Evan Rodenwald, another legislative fiscal analyst.
The shrinking revenues mean the House will have to make deeper cuts than the $22.1 billion that Perdue's office initially said was needed to run state government for the fiscal year that begins July 1. That figure was expected to maintain services at current levels, adjusted for inflation. Both Perdue's and the Senate's budget proposals used more than $1 billion in stimulus funds to narrow the gap. The revised projections also suggest lawmakers will need to find an additional $2 billion in revenues or cost cutting in the 2010-11 fiscal year.
While the state's economy could recover as soon as the end of the year, Boardman said it could be 2013 before North Carolina's revenue figures reach the $20.8 billion that had been expected this year before the economy soured. "We're a long way from getting well," said Sen. David Hoyle, D-Gaston, co-chairman of the Senate Finance Committee. Sen. Bob Rucho, R-Mecklenburg, said the state would be a better situation today if it had spent less and saved more this decade. But he said now wasn't the time to take an "I told you so" posture. "When hard times are present, you don't try to point a finger at somebody," Rucho said.(Gary D. Robertson, THE ASSOCIATED PRESS, 5/06/09).

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