NC could see $271 million shortfall this year, experts say
North Carolina is projected to face a $271 million shortfall in revenue in 2015 — which has some experts speculating about the state sectors that could absorb further budget cuts.
A memo about the shortfall was released on Tuesday by state economist Barry Boardman and Nathan Knuffman of the fiscal research division in the Office of State Budget and Management.
Mike Walden, a professor of economics at N.C. State University, explained that the shortfall is likely due to a reduction of income tax rates set in place by the General Assembly in 2013.
“Basically, they expected that by reducing income tax rates, income would increase, stimulating the economy,” Walden said.
While income for many state residents has risen, Walden said, the forecast was off.
“There isn’t as much revenue as expected, but that money will have to come from somewhere,” he said.
State lawmakers now face a decision over which state agencies and sectors to cut, much as they have had to do since the economic recession. The UNC system has dealt with more than $1 billion in state cuts since 2007.
“North Carolina’s General Assembly hasn’t been in a normal state of budgeting for the past couple of sessions,” said Wilson Parker, a UNC senior and head of state and external affairs in UNC Student Government’s Executive Branch.
Both Walden and Parker said that the education sector could expect budget cuts in response to the shortfall.
“When you have something that’s such a big part of the budget, like K-12 and public higher education, it’s usually inevitable that those things experience cuts,” said Walden.
Rob Schofield, policy director at N.C. Policy Watch, said echoed the concerns of Walden and Parker, adding that he thinks universities could become a target for further reductions.
“The language coming out of the conservative think tanks certainly suggests that higher education will be on the chopping block,” Schofield said.
But Parker said he thinks this year’s prospects are a bit brighter than 2014.
“Not only do we have less of a shortfall to overcome, but this year we’re in the long session,” he said, explaining that the legislature meets for several months in odd-numbered years and several weeks in even-numbered years.
“The cuts will probably be less damaging, now that they have more time to make decisions,” Parker said.
As to exactly how the cuts will fall, only time will tell.
“In April, after people file their taxes and those reports start coming in, that’s when we’ll know more about how the legislators will make up the lost revenue,” said Schofield.
Schofield said he does not see a resolution to the state’s revenue problems coming in the near future.
“Until the people at the top are paying at least as much as the people at the bottom, we’re all going to be scrimping and saving, trying to get by.”
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