$800 Million Budget Deficit Defines Easley's 1st 100 Days

Easley's inauguration is a first in many ways. He is the first governor to be born after World War II, the first practicing Roman Catholic and the first of the 21st century.

But as Easley moved into the new century, he also inherited the problems left behind by his predecessors -- a state divided along economic lines, an educational system falling below the national average in most categories and an ever-increasing budget shortfall.

In a 14-minute inaugural address, Easley spoke about dealing with some of these challenges. There was no mention of the budget deficit.

One hundred days later, that very issue has become one of the focal points of Easley's administration and the first major challenge for the new governor.

Filling the Fiscal Hole

Even as Easley was being sworn in, a budget shortfall of more than $400 million was looming over his head.

Just a month later, that deficit grew to more than $700 million and forced Easley to declare a state of emergency to deal with the budget crisis -- the first governor to do so since Jim Martin in 1991, when the budget deficit grew to more than $1 billion.

Since then, every legislative measure Easley has pursued has been under the shadow of the state's fiscal difficulties.

Both political pundits and legislators seem to agree that Easley's overall performance thus far has to be evaluated against the backdrop of one of the state's fiscal situation.

"To come into office and find out you have a budget shortfall in the current year is a huge problem," said Sen. Tony Rand, D-Cumberland. "Just getting started and being confronted with this has certainly been somewhat of a distraction from his legislative agenda.

Even Republican legislators say the budget deficit has been somewhat of a distraction for the governor.

"I think any analysis of Governor Easley has to start with the position that he was put in -- staring into a black hole of $750 million," said Sen. Hamilton Horton, R-Forsyth.

The hole was dug by both a downturn in the national economy and the actions of the previous administration.

"(The budget deficit) is not (Easley's) fault," said UNC political science Professor Thad Beyle. "Some people fault the previous legislature for lowering taxes or (former) governor for pouring too much funding into certain education programs."

In the late 1990s, as the economy was booming, the legislature approved a series of tax cuts that shorted the state more than a $1 billion a year.

Meanwhile, former Gov. Jim Hunt continued to pour money into education initiatives such as increasing teacher pay and Smart Start in an effort to make North Carolina a leader in education.

Then in September 1999, North Carolina was hit with Hurricane Floyd, which came with a cleanup price of more than $800 million and counting.

Today the budget deficit stands at close to $800 million. But with two months left before the end of the fiscal year, that number could grow even larger.

To deal with the budget deficit, Easley has set aside more than $1 billion -- pulling resources from various state funds.

Building a Budget

Not only has Easley had to deal with a budget shortfall this year, but he must also construct a budget for the next 2 years.

On March 12, Easley unveiled his budget proposal to members of the General Assembly and quickly came under fire from Republican legislators.

The budget included $300 million in revenue from a lottery, which has only a slim chance of being put on the state ballot by the legislature, and $150 million from recommendation of a loophole-closing commission, which might not be accepted by the legislature.

"Some people think that the budget proposal he submitted is irresponsible," said Charles Coe, an N.C. State University political science professor. "But if he had proposed a responsible budget, he couldn't have proposed any of his legislative agenda."

Sen. Howard Lee, D-Orange, said he thinks Easley recognizes that some of those revenue sources might not come through.

"(Easley) has been open in saying that this budget is built on a weak revenue base," Lee said. "I think he has bought some time, but he will have to work with the legislature to build a solid budget."

Senate Minority Leader Patrick Ballantine, R-Carteret, criticized Easley for leaving it up to the legislature to construct a feasible fiscal plan. "I think he needs to be in the trenches with us trying to write a responsible budget."

Betting on the Lottery

The centerpiece of Easley's budget, a state lottery, could shape up to be the first legislative test of the new governor.

The second year of Easley's budget relies on $300 million in proceeds from the lottery to fund the reduction of school class size from grades one to three.

And while Easley has been reluctant to push for the lottery in the early days of his administration, during his State of the State Address in February, he challenged lawmakers to come up with a better solution to the state's funding difficulties.

"You can't just say 'I'm against a lottery for education,'" Easley challenged legislators. "Finish the sentence, tell me what you're for. Because next year, 100,000 5-year-olds will show up at the schoolhouse door, and they deserve more than an overcrowded classroom and an overworked teacher."

Political observers seem to agree that Easley's efforts to push through a lottery could be the biggest test of Easley's clout with the General Assembly.

"The big gorilla is the lottery," Coe said. "But he doesn't have the grassroots base that Hunt had. The test of his legislative effectiveness will be in whether he can get the lottery passed."

The lottery bill, the first one proposed in the House during the current session, has yet to be heard by a committee.

Beyle said Easley, who has yet to actively campaign for the lottery, must take action quickly for the bill to have any chance of passing. "As the session continues, the legislature is going to get increasingly distracted with redistricting because that affects them directly."

Facing the Future

As Easley continues to contend with budget concerns, down the line his priorities could be the same as that of the governor that proceeded him -- education.

Easley already has put forth proposals to lower class size and create a pre-kindergarten program for at-risk children.

"(Easley's) challenge is to do what Hunt did well," Coe said. "Don't try to change everything. Select one or two policies and push those policies through."

Beyle also said that while the past few months have been difficult for Easley, the situation could improve. "If Easley can get through this year, and no one's feelings are hurt too badly and the economy gets turned around, then the fiscal situation could change, and he could get some of his bigger goals accomplished."

The State & National Editor can be reached at stntdesk@unc.edu.