Easley Declares Fiscal Emergency, Increases Cuts

Easley announced Tuesday that state revenue projections could fall more than $900 million below expectations for the 2001-02 fiscal year, which ends June 30.

To deal with the budget crisis, Easley took a variety of actions Tuesday that would set aside $1.17 billion in funding, including requiring an additional 3 percent budget reversion for most state agencies.

The additional budget reversions come on top of 4 percent reversions that Easley ordered in October, when it first became apparent that state revenues would not meet expectations.

Educational agencies -- such as the N.C. Department of Public Instruction, community colleges and the UNC system -- are exempt from the 7 percent budget reversion.

Instead Easley said his office has worked with each of these agencies individually to determine the appropriate magnitude for individual budget cuts.

"We're going to do everything humanly possible that there are no cuts in the classroom," he said.

In November, Easley ordered a 2.7 percent budget reversion for the UNC system, a total of about $43 million.

This week UNC-system officials learned that they will have to turn over an additional $21 million to the state.

All told, state agencies will revert $356 million in funding this fiscal year.

Easley also pulled funding from various trust funds and reserve accounts, including the state's Repair and Renovation Reserve Fund.

About $51 million of the $112 million taken from the repair and renovation fund was slated to be used for various construction projects within the UNC system.

Easley also will withhold more than $200 million in funding to local governments.

The freeze on all state travel, purchasing and hiring that has been in place since last fall will also remain in place.

Easley said the state's fiscal troubles are largely the result of the poor state and national economy.

Easley said revenue collections are down 3 percent from the last fiscal year. This is the first time there has been negative revenue growth since the state started keeping such statistics about 30 years ago.

"We've never had no growth," Easley said. "We've always had some positive growth in this state."

The governor also squelched rumors that he would call the N.C. General Assembly into an emergency session to deal with the budget crisis.

"I think (today's actions) will take care of the revenue problem for this year, and we will not have to call for a special session," Easley said.

The legislature is scheduled to reconvene in late May for its short session, where much of the discussion is certain to be about modifying the state budget for the next fiscal year.

Easley did take the opportunity Tuesday to once again call on the legislature to pass a statewide lottery to create an additional revenue stream and fund improvements in education.

A statewide lottery, which was a major plank of Easley's campaign, was the first bill introduced during the 2001 legislative session but never came to a vote in either legislative chamber.

"I'm going to ask the General Assembly again this year to pass the education lottery," Easley said. "It is an option for new revenue that it would make no sense not to take."

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