Officials must fill $1.2B hole

N.C. legislators are walking into a new session today carrying the burden of an estimated $1.2 billion budget deficit — and everything from education to public safety should brace for a hit.

Even though Gov. Mike Easley and many legislators have vowed to keep education off the chopping block, the reality of the budget situation means that nothing is completely in the clear.

“If we end up remaining in the billion-plus shortfall, I don’t think there’s any sacred cows out there that are safe,” said Rep. Bill Owens, D-Pasquotank.

Education, human resources, justice and public safety make up more than 90 percent of the budget and will be among the areas hardest hit by cuts, Owens said. “We’re going to have to cut services dramatically in education,” he said.

Sen. Richard Stevens, R-Wake, said he hopes legislators continue to make education a top priority, but he admitted that a number of factors have contributed to what will be a difficult budget season.

The state’s economy is still struggling to recover, he said. In addition, sales- and income-tax hikes enacted four years ago are set to expire June 30, which would reduce revenues by about $500 million. Also, the legislature had one-time use money to work with last year — money that will not be available this year.

Growth in public schools, community colleges and the university system, as well as a need for state employee pay increases, are adding to the problem, Stevens said. Moreover, counties will request that the state government take over their share of Medicaid costs — now more than $400 million.

Owens said that a loss of manufacturing jobs in the textile and furniture industries and the further downfall of other major N.C. industries originally contributed to the economic situation. But the recovery has not been as rapid as anticipated.

“We’re recovering, but we’re not recovering as quickly as we did in past recessions,” he said.

The legislature will not get to tackle the fiscal issues head-on until after Easley turns in his budget requests, which could happen in February or March. The House and Senate alternate every two years the chance to examine the budget first. This year, the Senate will get the first crack.

Despite fiscal restraints, Easley’s proposal likely will include an expansion of his More at Four pre-kindergarten program.

But as newer programs get the funding they need, legislators need to take a hard look at other, older state programs, Stevens said.

“I think we need to take a comprehensive look at all state funding,” he said. “There are certainly some programs that have been around for a long time that have seen better times and might need to expire.

“That requires discipline and effort and a lot of time by members of the General Assembly.”

In addition to possibly extending sales taxes and income taxes to rein in the deficit, legislators are going to examine an increase in the cigarette tax, which is currently 5 cents per pack.

Sen. Tony Rand, D-Cumberland, who supports the increase, said a higher tax would help alleviate some of the state’s health issues. North Carolina, he said, is simply behind the times with the nation's second-lowest tobacco tax. Only Kentucky’s is lower, at 3 cents per pack.

“It’s time we balanced that out,” Rand said.

There also has been talk among legislators about an increase in the excise tax on beer and wine.

Finally, the push for a lottery to fund education will go into high gear this session. Supporters say they are optimistic that the legislation will pass. Owens said he plans to introduce a bill today to put a public opinion poll before voters.

Regardless of what measures the General Assembly enacts to bridge the gap, the fact of the matter is that there currently is not enough money to spare for new programs, not to mention existing ones.

“The past two or three years, we’ve had to look under every rock for any extra money,” Owens said. “And all of that money has been exhausted.”

Contact the State & National Editor at stntdesk@unc.edu.