APRIL 16, 2009 ISSUE
Legislators, State Await Key Budget Numbers
Rep. Cullie Tarleton (D-93), pictured left, and Sen. Steve Goss (D-45)
Wednesday was more than tax day for legislators—April 15 marks the start of the countdown to the final revenue figures on which they will create the 2009-11 budget.
“When the Senate did their budget there was a projected $3 billion revenue shortfall,” said Rep. Cullie Tarleton (D-93). “We are anticipating it will be between $3.5 and $4 billion now.”
Sen. Steve Goss (D-45) said, “I cannot emphasize enough how important it is to get these revenue numbers in. This first quarter is very important. The indicators show it is very likely the revenues are going to be down in the first quarter. The deficit could easily shoot above $4 billion at that time.”
For Watauga County, the impact of potential cuts at ASU will be key. The university is the county’s largest employer and serves as a virtual economic engine for the region. The question of what the final budget will mean for the university—and the rest of the educational system—remains up in the air. Until the first quarter revenue numbers are in hand, which should happen by April 27, a lot remains on the table.
Asked about the potential impact on ASU, Tarleton said, “Obviously, there will be no capital funds. There will be no raises for our state employees. The thing that [UNC system President Erskine Bowles] has asked us for is full enrollment funding. When the kids are coming to school, the dollars will be there for the state’s share. That will be true for ASU and Caldwell Community College.”
The legislature will not attempt to dictate how state dollars are used—and cut—at ASU and the rest of the UNC system.
“The cuts are done mainly through the president, Erskine Bowles, meeting with the chancellors,” Goss said. “UNC-Chapel Hill is having to lay off and furlough some people. Appalachian, as I understand it, plans to handle this through attrition.”
One key project at ASU is at risk, at least until the revenue figures are available.
“We are trying to develop a nursing center at Appalachian. It will be a job creation tool, and it is very important,” said Goss.
Last year, Senate President Pro Tem Marc Basnight from Dare County pledged financial support for the project. Now, however, the staggering deficit has changed everything. “We will be trying to get it in at the conference,” Goss said. “Quite honestly, we are waiting to look at first quarter revenue before finding out if this is possible.”
The university’s new education building, on the other hand, is safe.
“Fortunately, the money was already allotted,” Goss said.
Furloughs are a controversial, but possible, solution to budget shortfalls in the university system. If approved, employees would be given one or more days off a month without pay. Asked whether ASU might have to cut some positions, Tarleton said, “As I sit here today, I cannot answer that with any degree of certainty. Erskine has said one of the tools he would like to have in his toolbox is furloughs. No one likes the idea of furloughs. But if it comes down to someone losing their job or furloughs, which spread the pain, we would probably come down on the side of him having furloughs.”
Process
Gov. Beverly Perdue unveiled her budget proposals on March 17. Her budget was designed to close a cumulative $6.4 billion shortfall over the two years and includes $2.6 billion in proposed cuts.
The two houses of the legislature take turns every two years in going first in developing a budget; in 2009, it was the Senate’s turn. On April 9, senators approved a $20 billion budget that was then sent to the House. What was sent, however, only included the expenditure side. The revenue portion of the budget—which includes a $500 million deficit that will probably have to be made up by tax increases—will come later.
The House is now developing its own budget.
“We will have three budgets on the table,” Tarleton said.
Then, conferees will be appointed by the Senate, House and Gov. Perdue to meet and hammer out a compromise. When that is complete both Senate and House must approve the final budget, which will be sent to Perdue for her signature.
“Some things in the governor’s budget will probably stay,” Tarleton said. “Some will not. Some did not make it through the Senate version. Some things in the Senate version will not be in the House version.”
The conference members will work on the budget in pieces, including subgroups tackling areas such as education, public safety, health and human services and transportation.
While the House’s work is underway, the leadership has made it clear that they are waiting for the revenue numbers to arrive later in April before trying to reach a final plan. That third budget, from the House, will be completed before the third week in May, Tarleton predicted.
Unlike the federal government, the governor and legislator must balance the budget. That is a requirement of the state’s constitution.
Taxes
Tax increases of any kind are proving controversial in the legislature. In her budget, Perdue called for a $1.3 billion increase in taxes on tobacco products and alcohol. But that part of her proposal has found little support in the House.
“Our preference is not to have any new taxes,” Tarleton said. “The speaker (Joe Hackney, D-Orange) has made that clear more than once. But if, when the final revenue numbers come in, there is a $4.5 billion deficit then that may not be possible. We want to cut fat, but no one wants to cut into muscle.”
Goss said the Senate is looking at tax reform as one way of helping the state get through this difficult time.
“I would like to see us drop the corporate tax rate to make us competitive not just in southeast, but in the whole nation,” he said. The Senate is also looking at small business tax incentives.
Both legislators stressed that money must be found to spur job creation in the state. The counties in Goss and Tarleton’s districts are all seeing unemployment at 20-year record highs.
Completion
No one expects the biennial budget to be passed by the theoretical June 30 deadline.
Goss said, “I suspect it will be late July or early August. I don’t see the budget holding us up as in some past years. The most expedient thing for us to do is to deal with the tough decisions we have to deal with and go back to our districts and talk with the people about them.”
Unlike the situation in Washington, D.C., both legislators report some bipartisanship in the budget debate.
“Everyone here, whether Republican or Democrat, understands the challenge we face,” Tarleton said. “We know the deficit we have to overcome.”
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