By Chris Fitzsimon
The state budget is always complicated. It comes in a stack of spiral-bound books that explain how agencies will spend more than $40 billion over two years. But it is more difficult than usual to understand all the ramifications of the spending plan presented by Gov. Beverly Perdue Tuesday, both because of the way the numbers were presented and the lack of detail in many of the proposed budget cuts.
The big numbers aren’t that hard to comprehend. Perdue addresses what her staff says is a $3.4 billion shortfall next year by reducing state spending by $360 million, eliminating more than 1,400 jobs, using $1.7 billion of federal stimulus money and increasing taxes on tobacco products and alcohol.
The budget shortfall for the second year of the biennium is expected to reach $3 billion and Perdue proposes another $1.3 billion in cuts to address it, along with federal funds and a forecast of 5.4 percent growth in state revenues, which seems hard to imagine in the current economic climate.
Perdue had already released many of the positive parts of her plan at press events in the last week: new investments in education, economic development and the probation system, and an increase in the State Earned Income Tax Credit to help the working poor.
Tuesday she talked more about those priorities, which she called strategic investments, and defended her call to raise the tax on cigarettes by a dollar a pack and add a 5 percent surcharge to every purchase of alcohol.
Together, the two tax increases will raise $507 million next year and $677 million the year after. Perdue did not include any broad-based revenue increases and did not propose closing a loophole that allows multistate corporations to avoid paying state corporate income taxes.
Instead, she reduced spending by more than a billion dollars a year to balance the budget, but it is hard to know exactly where all the cuts were made. The budget saves $100 million by freezing the rates the state pays Medicaid service providers and another $20 million by making changes in the prescription drug program. She proposes closing some small prisons and putting two inmates in some cells at existing facilities, a recipe for trouble.
There weren’t many details of other major cuts. Perdue’s staff passed out a three-page list of programs she wants to eliminate or significantly reduce, but the total cost of the cuts was only $37 million, a long way from $1.3 billion.
There were instead hundreds of millions in savings by funding salaries at 97 percent for most agencies and including unspecified cuts in “operating accounts.†Perdue pointed out that her budget includes $3.5 million for the expected enrollment increases at community colleges, but failed to mention that it also directs the community college system to find $20.9 million in cuts.
There are plenty of good things in Perdue’s budget too, and not just the large investments she trumpeted. She wants to spend $250,000 to set up a foundation to help the living victims of the state’s horrific forced sterilization program that operated until the early 1970s. And whatever you think of the tax hikes on cigarettes and alcohol, Perdue wisely determined that she couldn’t balance the budget with cuts alone.
That doesn’t mean all the cuts she did recommend make sense. Some don’t, most notably her call to eliminate Sentencing Services, a program that diverts offenders into treatment and community alternatives instead of prison.
The budget document itself says the program reduces admissions to prisons and provides treatment for offenders who may not receive it behind bars.
Sentencing Services saves the state money every year, not to mention the people it helps turn their lives around.
Most of the cuts in Perdue’s budget are still to come if her plan is adopted by state lawmakers. The reductions will be made by chancellors and agency heads and her budget commission will be looking for more programs to eliminate.
Overall, Perdue’s first budget is a mixed bag in an almost impossible year. She recognized the need to raise revenue, but didn’t ask corporations or wealthy individuals to help raise it.
She invested in worthy programs, but ordered unspecified cuts to many of the departments that administer them.
Now it’s the General Assembly’s turn to come up with a plan to address the shortfall and protect vital state services. Perdue has given lawmakers a reasonable framework to begin. Now let’s see all the details.
Chris Fitzsimon is the executive director of N.C. Policy Watch.