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State legislators say budget outlook is grim
[December 19, 2008]

State legislators say budget outlook is grim

(The Mountaineer Via Acquire Media NewsEdge) Dec. 19--While North Carolina is not insulated from the national economic slump, local legislators predict the state will be in much better shape than others.

Rep. Phil Haire, who heads the powerful House Appropriations Committee, said the state is already taking steps to address the challenges, and unlike other states, has 0 million in its "rainy day" fund to help offset shortfalls.

"We were conservative in preparing the 2008-09 budget," said Haire. "They were projecting a 4.5 percent increase in revenues, and we budgeted on 3.5 percent. We were clicking along fine until the September surprise when financial markets fell apart. Obviously like everybody else, we running behind. The initial projections are we're behind between 0 million and $ 1.6 billion."

In anticipation of the projected budget shortfall, N.C. Gov. Mike Easley is using a middle of the road budget shortfall of $ 1.2 billion, Haire said, and has asked state agencies to hold back between 3 and 5 percent of their allotted budget. Even schools have been asked to return funds that were budgeted.

Rep. Ray Rapp, who is chairman of the house education committee, said the October revenue figures put the state at a $ 320 million shortfall in expected year-to-date revenues.

"We're all looking for an infrastructure program to be available for President-Elect Obama to sign as soon as he gets into office," Rapp said. "In North Carolina, we have projects ready to go so we can put the money to work."

As far as where the state might get funds to cover the shortfall, Rapp said the cuts made so far could be considered "low-hanging fruit. As we get deeper into the budget year, if we don't see some revenue turnaround, then we'll have to make some more serious adjustments that could cause some pain."

"One thing I don't think we can afford to cut is education because we're investing in the future," Rapp said. "Our economic development in this state is tied to a well-educated workforce. A second need is to protect those most in need and make sure the basic safety net programs are solid."

Easley has proposed moving ahead with the infrastructure projects immediately without knowing the full extent of the revenue shortfalls that won't be known until January when the second-quarter sales tax figures will be available or May when the income tax collections are known. Rapp said he would like to examine each project on an individual basis.

"They will certainly serve as a stimulus and goodness knows we need that to get people back to work because we're pushing a 7 percent unemployment rate in the state," Rapp said. "But I'd want to take a look at the projects."

North Carolina highway projects are paid for through funds from the gasoline tax and the federal highway trust fund, Haire said. The state's gas tax revenues are lower than normal, despite the high fuel costs this summer, he said, because there is a 30-cent per gallon cap. The current low fuel prices are decreasing tax revenues, he said.

Even though the money is down, it will cost less to build now than a year ago, Haire said, noting some projects have been bid, but the contracts have not been accepted, so they could be rebid.

Neither representative was willing to speculate on which programs or agencies might be hit the hardest when cutbacks are considered.

"I'm hesitant to single out areas to cut," Rapp said. "We're all looking very closely at the budget. I've got some ideas, but I don't want to send employees into panic mode. It's safe to say we are going to become very lean in the next nine months as we approach the budget making process, and it is fair to say there will not be significant expansion. Anything that's new will have to be compelling."

Haire said there is no doubt state leaders will be reducing the budget that was approved 18 months ago because under state law, North Carolina must have a balanced budget and there's little doubt revenue will be down significantly.

But Haire said the budget outlook isn't all gloom and doom.

"Initial reports were that Black Friday sales were up, and home sales are starting to come back a little bit," he said. "There's a great deal of optimism in the new Obama administration and his proposed stimulus package. That's what we did in '30s with FDR. If we put people to work, that will get results."

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