Gov. Bev Perdue's austerity budget proposal, unveiled last week, earned an overall thumbs-up from the N.C. Justice Center, the progressive think tank in Raleigh that monitors such matters. Elaine Mejia, director of its N.C. Budget & Tax Center, said Perdue was "wise to take a balanced approach," with some tax hikes along with the program cuts, as the state's economy tanks and state revenues fall with it.
Mejia cautions, though, that Perdue's budget relies on a couple of tricks that, in effect, kick some hard decisions about programs down the road—or better, leaves them to the General Assembly. Some $500 million of Perdue's spending cuts take the form of underfunding salary accounts rather than actually cutting programs, Mejia said. The result is "an impossibly tight budget" with little room for error should employee turnover be less than anticipated or state revenues come in below projections.
"It amounts to a little bit of passing the budgetary buck," Mejia said. Ordinarily, the state uses the money it saves while positions are vacant from turnover to cushion against revenue shortfalls. If the cushion's not needed, the money fills up the Rainy Day Fund.
But this year, Perdue appropriated such savings in advance while also directing program managers to seek additional savings of 5 percent or more—on top of deep cuts in the current budget.
The aim of such tight budgeting is to avoid major layoffs or wage cuts for state workers. Perdue's budget eliminates some 1,400 positions. Of those, however, about half are vacant and another 300 will be offered transfers, while 400 new positions are created, Mejia notes. State employees would get no raises. They would, however, get extra vacation days if they've worked 10 years or more—up to 92 hours of bonus time for those with 25-plus years of service.
Some legislators are proposing as an option, in House Bill 708, that state leaders be empowered to furlough workers for up to 20 days if the budget situation worsens. State Rep. Rick Glazier, D-Fayetteville, estimates a potential savings of $140 million a year if the furloughs are used. Essential positions and everyone making below $30,000 a year would be protected against them.
A Perdue spokesman says the governor thinks the measure is unnecessary.
How else did Perdue fill a $3 billion revenue shortfall in a $20 billion budget without deep program cuts?
Mejia notes that $1.7 billion in federal stimulus funds helped a lot. So did her proposal to raise the state's tax on cigarettes from 35 cents a pack to $1.35 effective Sept. 1, garnering an extra $325 million over the rest of this year and $435 million in a full year. She also proposed a 5 percent, $200 million annual surcharge on alcoholic drinks. Another $170 million a year in savings comes from denying state workers their usual longevity raises, which Perdue proposes for both the 2009-10 and 2010-11 budgets.