Gov. Bev Perdue’s proposed budget for the new fiscal year would make permanent most of a temporary 1-cent sales tax hike, eliminate thousands of state employee positions, and reduce the corporate tax rate from the highest in the Southeast to the lowest.
Unveiled at a Thursday morning press conference, Perdue’s budget also avoids touching a $68 million annual allotment for the Golden LEAF Foundation. Republican majorities in the General Assembly had passed legislation diverting the funds to help plug a projected $2.4 billion state budget hole, setting the stage for a potential Perdue veto.
Overall, the $19.9 billion budget cuts most state programs between 7 percent and 15 percent, consolidates 14 executive branch agencies into eight, and sets aside another $150 million for the state’s Rainy Day Fund.
In addition, it eliminates 10,000 state employee positions — only 3,000 of which are currently filled — and protects all state-funded public school teachers and teacher assistants from layoffs.
“This budget stands up to our economic challenges and equips us for the future by resetting how we grow jobs, educate our children and operate state government,” Perdue said in a statement. “The cuts are deep, and some are painful. But through careful management of our resources we can also make investments in our core priorities.”
Perdue admitted that her budget wouldn’t make most people happy. “That’s what budgets are about,” she said.
Republicans concerned
GOP leaders in the General Assembly say there are positive elements of the proposal, but the sales-tax renewal — which would be reduced to 0.75 cents from the current 1-cent rate — concerns them.
“We think that the governor and the Republican members who ran on the promise to sunset those taxes should sunset those taxes,” said House Speaker Thom Tillis, R-Mecklenburg, at a press conference Thursday afternoon.
Senate President Pro Tem Phil Berger, R-Rockingham, criticized Perdue for saying in December that she didn’t “know how to spell tax increase.” Berger reemphasized that Republicans plan to balance the budget without raising taxes.
Legalizing and regulating video poker — an idea Perdue had hinted at in recent months as a revenue-generating option — was absent from her proposal. Perdue said that she didn’t want to get distracted by a “philosophical and moral debate” over gambling, and it appears the idea could be dead from the GOP’s end as well.
“I don’t see as part of our budget solution,” Berger said.
Also absent from Perdue’s recommended budget was renewal of an expiring temporary income tax surcharge, which lawmakers paired with the 1-cent sales tax hike in 2009. The tax increase expires June 30.
Other elements
The budget also creates an unemployment tax credit for small businesses and a path for qualifying high-school students to get a tuition-free 2-year degree or 2 years of career training at a community college.
On the economic development front, Perdue’s budget would snag $7 million in nonrecurring revenue from Jobs Development Investment Grants, but it would devote a nonrecurring appropriation of $10 million to the One North Carolina Fund.
It would reduce annual appropriations to the N.C. Biotechnology Center by around $2 million, and curb funding for the Clean Water Trust Fund by $50 million for the 2011-13 biennium.
Joseph Coletti, director of health and fiscal policy studies for the John Locke Foundation, said that Perdue makes “a number of small decisions” right in her budget.
“Consolidating programs and agencies, closing state forests that nobody visits, and charging more for admission to aquariums are all good small ideas,” Coletti said. “But the governor kept every single teacher and teacher assistant, even though she admitted in her State of the State address that some of them are not educating students. If she is serious about focusing on the core services, we should also make sure those core services actually achieve their objectives.”
David N. Bass is an associate editor of Carolina Journal.