As Republican senators approved a bill in committee that could slice almost $1 billion from the state’s Fiscal Year 2011-12 deficit they learned that lower projected spending and higher-than-expected revenue could shrink next year’s expected deficit.
But Senate Bill 13 also could be the first bill from the Republican-controlled General Assembly to suffer a gubernatorial veto.
If the bill is enacted, it could further reduce the state’s deficit. In early January, the FY2011-12 deficit was estimated at $3.7 billion. However, lower projected spending on both the State Health Plan and public education has reduced next year’s deficit to $3.4 billion.
The $800 million from S.B. 13 would slice that figure to $2.6 billion. And that tally could shrink even further by next week.
Fiscal Research is expected to release updated figures on tax revenue that are expected to report higher than predicted collections of state income and sales taxes. The revised figures should be announced no later than Monday.
The bill next goes to the Senate floor.
S.B. 13, by Sen. Richard Stevens, R-Wake, could slash the deficit for the fiscal year starting July 1 to $2.6 billion. The General Assembly must balance the state’s General Fund budget — now pegged by the legislature’s Fiscal Research Division at $20.85 billion — before the current budget cycle ends in June. Fiscal research estimates the state will have only $18.2 billion in revenues available for the next fiscal year.
“We decided this is the best way to move forward instead of cutting teachers’ jobs,” said Stevens, co-chairman of the Senate Appropriations/Base Budget Committee, which passed the bill Wednesday.
S.B. 13 proposes several different ways to reduce state spending and save money going into the next budget cycle.
First, it would give Gov. Bev Perdue additional authority to cut spending. With the new authority, she could save $400 million. Second, it would capture about $165 million in state spending that has not been assigned to specific programs. Third, it accounts for about $237 million in unspent federal revenues that are left over from the previous fiscal year. (The state may have to return some of that money to Washington.)
Capturing the uncommitted state spending would take money from business incentive funds, including One North Carolina, the Industrial Development Authority, and Job Development Investment Grants. It also would redirect unspent money from the tobacco settlement funds — Golden LEAF, the Tobacco Trust Fund, and the Health and Wellness Trust Fund.
“When business is bad, you don’t fire the salesman,” Commerce Secretary Keith Crisco said in opposing the bill. He argued that capturing uncommitted money in the funds would stymie North Carolina’s competitiveness with other states.
Stevens disagreed. “We believe not spending money will leave more money with business owners,” he said. He also noted that recapturing this uncommitted money would not affect any economic incentive deals now being negotiated.
Perdue’s spokeswoman Chrissy Pearson said the governor opposes reducing the business incentive funds, suggesting that Perdue might consider vetoing the bill if it passed with no other changes. Pearson did say stopping the diversion of business incentive funds would lessen the chance of a veto.
Stevens was not willing to negotiate any changes unless equal cuts in spending were offered. “Anyone who wants to substitute anything, propose an amendment that would cut something else or cut some position, some teaching position,” Stevens said.
Anthony Greco is an associate editor of Carolina Journal.