RALEIGH – While hot-button issues such as a proposed voter ID bill and state resistance to ObamaCare are already stirring passionate debate in the first few days of the 2011 legislative session, the preseason prediction is still valid: most of the attention of North Carolina lawmakers, lobbyists, and activists will remain focused on a projected $3.2 billion deficit in next year’s General Fund budget.

Oh, did I misstate that number? Isn’t the budget gap pegged at $3.7 billion, or about 17 percent of the FY 2011-12 baseline of $21.9 billion?

It was. Not anymore. Several things have changed since the $3.7 billion estimate made its appearance last fall.

First, the General Assembly fiscal staff has tightened its estimate of the base budget for next year. It is now pegged at $20.85 billion, about $150 million less than the December projection.

Second, the staff now estimates that the state employee health plan will need an infusion of $150 million to stay solvent in 2011-12. That’s about $50 million less than the December projection.

Third, the staff is now budgeting $110 million to cover next year’s enrollment growth in the state’s K-12 schools, community colleges, and universities. That’s about $90 million less than the December projection.

So far, that yields a spending number of $21.6 billion, instead of the $21.9 billion previously projected. If the state’s previous General Fund revenue estimate of $18.2 billion stayed the same, that would yield a projected deficit of $3.4 billion.

But the revenue estimate is likely to change, too, within the next few days. Both sales and income tax collections ran ahead of projections for the first six months of FY 2010-11. But fiscal forecasters aren’t about to take those trends and simply extrapolate them for the remainder of the year. There can be a lot of volatility in revenue collections in the second half of the fiscal year, particularly with income tax filings around April 15.

Still, there’s talk around the General Assembly that lawmakers should expect at least a modest bump in revenue – perhaps in the range of $200 million. That pulls the projected deficit down to $3.2 billion.

The deficit number may shrink even more if Republican legislative leaders and the Perdue administration can work out the details of a “rescission bill” that would give the governor more authority to enact budget savings immediately, during the current fiscal year. Depending on how much authority lawmakers approve, and how aggressively Perdue uses it, the savings could fall between $400 million and $800 million.

That’s money the General Assembly could use for next year’s budget, especially if directed towards some of the projected spending that the fiscal staff classifies as one-time items, such as catch-up money for the health and pension plans.

Put all this together, and the actual FY 2011-12 deficit lawmakers will have to close with new spending cuts, tax hikes, asset sales, or other revenue gains could be in the neighborhood of $2.4 billion to $2.8 billion.

That’s still a big task. Just not as big as folks thought it would be as recently as last week.

Hood is president of the John Locke Foundation.