RALEIGH – In the week leading up to Christmas, North Carolinians saw gray skies and dodged a steady drizzle – not exactly the makings of a merry holiday. Turning from the literal to the figurative, unfortunately, the signs of an impending storm were even more ominous.

The state, national, and international economy are all sliding into a deep recession. Nearly 50,000 North Carolinians lost their jobs in a single month, with the unemployment rate approaching 8 percent and likely to rise far beyond that in 2009. Retailers are muddling through a perilous shopping season, resorting to steep discounts to move their merchandise. Year-end raises and bonuses are modest at some employers, nonexistent at others.

The fiscal impact is dire. Government programs such as Medicaid cost more during recessions. State revenues were 6.1 percent below projection for the first five months of the 2008-09 fiscal year, or $520 million. By June, the state budget may well be at least $1.5 billion out of kilter, creating a big hole for 2009-10. At the local level, the boom-and-bust cycle in housing prices has had a similar effect on property-tax collections and spending expectations, creating dozens of additional budget deficits.

Now is the time for tough decisions. Now is the time to set fiscal priorities. Now is not the time to let special-interest pleading result in yet another round of tax increases, ratcheting up spending in the future and setting the stage for the next fiscal emergency.

In budgeting, North Carolina should strive to be a tortoise, not a hare. That means committing the taxpayers to a few key initiatives and otherwise leaving their money in their own hands so they can take care of their own needs, such as paying some debts, retraining for a new career, coping with medical bills, or pursuing new business ventures to create goods for consumers, value for shareholders, and jobs for workers.

What are these few key initiatives? My short list is, indeed, pretty short:

• Public safety. The primary responsibility of any government is to protect the life, liberty, and property of its citizens. While our reported-crime rate remains lower than that of a generation ago, recent upticks in violent crime are worrisome and disproportionately plague low-income communities. The state’s well-publicized fiascos in supervising criminals on probation and parole and in serving the needs of the mentally ill have manifestly undermined the safety and security of North Carolinians. These problems must begin to be addressed next year.

• Teacher excellence. Over the past 15 years, North Carolina has plowed hundreds of millions of dollars a year into programs to reduce class size, intervene with preschoolers, and raise average teacher pay. The educational payoff has been scant. In fashioning next year’s budget, lawmakers should ignore the fads, remove the pads, and redirect spending towards merit-based raises for teachers who take on difficult assignments and whose efforts add measurable value to classroom results. Total spending on North Carolina public schools already averages $8,400 per pupil. It’s not spent well.

• Traffic congestion. Large swaths of North Carolina are plagued with costly and dangerous transportation delays. While ports and rail can and should be financed directly by user charges, there is as yet no practical way to replace a state road network funded by gas and car taxes, which are rough proxies for user charges. Before coming up with still more ways to charge North Carolinians to drive, state and local officials need to spend existing tax dollars more efficiently. That means reforming the Department of Transportation, making traffic alleviation a key goal of the funding formula, and axing low-priority projects that move relatively few people per dollar expended (yes, transit boosters, I’m looking at you with disdain).

Collectively, the state and localities are probably facing the need to cut a couple billion dollars out of their annual budgets for 2008-09. That’s a lot of money, but it’s not impossible. There are many opportunities for savings in Medicaid, university budgets, non-teacher expenditures in education, corporate welfare, nonprofit subsidies, administrative waste, and program redundancy.

It might well have been better to implement these budget savings several years ago, when the economy was stronger and policymakers had the luxury of taking their time. But such foresight appears to be contrary to human nature, or at least to the nature of those who wield political power in our state (and beyond).

It’s easier to fix a leaky roof when the sun is shining. But people tend to notice the leaks when it’s rainy. Our politicians must climb up and start plugging the holes before the fiscal drizzle becomes a downpour.

Hood is president of the John Locke Foundation