BTC REPORT: The Governor's 2011-2013 budget proposal: Despite sales tax extension, budget slashes public-sector jobs

By Brenna Burch & Alexandra Forter Sirota with Edwin McLenaghan
NC Budget & Tax Center
March 2011

Executive Summary

  • Governor Beverly Perdue has proposed a $19.9 billion general fund budget for fiscal year 2011-2012 and a $20.4 billion budget for fiscal year 2012-2013. The governor’s proposed budget, if enacted, would decrease total general fund spending (recurring and non-recurring) by $67.8 million, or 0.3 percent, over the revised fiscal year 2010-2011 budget. When compared to the FY 2010-2011 revised general fund budget minus all federal assistance dollars – approximately $1.4 billion to date – this budget increases year-over-year spending by $944.3 million, or 5.0 percent.
  • The governor closes the first-year $2.4 billion budget gap by spending down a $323.3 million general fund net credit balance; generating $826.6 million by retaining $0.75 of the one-cent temporary sales tax that is set to expire in the new biennium; raising $112 million from other revenue sources; and cutting $1.3 billion in spending from the general fund budget.
  • The governor’s revenue plan includes cutting the corporate tax rate from 6.9 percent to 4.9 percent; extending $0.75 percent of the one cent percent temporary sales tax through the biennium; extending the sunset on the unemployment insurance tax credit for small businesses for one year; and permanently repealing the corporate tax transfer to the Public School Building Construction Fund.
  • A significant portion of the governor’s $1.3 billion spending reductions is attributable to major cuts to state employees via a retirement incentive program ($59.5 million); conversion of 179 state-funded positions in multiple agencies to receipt-only support; and management flexibility reductions that could result in the elimination of more than 5,000 filled and unfilled positions from state government. Other significant spending reductions include management flexibility cuts and tuition hikes at NC community colleges ($98.4 million) and UNC System schools ($271.4 million); reductions to Medicaid spending and provider assessments ($133.6 million); and a 3.8 percent cut to state public school funding, excepting teacher and teacher assistant salary funding, that would shift approximately $316.4 million in state public school funding responsibilities to local governments.
  • More spending reductions include cost savings from consolidating 14 state agencies into eight and eliminating redundant services and positions.


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