MEDIA RELEASE: Report: State budget shortfall from pre-recession levels is over $4.5 billion

 Report: State budget shortfall from pre-recession levels is over $4.5 billion

New BTC Brief puts North Carolina’s budget cuts over the past two years in context

RALEIGH (Feb. 14, 2011) – Estimates of the revenue shortfall facing North Carolina have shifted drastically over the past several months. Most recently, Gov. Beverly Perdue has put the number at $2.7 billion.

But a new report shows that, in real terms, the shortfall over past two years amounts to more than $4.5 billion.

“To get back to pre-recession levels, we would need to re-invest over $4.5 billion back into vital programs,” said Edwin McLenaghan, the NC Budget & Tax Center policy analyst who authored the report. “Substantial cuts over the past two years have had a very real impact on the lives of millions of North Carolinians – and impaired economic recovery.”

Governor Perdue’s $2.7 billion estimate for next year’s revenue shortfall represents the amount next year’s revenues are projected to fall short of maintaining current service and investment levels. Additional one-time funds from better-than-expected revenues and lower-than-expected costs in the current year’s budget – if used to fund recurring expenses in the next fiscal year – could reduce next year’s shortfall from current-level services even further to $2.1 billion.

This doesn’t take into account the deep cuts to vital public investments that have occurred over the last few years, though.

Getting back to pre-recession levels of services, the report finds, would require restoring nearly $1.8 billion in cuts to public schools ($800 million), community colleges and universities ($300 million), health services ($500m), and other valued public structures.

Factoring in these cuts — excluding true cost-saving measures — puts the shortfall from pre-recession service levels at over $4.5 billion.

State policymakers are considering using one-time funds to fund recurring expenses. This shortsighted approach would not address the long-term structural gap between demand for state-funded services and inadequate state revenues, the report says.

“Using one-time funds just plays a numbers game with next year’s gap, and does nothing to address the state’s long-term revenue shortfall,” said McLenaghan.

The improved revenue outlook in the consensus estimate will merely return state revenue levels to the same as in 2006-07 by the end of 2012-13 even before accounting for inflation and population growth.
These revenue levels will not provide the state with adequate revenues to meet its responsibilities today or in the future.

“The only real solution to this problem is modernizing our revenue system,” said McLenaghan. “To preserve and create jobs – now and in the future – we need to fuel our vital public investments, and bringing our revenue system into the 21st century is fundamental to making that happen.”
FOR MORE INFORMATION, CONTACT: Edwin McLenaghan, Policy Analyst, 919.861.1468,ed@ncjustice.orgAlexandra Forter Sirota, BTC director, 919.861.1468,; Jeff Shaw, director of communications, 503.551.3615,
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