MEDIA RELEASE: Warts and all, Gov. Perdue’s first budget proposal rises to the tough task by taking a balanced approach

MEDIA RELEASE: Warts and all, Gov. Perdue’s first budget proposal rises to the tough task by taking a balanced approach
The budget is a mixed bag, with certain cuts that undermine smart public investments like transportation and the state’s community college program

RALEIGH (March 17, 2009) – No one envied the task Gov. Beverly Perdue faced: closing a budget gap in the billions. Though the cuts proposed in her budget were wide-ranging and painful, fiscal policy experts said that the governor’s decision to partially address the budget gap with new revenue as well was a solid approach.

“The governor was wise to take a balanced approach that did not focus just on spending reductions,” said Elaine Mejia, director of the NC Budget & Tax Center.

There is concern with the overall fairness of the revenue package, however, Mejia said. While the tobacco taxes the governor advocates are large enough to prevent teen smoking while also raising revenue, the tax plan overall is regressive. Perdue’s proposed increase in the Earned Income Tax Credit, Mejia said, is not enough to offset this.

“As it moves to the general assembly, we hope state leaders will consider additional revenue options such as closing corporate tax loopholes and asking wealthy North Carolinians to contribute to the cost of preserving key public investments,” said Mejia.

She cited the reform known as combined reporting, which makes it more difficult for large multi-state companies to avoid the corporate profits tax, as one example.

On the spending side, most of the governor’s spending reductions come not from elimination of smaller programs, but from big, sweeping changes, like budgeting for less than 100 percent of state salaries. This counts on turnover happening at state agencies.

“This might be a preferable approach to making deeper spending cuts to programs,” said Mejia, “but this is also how we’ve funded the Rainy Day Fund and paid for building repair and renovation. Moving forward, will it be harder to do those things?”

Certain program cuts are unwise, BTC staff said, because they undermine essential public investments in areas like education and transportation. Mejia cited the dwindling funds for the state’s community college program as ill-advised during a time of economic crisis.

“This budget is a fix-it-first killer on transportation issues,” says policy analyst Steve Jackson, who focuses on transportation for the JusticeCenter’s Budget & TaxCenter.

Appropriation cuts in transportation are “vicious,” he said. The maintenance budget faces 13 percent cuts this year and a whopping 17 percent cut next year. This, even though recent Department of Transportation estimates of the shortfall in maintenance needs alone stand at $4 billion over next 5 years. Maintenance needs to be a higher priority, said Jackson, who has a comprehensive plan ( designed to help meet the state’s transportation revenue needs.

FOR MORE INFORMATION, CONTACT: Elaine Mejia, 919.856.2176 (office), 919.274.4222 (mobile); Steve Jackson, 919.856.2151 (office); Jeff Shaw, communications director, NC Justice Center, 919.863.2402 (office), 503.551.3615 (mobile).