Fitzsimon File

It wasn't long after Governor Mike Easley took office in January of 2001 that he realized his plans for a new program for at-risk kids and other budget priorities would have to wait.

The state budget was in crisis. Early in February of that year Easley declared a budget emergency and took money from trust funds, local governments, and the state employee pension fund to address a billion dollar shortfall.

Now almost eight years later, it is starting to look like the next governor may face a budget crisis of his or her own, though neither Republican Pay McCrory nor Democrat Beverly Perdue are talking much about it.

Perdue wants to make community college tuition free for high school students who qualify and expand health care programs for children and working poor parents. Worthwhile ideas, but they won't be cheap.

McCrory complains that taxes are too high and wants significantly more funding for the state's criminal justice system. Cutting taxes now is a bad idea with state revenues already shrinking and McCrory's proposal for the courts will cost tens of millions of dollars.

Neither candidate is facing the state budget reality made painfully clear in a recent column by Elaine Mejia of the N.C. Budget and Tax Center.  Lawmakers made several decisions late in the session that will have a major impact on next year's budget.

They spent $166 million in one time money on recurring expenses, money that won't be there next year. They authorized $857 million in debt without voter approval that will eventually cost almost $100 million a year to pay off. And they ignored the growing shortfall in the State Health Plan that covers state workers and retirees. The shortfall may end up close to $200 million by the end of the fiscal year.

All that is troubling enough in good times, but digging budget holes when the economy is slowing down could lead to a disaster. There is no guarantee that state revenues will grow at the conservative rate projected. Even if they do, it will cost several hundred million dollars just to pay for increased enrollment in schools, the increasing fuel costs for state programs, and the annual increases in health care.

The budget hole created this session and the requirements to keep state programs at current levels add up to roughly a billion dollars and that includes nothing for cost of living increases for teachers and state workers or the new investments needed for human service programs in a struggling economy.

It is not unreasonable to think that the next governor will face a shortfall as least as great as the billion dollar problem that confronted Easley when he took office almost 8 years ago. That doesn't include the growing problems in transportation funding.

The state budget is bigger now that it was in 2001, so the actual percentage of the budget hole may be smaller, and the state has more than $800 million in the Rainy Day Fund for such emergencies, a reserve Easley didn't have in 2001.

Still, the state budget numbers put a far different spin on what McCrory or Perdue will face when they begin to put their first spending plan together. There will be no money to cut taxes and no way to create new initiatives unless they come with a tax increase to pay for them.

Keep that in mind the next time you hear a campaign speech from either candidate about new programs or lower taxes. Unless things change dramatically, neither is likely in 2009 in North Carolina. Instead, it will be déjà vu all over again.

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This entry was posted on Thursday, August 7th, 2008 at 4:05 pm and is filed under Fitzsimon File. You can follow any responses to this entry through the RSS 2.0 feed.