Déjà Vu All Over Again

Poor Budgeting Decisions Leave Another Looming Crisis

Raleigh, N.C. – Recent revenue estimates released by the Fiscal Research Division sound an alarm of warning for expected revenues for state government just two months into the new fiscal year.

Dr. Barry Boardman writes for the Fiscal Research Division that, “The latest expectations are that the recession is over, but it will continue to feel like we are still in a recession as current economic conditions show little sign of recovery. These conditions are expected to persist through this fall and well into 2010.”

Two of the main factors in the decline in revenues are a decline in the sales tax base as well as a decline in withholding tax collections as the job market has shown few indications of a rebound in the near future.  Dr. Boardman concludes, “The May revenue forecast was built on a scenario where the State’s economic conditions gradually improve starting the 2nd quarter of the fiscal year. For that to happen employment losses will have to abate, wage & salary incomes will need to show year-over-year improvements and consumer spending on items in the sales tax base will have to begin a modest rebound.”  Even an optimistic economic forecast could leave North Carolina facing the same dire circumstances with the state budget that were faced this year.

Senate Republican Leader Phil Berger (R-Rockingham) issued the following statement:

“Governor Perdue and Legislative Democrats took the easy way out and balanced the state budget by raising taxes by more than $992 million annually.  And they chose to use federal stimulus money to plug holes in this year’s budget – which simply delays tough and realistic budgeting decisions to next year and beyond.  To the surprise of no one that has studied the results of huge tax hikes in the middle of recessions, the jobs market in North Carolina shows little improvement.  Meanwhile, the Governor and legislative Democrats have advanced no strategy for creating jobs.

“The early numbers on tax collections for this year show Governor Perdue and her Democratic allies in the legislature have put North Carolina on course for another budget crisis next summer.  Republicans believe we must take action to fuel business growth and create jobs or North Carolina will still be suffering the effects from the recession long after our neighboring states have started recovering.  The last thing we need is inaction followed by more tax increases next summer.”

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